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Charitable Giving During Your Lifetime: Maximizing Your Impact

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“Lifetime Charitable Giving” by Attorney Cristol Wagner (Audio)

Clients are often curious about the best way to donate to charitable organizations during their lifetime. While there is no wrong way to donate, there are a few options for charitable giving that can help minimize income taxes or even reduce the value of your estate to avoid estate taxes while also accomplishing your charitable goals. These are in addition to the straightforward process of donating to a charity and receiving an income tax deduction. 

1. Qualified Charitable Distributions

The first option is to make qualified charitable distributions or QCDs. This option is available to you if you are an IRA owner aged 70 ½ or older. The IRS allows you to transfer up to $100,000 to charity per year through QCDs. These distributions count towards your required minimum distributions (RMDs) for the year. Therefore, you would not need to pay income tax on the money that is directed to a charity instead of distributed to you. For these distributions to be made tax-free, they must be made directly from the IRA to an eligible charitable organization. 

2. Charitable Remainder Trusts

There are several different options for Charitable Remainder Trusts, also known as CRTs. Generally, a CRT allows you to make contributions to the trust and be eligible for tax deductions based on the assets that will pass to charitable beneficiaries. Contributions to the trust are irrevocable and require that a portion of the CRT income or principal be distributed to you (or another named beneficiary) for a specific period. This can provide a guaranteed stream of income for you. Then, one or more named charities shall receive the remainder of the assets. 

As for tax consequences of CRTs, contributions to a CRT qualify for a partial charitable deduction. This deduction varies based on the type of trust chosen, the term of the trust, the projected income payments, and IRS interest rates that assume a certain rate of growth of trust assets. 

3. Donating Appreciated Securities

If you have stocks that have appreciated exponentially, you can donate them to a charity and avoid paying taxes on the gain. You also get to deduct the full fair market value of the security. 

These are just a few of the many ways to give in line with your charitable inclinations while keeping your estate plan in mind. If you would like to discuss charitable giving and its potential role in your estate plan, please contact us today!

Jon J. Gasior, Estate Planning Attorney
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About Jon J. Gasior, Estate Planning Attorney

His personal experience with family and the problems that resulted from their failure to create an estate plan resulted in his desire to learn more about this area of the law. From his work in the Elder Law Clinic, he further realized the need to plan not only for death, but also for incapacity during their lifetime. About the Author !