Charitable Planning

The charitable gift.  It’s one of the most powerful tools for changing the world.

And to encourage that behavior, the Internal Revenue Service has a complex set of tax breaks for different kinds of charitable giving.  Taking advantage of those rules allows you and your charities to get more out of your giving.

Whether you’re already giving to charity or you would like to start giving, we can help make your gift go farther.

The most common charitable gift is the direct gift of cash or property.  It’s the gift made during the pledge drive, the check left in the collection plate at church, or the sack of given clothes given to Goodwill.

But direct gifts often aren’t the most effective ways to give.  That’s where charitable planning comes in.

What is Charitable Planning?

Charitable planning is first and foremost about helping your philanthropic causes.  And through the use of advanced estate planning techniques you and your charities can get more out of the giving you’re already doing.

How It Helps Your Charities

Your favorite charities can get a significant boost from your charitable planning:

  • Predictable future gifts made as part of an overall estate plan provides the charity with planning and budgeting certainty
  • Charities can receive charitable gifts sooner—often during your lifetime, rather than waiting until you pass away

Why it Makes Sense for You Too

Charitable planning can do much more for you than just providing a direct income tax deduction:

  • Make gifts that effectively allow you to exceed the charitable deduction AGI limit, while helping your family at the same time
  • Avoid future capital gains taxes by donating appreciated property with more leverage
  • Make charitable gifts now while retaining the income that you need to support your lifestyle

Charitable Planning Strategies

We have a number of strategies and tools at our disposal.  Using multiple strategies together as part of a comprehensive charitable plan can provide tremendous benefits to you, your family, and your charities.  A few of the more common strategies are described below.

Charitable Remainder Trusts

A charitable remainder trust (CRT) pays you first and your charities second (ie. the charities get what’s left—the “remainder”).  You get to use the property placed in the CRT for a number of years via an annuity payment from the trust.  At the end of the annuity term, the remainder goes to your charities.  Even though the charity receives its gift in the future, you will receive an immediate income tax deduction based on the projected future gift.

This strategy works especially well with highly appreciated property because the CRT can avoid capital gains taxes on the sale.

There are many variations of CRTs with similar names (for example CRAT, CRUT, and NIMCRUT) that have slightly different terms.  Payments can be made for a specific number of years or for the life of one or more people.  And the annual payments can be fixed, based on a percentage of the assets, or based on the net income of the trust.  There’s enough variety to fit just about any situation.

Charitable Lead Trusts

A charitable lead trust pays your charities first and your family second (ie. the charities are at the front of the line for distributions—they “lead”).  Unlike the charitable remainder trust, the charitable lead trust doesn’t give you an income tax deduction.  Instead, the CLT allows you to make a gift to your beneficiaries but have it treated as a much smaller gift (or as no gift at all) for gift tax purposes.  At the same time, it effectively allows you to bypass your charitable deduction AGI limit because gifts made by the CLT aren’t included in your limit.

A charitable lead trust can be very effective with property that will either produce significant income or appreciate rapidly in the future.  All told, it’s a great way to make charitable gifts and pass extra income or growth onto your heirs estate and gift tax free.

Other Charitable Planning Options

Charitable remainder trusts and charitable lead trusts are two of the more common planning tools, but there are many others. For example:

  • Charitable gift annuities
  • Charitable life estates
  • Private foundations and family foundations
  • Donor advised funds