Estate Planning and Charitable Giving

Leaving a legacy requires navigating gift and estate taxes. Proper planning ensures your money goes to your family or chosen charities rather than the federal government.

18. Volunteer and Charitable Expenses

Retirees form the backbone of the American volunteer workforce. While you cannot deduct the value of your time, you can deduct the out-of-pocket expenses associated with your volunteer work. If you drive for Meals on Wheels, transport rescue animals, or drive to a hospital to volunteer, you can deduct your mileage at the IRS charitable rate. You can also deduct the cost of purchasing and cleaning required uniforms, as well as any supplies you purchase out-of-pocket for a recognized 501(c)(3) organization.

19. The Annual Gift Tax Exclusion

If you want to help your children buy a house or fund your grandchildren’s college education, you can utilize the annual gift tax exclusion. The IRS allows you to give up to a specific amount (which adjusts for inflation, reaching $18,000 to $19,000+ in recent tax years) to as many different people as you want without having to file a gift tax return or eat into your lifetime estate tax exemption. A married couple can effectively double this amount per recipient. Giving money away while you are alive reduces the size of your taxable estate and allows you to watch your family enjoy the funds.

20. The Step-Up in Basis

While this is technically a tax break for your heirs, the “step-up in basis” is the cornerstone of senior estate planning. If you hold onto highly appreciated assets—like a stock portfolio or real estate—until you pass away, the tax basis of those assets “steps up” to their current market value on the date of your death. If your heirs sell the property the next day, they owe zero capital gains tax. This rule incentivizes retirees to spend down their tax-deferred IRA money first while holding onto taxable brokerage assets to pass on tax-free.