2010 Estate Tax & Charitable Giving

We’ve previously discussed how 2010 is a ‘fabulous year to die‘ due to the expiration of the federal estate tax. But how has the presence & absence of that tax had a direct effect on charitable giving?

But it wasn’t really an equal choice. With the government taking a large chunk for the estate tax, the choice was to leave a portion to heirs after the IRS took its chunk, or leave the full pretax amount to charity. In other words, for each $1 of the estate, the wealthy could leave $1 to charity, or they could leave 55 cents for their heirs and 45 cents to the IRS (with various caveats for spouses, thresholds etc).

As of Jan. 1, however, there is no estate tax, at least for a year. So the wealthy now have a more equal choice: $1 for heirs, or $1 for charity.

We’re not talking about going from a 45% estate tax to a 35% tax. We are talking about from 45% down to zero. Does this mean people won’t give to charity anymore? No. Of course they’ll give to charity; just less.”

“Virtually every well-to-do person sitting down with a lawyer to talk about their will gets into a conversation about whether he needs to do something for his church, his university, whatever,” Mr. Gates said. The estate tax, he said, “is a gigantic element for philanthropy in this country.”

It is certainly an interesting question. Historically, liberal folks have supported the estate tax and conservative folks have protested it. Of course, as we have discussed before, conservatives are substantially stronger charitable givers. So, in the absence of an estate tax, maybe there would be more charitable giving than we think. What do you think? How would an estate tax effect your estate planning?

Article | The New Estate-Tax Math: Give to Charity or Your Children? – WSJ
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