Charitable Giving Strategies
A strategic approach to charitable giving allows you to incorporate philanthropy into
your overall wealth management and estate planning strategies. It also helps benefit
charitable organizations meaningful to you and your family by providing consistent
support.
The PNC Center for Financial
InsightSM builds bridges from
thought to action, creating
practical, applicable
strategies to help benefit you
and your family.
Many individuals make gifts directly
to charitable organizations. It is
simple and may provide tax
advantages. There are, however,
strategic charitable giving options to
maximize benefits to the donor, the
donor’s family, and charitable
organizations. A structured approach
to charitable giving provides many
benefits, including creating a legacy
and involving family members, as
well as several tax advantages.
Beneficiary Designations
Donors can designate a charitable
organization as a beneficiary of their
will, retirement plan, individual
retirement account (IRA), life
insurance policy, annuity, or any other
asset that passes by contract, such
as a payable on death account. The
charity can be the primary beneficiary
or one of several beneficiaries.
Accounts with named beneficiaries
are generally not subject to probate;
however, designating a charitable
beneficiary under a will is subject to
probate. Distributions of retirement
assets that would be subject to
income tax, such as from a traditional
IRA, are also exempt from income tax
when passing to a charitable
organization.
Charitable Remainder Trust
If you want to make a future gift while
retaining the right to income from the
assets during your lifetime, you could
consider a charitable remainder
trust. This is an irrevocable trust
funded with either cash or property.
You retain the right to an income
stream that is either a fixed amount
or a fixed percentage, such as with a
charitable remainder annuity trust
(CRAT) or charitable remainder
unitrust (CRUT). Income is paid for a
number of years or for the life of the
income beneficiary. When the trust
ends, the assets pass to the
charitable entity.
You may be entitled to a tax deduction
when you transfer assets to the trust.
Also, by donating highly appreciated
property to the trust rather than
selling it and donating cash, you avoid
incurring capital gain tax on the sale
of the property since the trust, not
you, owns the property.
Keep in mind that such a trust is
irrevocable, so you cannot terminate
it or change the terms (other than
retaining a power to change
charitable beneficiaries). Also, the
assets in the trust will not be
available for your heirs.
Charitable Lead Trust
Like the CRAT or CRUT, the
charitable lead trust makes periodic
payments for a term of years or for
life, but the payments go to a
charitable entity rather than to the
donor or another individual. When the
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trust ends, the remaining assets
return to you or pass to other
noncharitable beneficiaries, such as
your children. Depending on how the
trust is structured, you may be
entitled to an income tax charitable
deduction when assets are
transferred to the trust.
be immediately distributed to a
charity. You may retain the ability to
make recommendations for
distributions to charitable
beneficiaries. This is helpful if you
want to take a charitable deduction
but are not yet sure which charities
you want to support.
Donor-Advised Fund
Conclusion
If you would like to make multiple
gifts but are tired of the paperwork,
consider creating a donor-advised
fund. This is a charitable fund
managed by a community foundation
or a charitable entity created by a
bank or other organization.
Certain of these charitable giving
methods allow you or your heirs to
benefit from your assets while also
providing needed funds to charity. If
these options interest you, you should
consult with your attorney or other
financial advisor since significant
planned gifts should be incorporated
into your overall estate plan.
Contributions to a donor-advised fund
are tax deductible; however, assets
transferred to the fund do not need to
For more information, please contact your Hawthorn advisor.
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