Giving some of your assets to charity after you've passed is a great way to support your favorite non-profit organizations and reduce the tax burden on your heirs. Here are two ways you can accomplish this task in a way that will have minimal impact on your life and doesn't require a lot of effort to do.
Assign Retirement Assets
It's not unusual for people to leave behind retirement accounts full of cash when they pass away. Those accounts can be left to friends and family members, but the tax consequences of doing so will often reduce the amount of money beneficiaries receives and some retirement accounts have rules that make that asset troublesome to maintain.
For instance, a spouse who receives an IRA account will have to pay a 10 percent federal tax on any withdrawals made before they've turned 59 ½, and they are required to take a minimum amount of money from the account every year after they turn 70 ½ and those distributions are taxed at regular rates.
However, charities are not subjected to those rules. The money from the retirement account is transferred tax-free. Additionally, your heirs won't have to worry about paying any federal or state inheritance taxes on the amount and may even score additional tax benefits, depending on the circumstances.
Assigning retirement assets to a charity is very easy. Simply list the charity of your choice as the sole beneficiary on the account and notify the organization. You will continue to enjoy all the benefits your retirement account provides when you're alive and any balance remaining in the account will be passed onto the charity after you're gone.
Give a Life Insurance Policy
People take out life insurance policies to ensure their loved ones have enough money for their needs when they pass away. However, sometimes things don't go as planned and the policies are no longer needed. Whether you're still paying premiums on the policy or not, you don't have to let it go to waste. It is possible to give the life insurance proceeds to a donation program upon your death. Not only will you be helping the charity, but you'll secure a generous tax deduction for your estate.
All you need to do is designate the charity as an irrevocable beneficiary to ensure the money goes to them. You also have the option of listing the charity as the owner of the policy. Be aware, though, doing this will cause you to lose control over it and you won't be able to make any changes later as a result.
For more ideas on donating money to charity, such as a child cancer donation program, contact the non-profit organization for assistance.