Charitable gifts provide excellent vehicles for families to fulfill their philanthropic desires. Gifts to charitable organizations may be made during the donors' lifetimes or upon their death. Charitable gifts generally produce income, gift, and estate tax benefits for the donors. Properly structured planned gifts can benefit both the donor(s) and other natural objects of their bounty (family members or friends, for example) as well as the charities of their choice.
The particular type of gift a donor may choose should depend on his or her non-tax, non-charitable objectives. Said another way, charitable gift planning should be part of an overall estate plan that meets both charitable and non-charitable objectives. Under the caption "Charitable Gift Planning" on this website, you will find a brief description of more than a dozen types of gifts that serve different objectives. In some cases, there are multiple variations of the different types of gifts listed. Charitable remainder trusts are frequently used to provide income for the donors for the remainder of their lives with the trust corpus passing to charity after the death of the donors. Charitable lead trusts may be used to transfer unneeded income to charity for a period of time, with the trust corpus passing to other family members at the end of the trust term. Charitable bequests are appropriate for those individuals who want to support charitable organizations, but who must retain all of their assets to provide for their lifetime financial requirements. Families often satisfy charitable desires through lifetime and testamentary gifts and still provide for their heirs through wealth replacement life insurance. Typically, no single type gift will meet all of a donor's charitable and non-charitable objectives. A combination of charitable vehicles may be required; the list of possible combinations is endless and requires an understanding of the donors' objectives and creative planning to produce an optimal plan.
While charitable gifts generally produce income savings, the income tax economics alone are generally insufficient motivation for a donor to make charitable gifts. Philanthropic desires should be the prime motivation for gifts. People give to people, to causes they endorse, and to organizations that support and perpetuate the donors' values. While charitable gifts may be somewhat more sensitive to estate tax savings than income tax benefits, reduced or eliminated death taxes simply provide individuals with more wealth to leave to both family and charitable institutions. Since the various types of charitable gifts meet both non-tax, non-charitable objectives, these various types should remain viable wealth transfer vehicles without regard to substantial changes in transfer tax laws.
We have helped individual donors in structuring their lifetime and testamentary charitable transfers, and our charitable organization clients in working with their donors to understand and quantify the benefits of making lifetime gifts as well as through their estate planning documents. We invite you to review the various types of gifts listed on this website and contact us for help in planning your charitable estate.
©2008 Ronnie C. McClure, PhD, CPA