You are currently viewing The impact of charitable giving on estate planning and probate in Malaysia

Charity giving via your estate planning isn’t necessarily always a bad thing. When people hear “charity”, they may straightaway hold back and not want to lose more money. Though that may be a normal reaction, it does not mean that charity is a bad thing. 

As a matter of fact, charity giving can be a beneficial thing not just for the charity body. It is also beneficial for your estate planning and probate as well. There are various charity bodies in Malaysia you can choose to pledge for a good cause. You just need to find one that you can trust in the long term. 

Tax rebates for charity donation 

If you donate to recognized charity organizations, you are entitled to tax rebates within the country. There are up to a certain percentage of tax rebates you are entitled to when you are filing for your year taxes. The specific amount or percentage of rebates may vary and you may have to check with the relevant departments regarding this matter. 

How much you wish to donate is wholly on your own decisions. People don’t just contribute to charity donations on a personal level. Some people donate on their estate level for the tax rebates too. It all comes down to your own decisions in the end. 

Types of charity donation via estate 

As there are benefits to donating to charity organizations, it is without a doubt both giving and receiving parties can benefit from it. Here are some examples of how charity donation works. 

a.      Charitable giving as part of your will or trust 

This is the most simplest and straightforward way of donating to charities for your estate planning. As it does reap certain tax rebates and benefits, all you need to do is to name a charity organization, foundation, or non-profit organization in your wills or trusts. This type of charity donation are often bequests. 

It can be a general bequest where a monetary gift is paid out of the general estate assets. It can also be a specific bequest where specific monetary amount or items from the estate are given to the charity. Or it can be a demonstrative bequest where monetary amounts from specific parts of the estate be given to the charity. Sometimes, it can also be a residuary bequest where the remainder of the estate are donated to the charity in question. 

b.      Charitable reminder trust 

Charitable reminder trust is also known as split-interest trust. It offers financial benefits for both estates and charities. Charitable interest trusts go into effect when the owner is still alive and around. As soon as the trust is in effect, the owner begins to receive income from the trust up to the point of their death. When the owner and their descendants have passed away, the assets named within the charitable reminder trust will be donated to the charity named in their wills and trusts. 

c.       Donating appreciated stock to charity 

You can also choose to donate appreciated stocks to charity organizations. If you have made any financial gains through the stock market, you can residually donate part of that amount to charities. Or you can donate it in whole when you are no longer around. 

If you choose to sell that particular beneficial charity, you will be liable to pay for capital gain taxes. However, if you donate it to charity, you can avoid having to pay for taxes. Again, you can get a charitable income tax deduction for the full value of the stock at the time of the gift donated. 

Bottom Line 

If you hadn’t know that charity donation entitles you to tax exemption, well then, now you know. You can certainly get tax exemptions from it, but only up to a certain amount or percentage. All you need to do is to include it in your will and trust for such tax exemptions. 

Need help with will writing and trusts? Talk to us today so we can help you with writing your will or trust.