Charitable Planning


charitable planning givingWe encourage and assist the tradition of giving to charitable causes. In addition to the many personal rewards inherent in making a charitable gift, most gifts also provide a current charitable income tax deduction. Some charitable giving strategies also save capital gains taxes, increase income, and provide you, or whomever you designate, with an income for life. Additionally, these types of gifts may provide an estate tax deduction — an important consideration in planning your estate. A wide variety of techniques may be used to maximize these saving opportunities, but the ultimate results may be achieved only by careful planning and analysis. Individuals should not make important financial decisions, including the decision to make significant charitable contributions, without considering the effect they will have on their personal and family wealth planning.

The simplest way to give to a charity is by making an outright gift. Outright gifts can be made either during a person’s lifetime or at death, with the donor receiving tax benefits. The availability and amount of those benefits depend on several factors, and the charitable gift must be properly structured to maximize the tax advantages. Some of the factors we discuss with our clients are:

  • The type of property given (e.g. cash, stock, real estate, short term or long term)
  • The nature of the charitable organization
  • The value and tax basis of the gift
  • The potential giver’s contribution base (adjusted gross income, without regard to net operating loss)
  • The charitable deduction interplay between or among other charitable gifts made in the same year or “carried over” from prior tax years

Types of Bequests

A direct bequest to a charitable organization can take several forms. A cash bequest provides that your charity received a specific dollar amount. You can also give tangible personal property such as a residence or a piece of artwork.

A residuary bequest allows your charity to receive everything after estate expenses and specific bequests have been paid. Furthermore, you can leave the remainder of a retirement plan to your charity.

Alternatively, you might want to consider a contingency bequest, which would allow your charity to receive your assets, only in the event of the death of your other beneficiaries.

Charitable Trusts

Gifts can also be made through the use of charitable trusts upon your death. Some of these trusts can benefit both a charity and the beneficiaries of your estate. These types of trusts are commonly known as “split-interest trusts.”

Some examples of split-interest trusts include the following:

  • Charitable remainder trusts: Designated beneficiaries receive the benefit of the assets within a charitable remainder trust while they are alive. Upon the death of the beneficiaries, the remaining assets in the trust are distributed to a designated charitable organization. A charitable remainder trust offers a significant estate tax deduction, gives a donor control over assets distributed to heirs, and provides a philanthropy opportunity when your loved ones are no longer capable of benefiting from the assets within the trust.
  • Charitable lead trusts: A designated charitable organization receives the benefit of assets within the trust for a specific number of years. The remaining assets within the trust are then distributed to designated beneficiaries. A charitable lead trust offers a significant tax deduction, enhances philanthropy opportunity until your beneficiaries (usually grandchildren) are responsible enough to manage the assets within the trust, and affords control over distribution of inheritance to grandchildren or other loved ones rather than to wealthy children, thereby also reducing their taxable estate.

Charitable Foundations and Gifts

We can:

  • Obtain and maintain the charitable status of family foundations.
  • Plan and implement charitable lead trusts, including charitable lead unitrusts designed to leverage the generation-skipping tax exemption as well as more traditional charitable remainder trusts.
  • Ensure compliance with state and federal regulations on foundation investments.
  • Administer large estates through sophisticated split-interest charitable trusts.

Gift Planning

We establish annual gifting programs, which may be one of the most effective ways to minimize estate taxes and protect family assets. We emphasize aggressive planning and creative trust vehicles to leverage your gift tax exclusions and credits. We ensure full tax compliance in all our giving strategies, and regularly secure Private Letter Rulings and other guidance from the IRS to allow effective gift and generation-skipping tax planning.

Exempt Organizations

We help tax-exempt organizations secure and maintain their charitable status, which often involves guidance on establishing the most effective grant-making policies. We often counsel exempt organizations on their investment, reporting and tax obligations under state and federal laws, particularly those that involve ownership of for-profit subsidiaries. If IRS questions arise over tax-exempt status, we will respond to audits and inquiries and secure letters of determination.

Charitable Trusts and Foundations

As part of our practice, we have considerable experience in advising charitable organizations about endowment development programs, including the structuring and operation of donor-advised funds and supporting foundations.

If given the choice between paying taxes or making a charitable gift, most people would choose the latter, because it gives them the benefit of knowing who the money will benefit and how it will be used. We help clients make charitable gifts and practice good stewardship in the most tax-efficient manner. Whether you have been involved in a charitable activity that you would like to see continued beyond your lifetime or whether you would simply like to consider ways of integrating charitable giving into your family’s wealth management plan, our office can assist you in meeting your goals.