Question:

What are the tax implications of making a bequest?

A Gift Today and a Bequest

Are you considering leaving money to a charity or charities in your will? This can be a great way to leave a legacy while also saving your heirs quite a bit in estate taxes by reducing the size of your taxable estate. One thing to keep in mind, however, is that a gift today also automatically reduces your estate.

If your desire to reduce your estate by leaving money to a charity in your will is keeping you from making donations today, remember that you can also gain charitable tax benefits by making the gift now. If you are more concerned with saving money for your children or other heirs, a bequest in your will may be the best option. If you are in a financial situation that allows you to give now and in your will, you can realize tax benefits for yourself now and your heirs later.

Save Income and Estate Taxes

If you want to give to charity from your pension plan account or IRA, you can save income and estate tax by making these gifts through your will. Even after your death, the person or who receives the pension or IRA money has to pay income taxes on that money unless the recipient is a charity.

If you have already provided well for family members, a posthumous gift of a pension or IRA to a charity both reduces your estate and helps reduce estate taxes and avoids the income tax that your heirs would have to pay upon receiving these accounts. This is, of course, a simplification of the various issues related to planned giving and tax benefits.

*Be sure to get personalized and professional advice from someone sophisticated in this area.

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Jerry Mayo