As you approach retirement, you're probably thinking about all the things you want to do. Maybe you'll take an art class at the community college, spend more time in your garden, or go on that once-in-a-lifetime trip you've been dreaming of.
While making your plans, have you considered ways to support your favorite causes during retirement? Two options to consider are a Charitable Remainder Trust (CRT) and giving with an IRA. Both methods offer unique benefits, and understanding their differences can help you make the right decision for your giving legacy.
A Charitable Remainder Trust allows you to contribute appreciated assets, such as stocks or real estate, to the trust. In return, the trust provides you with a fixed stream of income for a specified period or for the rest of your life. This can be beneficial for generating income during retirement while also allowing you to support charitable causes. By contributing appreciated assets to the trust, you may be able to eliminate capital gains taxes and reduce potential inheritance taxes. The trust is managed by your community foundation or another qualified trustee, which relieves you from administrative responsibilities and allows you to enjoy your retirement while making a meaningful impact
On the other hand, giving with an IRA involves donating funds directly from your Individual Retirement Account (IRA) to qualified charities. This is called a Qualified Charitable Distribution and if you’re 70 ½ or older you can transfer up to $105,000 to charity and not recognize it as income. This can be a tax-efficient way to support charitable causes during retirement. However, it's important to note that donations from IRAs to charities are ineligible for donor advised funds (DAFs), which are philanthropic vehicles that allow donors to recommend grants to charitable organizations over time.
When deciding between a CRT and giving with an IRA, consider your financial goals, charitable intentions, and estate planning priorities. Each method offers unique benefits, and consulting with financial and legal advisors can help you determine the best approach for your individual circumstances. Ultimately, whether you choose a Charitable Remainder Trust, giving with an IRA, or some other option, your generosity can leave a lasting legacy while providing for your retirement needs.
