NEW YORK (MainStreet) – At its core, estate planning is an existential question.
It digs to the root of humanity and addresses directly what someone wants their impact on the world to be once they're gone. Property and wealth can be distributed to the benefit of future generations, but financial advisors note that heirs and greater society alike can benefit from considerable investment in charitable causes and contributions.
“What difference do we make in the world, how do we leave our mark in this world and how do we leave this world a better place?” says Masood Vojdani, founder of MV Financial in Bethesda, Md. “It sounds cliched, but a man could make a change by giving back to a world that allowed him to be successful enough to make $20 million, $30 million or $40 million. You could give that money and make a difference to causes that you care about, and you avoid taxes and get the government to pay for it.”
The immediate personal benefits of charitable donation are fairly simple. The Internal Revenue Service allows taxpayers to deduct donations up to 50% of their adjusted gross income when those gifts are given to public charities or certain private foundations. Even for gifts to family or other non-qualifying foundations, the deduction can be as large as 30% of all adjusted gross income.
“If a taxpayer itemizes her deductions, the charitable donations she makes will lower her taxable income,” says Shomari Hearn, certified financial planner and vice president of Palisades Hudson Financial Group in Fort Lauderdale, Fla. “However, the tax benefit she derives is secondary to her intention to help others. This is because the tax savings received will be less than the value of the contribution.”