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Tax laws could impact charitable giving choices

The changes to estate tax law that took place as part of the Tax Cuts and Jobs Act of 2017 have sparked discussion in California and across the country regarding their potential impact on charitable giving as part of estate planning. Over the years, bequests to charities included in a will have been exempt from federal estate taxes, making them particularly appealing to wealthy donors whose gifts to their children and other family members could face significant tax burdens. However, after the individual exemption from estate tax was doubled to $11.18 million, only 0.2 percent of estates in the country could potentially still face federal inheritance taxes.

This means that the tax benefit for charitable gifts during estate planning is less likely to be a factor in choosing philanthropy. However, charitable giving as part of one's estate is unlikely to decline as a result to changes in tax law. In fact, people may feel more inclined to make a charitable donation in their will knowing that their heirs will enjoy a greater portion of their fortune due to an enhanced estate tax exemption.

Other changes to tax law might mean that the use of living trusts and other trust instruments could grow as a means of providing immediate income tax benefits for people thinking about the future of their assets. Now that the standard deduction for couples over 65 has increased to $25,600, charitable gift annuities or gifts to a charitable remainder unitrust could allow donors to itemize additional costs or gifts.

When planning for the future, a full picture is important to make the best financial decisions for one's family. An estate planning attorney may help individuals create wills, trusts and other important documents that reflect their wishes for the future of their assets and make the most of current tax law to benefit their heirs.

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