As there is no estate or inheritance tax in Australia, I think it makes much more sense to give money to charity while you are alive rather than in your will. If I give money in my will, my children will have less but no tax benefit from giving money. If I give while I am alive then I can claim a tax deduction. Or am I wrong?
P.S. 6 February
I thought of an alternative approach. You can write in your will that your children need to make contributions to charity from the money they receive. That way they can take tax deductions instead. The advantage of this is that if you are unsure if you will run out of money in retirement you can direct your children to make donations if you didn't run out of money. The downside is that they may not follow your directions. Maybe there is some trust structure that enforces this. Also, you don't get to see the benefits of your donations.
3 comments:
Estate tax planning is a specialist area, so I'd suggest getting expert advice (although I don't think it comes cheap). It seems like it might be worthwhile leaving assets that have CG to charities rather than your kids (who wouldn't pay CGT on receipt, but would eventually pay CGT on disposal) - https://www.quinns.com.au/blog/tax-planning-charitable-donations-in-wills/.
If leaving some super balance to a non-dependent child (i.e. generally adult kids) as a death benefit, the ratio of untaxed to taxed super can have tax implications, so re-contribution strategies might help.
Taking some excess untaxed super pension income and gifting it to your kids as undeducted contributions into their super while you are alive might also be tax effective means of intergenerational wealth transfer, but you'd want to check that theory ;)
I vaguely recall some tax planning benefits of setting up your own charitable trust, so that might also be worth looking into as part of your charitable giving/tax/estate planning considerations.
Giving some assets to charities (directly or into a charitable trust) while you are alive, rather than making the bequest via your will also might have some positive benefits when it comes to distributing your estate. Rather than $X being split amongst wife, kids and charities in the will, you would instead have $Y being simply split between wife and kids ($Y = $X - previous charitable gifting while you were alive). That might avoid any unhappiness if your beneficiaries have different viewpoints regarding how much and to which charities you should have left your estate to. They can't miss what was never part of your estate.
Putting funds into an investment bond with a charity as the nominated beneficiary might also provide the benefit of it not being seen as part of your estate by your wife and kids, and not being subject to contesting your will, and would also retain the funds under your control (in case you suddenly needed the funds you could always withdraw them prior to your death).
Yes, I plan on getting estate planning advice later this year after I have the SMSF in place. I hadn't thought about the CGT on inherited assets dimension. That does tilt things a bit towards leaving money to charity in a will but I think doesn't change the basic equation that taking tax deductions while alive increases the available money to both charities and children. This was a general blogpost, not neccessarily about anything I plan to do :)
My children are 2 and 5 years old now. So was mainly concerned with issues of leaving money to minor children but there are lots of other things to think about here.
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