Planned Giving: Crafting a Strategic Legacy

10 Strategies to Consider

• 1. Bequests in Wills and Trusts: One of the simplest methods, a bequest lets you designate a specific amount, asset, or percentage of your estate to a charity directly in your will or trust. Bequests are popular for their simplicity, flexibility, and ability to adjust as life circumstances evolve. They’re ideal if you want an easy way to leave a legacy while retaining control of your assets during your lifetime.
  2. Charitable Remainder Trusts (CRTs): A CRT is ideal if you’re looking for a way to balance philanthropy with financial needs in retirement. This trust provides income for you or other beneficiaries over a set period, with the remaining assets going to charity. Funding a CRT may qualify for income tax deductions and potentially avoid capital gains tax on appreciated assets—making it a win-win for those preserving income while supporting a cause.
  3. Charitable Lead Trusts (CLTs): A CLT works in the opposite way of a CRT. The charity receives income from the trust first, and the remaining assets eventually pass to your heirs. This option suits those wanting to impact charitable causes immediately while reducing estate taxes for beneficiaries.
  4. Pooled Income Fund (PIF): Similar to a CRT with minor differences, a PIF provides income for you or other beneficiaries over a set period, with the remaining assets going to charity. Funding a PIF may qualify for income tax deductions and potentially avoid capital gains tax on appreciated assets.
  5. Donor-Advised Funds (DAFs):  DAFs are known for their flexibility. By contributing to a DAF, you make an immediate tax-deductible gift, and then distribute grants to charities over time. DAFs suit those who want to make an impact now while keeping options open for future giving.
  6. Life Insurance Gifts: Life insurance can be a powerful tool for planned giving. Naming a charity as the beneficiary—or transferring ownership of an existing policy—creates a substantial future gift with a small ongoing investment. This approach offers tax benefits and turns an underutilized asset into a lasting legacy.
  7. Retirement Assets (IRAs, 401(k)s): Retirement accounts are among the most tax-efficient assets to leave to charity since qualified charities don’t pay income tax on these gifts. Designating a charity as the beneficiary of your IRA or 401(k) maximizes the value of your gift while sparing heirs from hefty income tax.
  8. Charitable Gift Annuities (CGAs): A CGA offers a predictable income stream during your lifetime, with the remaining value going to a designated charity. It’s an ideal solution for those wanting a steady income while supporting a cause. With potential tax deductions and reduced capital gains liability, CGAs balance philanthropy with financial planning.
  9. Real Estate Gifts: Real estate gifts can have an outsized impact, allowing you to contribute more than you might otherwise feel comfortable giving. Options include outright donation, charitable trusts, or retained life estates. Each has distinct tax advantages and can provide significant support to your chosen cause.
  10. Bargain Sales: A lesser-known strategy, a bargain sale allows you to sell property to a charity at less than market value. The difference between the sale price and the property’s market value is treated as a charitable gift, offering a tax deduction and cash payout—ideal for those seeking both liquidity and substantial contribution.

Planned Giving Vehicle Matrix

Source: fpPathfinder

Key Considerations

• • Define Your Legacy Goals: First, consider the intent. Then, clarifying your purpose will help narrow down the best-suited strategies.
  • Assess Financial Needs and Timeline: Consider whether you need an income stream or prefer immediate impact.
  • Tax Implications and Estate Size: Consult with a tax professional and financial advisor for the best strategies to reduce tax burdens.
  • Consider Family and Heir Needs: Planned giving can provide for both charity and family, with options like charitable lead trusts.
  • Consult Professionals: Estate planning attorneys or financial advisors specializing in philanthropy can provide essential guidance.
  • Reevaluate Periodically: Regularly reviewing your planned giving strategy ensures alignment with your evolving goals.

Common Questions on Planned Giving

• • Can I change my mind about a planned gift? Yes. Many planned giving options, such as bequests or beneficiary designations, allow modification or revocation if circumstances change.
  • What are the tax benefits? Planned giving offers income tax deductions, estate tax reductions, and minimizes capital gains taxes.
  • How can I ensure my family is still provided for? Many options, like charitable lead trusts, benefit both charity and heirs.
  • Is there a minimum amount required? Bequests can be small, though some options, like charitable annuities, may have minimums.
  • Can I support multiple charities? Yes, especially through vehicles like donor-advised funds or trusts.
  • What assets can I use? Common options include cash, stocks, real estate, retirement accounts, and life insurance.

Downloads

1. COMMON CHARITABLE GIVING VEHICLES
2. CAN I DO A QUALIFIED CHARITABLE DISTRIBUTION FROM MY IRA?
3. COMMON DEDUCTIBLE CHARITABLE GIFTS
4. SHOULD I USE A DONOR-ADVISED FUND (DAF) WHEN GIVING TO PUBLIC CHARITIES?
5. WHAT ISSUES SHOULD I CONSIDER WHEN ESTABLISHING MY CHARITABLE GIVING STRATEGY?

Resources

1. “Leaving a Legacy Through Wills and Trusts” by the American Bar Association.
2. The Complete Guide to Wills, Estates, & Trusts by Alexander A. Bove Jr.
3. Internal Revenue Service (IRS) Charitable Remainder Trusts (CRT) Guidelines
4. Planned Giving in a Nutshell by Craig C. Wruck, covers CRTs extensively.
5. Charitable Lead Trusts Explained by Fidelity Charitable.
6. The Tools & Techniques of Charitable Planning by Stephan R. Leimberg et al., with in-depth information on CLTs and related planning strategies.
7. Donor-Advised Funds: An Overview by the National Philanthropic Trust.
8. Charity on Demand: Understanding Donor-Advised Funds by Thomas J. Billitteri.
9. Using Life Insurance for Charitable Giving by the Chartered Life Underwriter (CLU) Association.
10. Charitable Giving through Life Insurance by the American College of Financial Services.
11. IRS Publication 590-B on Distributions from Individual Retirement Arrangements (IRAs), detailing tax implications for charitable giving from retirement accounts.
12. Retirement Assets and Charitable Giving by Conrad Teitell, a noted expert in tax and estate planning.
13. Guide to Charitable Gift Annuities by the American Council on Gift Annuities (ACGA).
14. The Philanthropic Planning Companion by Brian M. Sagrestano and Robert E. Wahlers covers CGAs in detail.
15. Real Estate Charitable Giving Guide by the National Association of Charitable Gift Planners (NACGP).
16. Giving Back: Discover Your Personal Path to Philanthropy by Linda K. Spencer, which includes a section on real estate gifts and tax-efficient giving.
17. The Benefits of Bargain Sales in Charitable Giving by the National Council of Nonprofits.
18. Structuring Charitable Gifts of Non-Cash Assets by Bryan Clontz provides extensive insight into using assets like real estate in planned giving.

Disclosures

1. Cestia Wealth Management is not a legal tax professional. We offer tax gap analysis for clients who desire to have a comprehensive financial plan, which requires in-depth tax strategy and planning as a distinct part of the overall customized solution. Please consult your tax professional on all matters addressed in this report.
2. Wealth Mechanics™ is a registered trademark of Cestia Wealth Management. Unauthorized use of the trademark, including but not limited to commercial use, reproduction, or imitation without explicit written permission from Cestia Wealth Management, is strictly prohibited.
3. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.
4. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through NewEdge Advisors, LLC dba Cestia Wealth Management, a registered investment advisor and separate entity from LPL Financial. Cestia Wealth Management employs (or contracts with) individuals who may be (1) registered representatives of LPL Financial and investment adviser representatives of Cestia Wealth Management; or (2) solely investment adviser representatives of Cestia Wealth Management. Although all personnel operate their businesses under the name Cestia Wealth Management, they are each possibly subject to differing obligations and limitations and may be able to provide differing products or services.