Life Events

Beyond writing a check, several giving techniques can increase what a charity receives, lower your taxes or both. They tend to involve legal documents, so they work best when planned with your advisers.

Donor-advised funds

A donor-advised fund is an account at a sponsoring charity. You contribute cash, securities or other assets, take the deduction in the year of the gift and then recommend grants to charities over time. It can be useful for combining several years of giving into one tax year, or when you have a one-time event such as the sale of a business or a large bonus.

Qualified charitable distributions

If you are old enough to qualify, you may be able to direct a gift from an IRA straight to a charity. The amount can count toward required distributions and is generally kept out of your taxable income. Rules and limits apply, so confirm them first.

Charitable remainder trusts

You transfer assets to a trust that pays you, or other beneficiaries, income for a period or for life. Afterward, what remains goes to charity. Benefits can include an income stream, a partial deduction and deferral of gain on appreciated assets placed in the trust. The trade-off is that the transfer is irrevocable.

Charitable lead trusts

This is roughly the reverse. The charity receives income for a set time, and then the remaining assets pass to your family. It may reduce gift or estate tax on assets passed to heirs.

Charitable gift annuities

You give assets to a charity, and in return it promises fixed payments for life. Part of your gift may be deductible, and part of each payment may be tax-favored. Payments are backed by the charity, so consider its financial strength.

Private foundations

Families with substantial assets sometimes form a private foundation for control over giving and a lasting legacy. Foundations carry setup costs, annual filings, minimum distribution requirements and restrictions on dealings with insiders. A donor-advised fund is often simpler.

Bequests and beneficiary designations

Naming a charity in your will, or as beneficiary of a retirement account, can be efficient. Charities do not pay income tax on inherited retirement funds, while individual heirs generally do.

Before you start

1. Be sure your charitable goals are clear.
2. Compare the cost and complexity of each approach to the benefit.
3. Check the rules at irs.gov or ask us for current limits.
4. Involve an attorney for any trust or foundation.

If one of these strategies might fit you, contact our office and we will help evaluate it.