Year-End Options for Giving to Charity

• Direct Bequests: The simplest way to include charity in your estate plan is through a direct bequest in your will or trust (“bequest” simply means leaving something to someone in your estate plan, whether it’s money or personal belongings). You can specify a fixed dollar amount or percentage of your estate to go to your chosen charitable organizations. This approach provides flexibility and can be easily modified if your circumstances change. Note that for tax purposes generally, any charitable bequest (to a “qualified” charity per the IRS, typically a 501(c)(3) organization) is tax deductible and will reduce the tax liability of your estate. If you want to receive a tax deduction now, however, give an outright gift. In 2024 you can give up to $18,000 to each person or organization without having to report the gift to the IRS or pay gift tax. That number increases to $19,000 per donee in 2025.

• Required Minimum Distributions with Qualified Charitable Distributions (QCDs). If you're over 70.5 (or have parents who are) and don't need your required minimum distributions (RMDs) from your retirement accounts to live on, here is a tax-saving, life-affirming strategy: Consider making a qualified charitable distribution (QCD) of your RMDs to a 501(c)(3) of your choosing before year-end, and lower your taxes, support your favorite cause or movement, and possibly kick yourself down into a lower tax bracket for your other taxable income. You can distribute up to $105,000 (2024) or $108,000 (2025) directly to a 501(c)(3) public charity of your choice. 

• Charitable Trusts: For those with larger estates, charitable trusts offer sophisticated ways to benefit both charity and your heirs. A charitable remainder trust can provide income to your beneficiaries for a set period, with the remaining assets going to charity. Conversely, a charitable lead trust can provide income to charity for a period, with the remainder going to your beneficiaries. Note that charitable trusts are typically used to save money on capital gains tax as part of a sale transaction.

• Donor-Advised Funds: A donor-advised fund (or DAF) is a way to make charitable contributions during your lifetime to a fund that is then invested and managed by a fund manager, and as the donor, you are able to recommend grants to your favorite charities over time. When using a DAF, you can name successor advisors, enabling your children or other loved ones to continue your charitable legacy through your DAF after you're gone. Gifting to a donor-advised fund is similar to gifting to a family foundation but with minimal administrative time or energy required. On the flip-side, DAFs are often not used as intentionally as they could be. If you have a DAF, or want to set one up, let’s discuss what I mean by this so you can be sure to use yours as intentionally as possible. 

• Family Foundation: For families with more significant assets, and a desire to govern and control the use of those assets, while also creating a lasting legacy, the private family foundation is the way to go. With a private foundation, you control the investments, the governance, the distributions, and can use the foundation as a multi-generational educational tool for the family.

MAKING YOUR CHARITABLE GIVING MORE EFFECTIVE

To ensure your charitable giving achieves maximum impact, consider these important factors:

• Tax Implications: While tax benefits shouldn't be the primary motivation for charitable giving, proper planning can help reduce estate taxes and maximize the impact of your gifts. Certain charitable giving strategies as discussed above, can provide immediate income tax benefits during your lifetime while reducing estate taxes after your death.

• Timing of Gifts: Consider whether making charitable gifts during your lifetime might be more beneficial than waiting until after your death. Lifetime giving allows you to see the impact of your generosity and may provide immediate tax benefits. 

• Selection of Charities: Research potential charitable recipients carefully. Look for organizations with strong track records of effectively using donations to advance their missions. Consider whether you want to support large national organizations or smaller local charities.

INVOLVING YOUR FAMILY

Charitable giving through your estate plan can do more than just support worthy causes – it can help instill philanthropic values in future generations. Consider these approaches:

• Family Discussions: Talk with your family about your charitable intentions and the causes that matter to you. These conversations can help your loved ones understand your values and motivations while potentially inspiring their own charitable giving.

• Collaborative Decision-Making: If you establish a donor-advised fund or family foundation, involve your children or grandchildren in grant-making decisions. This hands-on experience can help them develop their own philanthropic interests while carrying forward your legacy.

• Educational Opportunities: Use your charitable giving as a teaching tool to help younger family members learn about financial responsibility, social issues, and the importance of giving back to the community.

CREATING YOUR CHARITABLE GIVING PLAN

As your Personal Family Lawyer®, I can help you develop a comprehensive charitable giving strategy that aligns with your overall estate planning goals. I'll work with you to:

• Identify the charitable causes most important to you

• Select the most appropriate giving vehicles for your situation

• Structure your giving to maximize tax benefits

• Ensure your charitable intentions are properly documented

• Create a plan for involving future generations

We'll also help you maintain flexibility in your plan, recognizing that charitable organizations and family circumstances can change over time. While estate planning often focuses on what happens after we're gone, charitable giving allows you to start building your legacy today. By thoughtfully incorporating philanthropy into your Life & Legacy Plan, you can create positive change that extends far beyond your lifetime while potentially providing tax benefits for your loved ones.

HOW WE HELP YOU CREATE A MEANINGFUL LEGACY

As your Personal Family Lawyer®, we help you create a comprehensive Life & Legacy Plan that includes charitable giving strategies aligned with your values and goals. We'll work together to ensure your philanthropic wishes are properly documented and structured for maximum impact, while keeping your family out of court and conflict. With your charitable giving plan in place, you can rest easy knowing you've created a meaningful legacy that will benefit both your loved ones and the causes you care about most.

Click here to schedule a complimentary 15-minute consultation and learn how we can help you create your charitable giving legacy.

This article is a service of Sky Unlimited Legal Advisory PC, Personal Family Lawyer® .  We're not your traditional law firm, we stand apart from the rest by helping you make informed and empowered decisions on how to deal with your business throughout life and in the event of an emergency. We offer a complete spectrum of legal services, including a New Business Planning Session or an Existing Business Review Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. You can begin by calling our office at (650) 761-0992 today or book online to schedule a Business Planning Session and mention this article to find out how to get this $950 session at no charge.