Smart Ways to Give To Charity

Smart charitable giving

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As an estate planner, I often get asked about smart ways to give to charity, especially considering estate and income tax savings, and here are some strategies:

  1. Charitable Remainder Trusts (CRTs):

  2. Charitable Lead Trusts (CLTs):

    • A CLT works in the opposite way of a CRT. The charity receives the income stream for a specified period, and the remainder goes to your beneficiaries. This can reduce gift and estate taxes on assets transferred to heirs.
  3. Donor-Advised Funds (DAFs):

    • A DAF lets you make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. It offers flexibility and can be a good way to involve family in philanthropic decisions.
  4. Qualified Charitable Distributions (QCDs):

    • If you are 70½ or older, you can transfer up to $100,000 directly from your IRA to a qualified charity without including the distribution in your taxable income. This can satisfy your required minimum distribution (RMD) and reduce your taxable income.
  5. Gifts of Appreciated Assets:

    • Donating appreciated stocks, mutual funds, or real estate held for more than one year can provide a double tax benefit: a charitable deduction for the fair market value and avoidance of capital gains tax on the appreciation.
  6. Bequests in Your Will:

    • Including a charity in your will can reduce estate taxes. You can leave a specific dollar amount, a percentage of your estate, or specific assets to a charity.
  7. Charitable Gift Annuities:

  8. Pooled Income Funds:

    • Similar to a CRT, a pooled income fund allows you to pool your donation with others, receive income based on your share of the pool, and receive a charitable deduction.
  9. Endowment Funds:

    • Creating or contributing to an endowment fund within a charity can provide lasting support and a potential income tax deduction.
  10. Life Insurance Policies:

    • You can name a charity as the beneficiary of a life insurance policy, providing the charity with a significant future gift. Premiums paid may be tax-deductible.

It’s important to consult with a financial advisor or tax professional to understand the specific tax implications and benefits of these strategies based on your individual circumstances and to ensure that your charitable giving aligns with your financial goals and estate planning needs.


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