Charitable giving can be integrated into estate plans through various options, including Donor Advised Funds (DAFs), Charitable Lead Trusts (CLTs), Charitable Remainder Trusts (CRTs) and donations of cash, real estate, or other assets. A recent article from Citizens Private Bank, “Incorporating charitable giving into your estate plan,” explores these strategies.
DAFs allow donors to contribute money or other assets into an account and later direct payments to their preferred charity. Because the donations are irrevocable, they are considered a completed gift and can be deducted in the year the gift is made. The asset becomes the property of the fund. However, you can generally name the organization you want to receive the distribution. This allows assets to be removed from your estate, even if you aren’t sure which organization you wish to support or how much you want to give.
A DAF can be used to receive assets upon death through a beneficiary designation or by distribution in a will or trust. The fine print: cash donations to a DAF are tax-deductible only up to 60% of adjusted gross income, and deductions for contributions of appreciated securities are limited to 30% of AGI. You can donate private stock and other assets. However, a professional valuation may be needed to determine the deduction. Appreciated assets must be held for more than a year; otherwise, the deduction is limited to the cost basis.
CLTs and CRTs, often referred to as split-interest trusts, distribute income during the term of the trust. At the same time, the remainder of the assets is divided between charitable and non-charitable beneficiaries upon termination of the trust.
The Charitable Lead Trust provides regular distributions to the charity during the term of the trust, which can last up to twenty years or the donor’s lifetime. The donor may be eligible for a tax deduction based on the present value of the annuity stream. However, this depends on how the trust is structured. The donor pays the tax liability on trust income and capital gains. At the end of the trust, the remaining assets go to the trust beneficiaries.
Charitable Remainder Trusts offer tax deductions based on the expected remainder interest, which is ultimately transferred to the charity. The trust creator or a non-charitable beneficiary receives income from the trust for a specific term, and what remains is transferred to the charity at the end of the trust.
Both CRTs and CLTs are strong contenders for those with a charitable mindset. CRTs are especially favored by those who require a steady income and are often utilized by retirees, particularly those who own highly appreciated stocks.
Speak with your estate planning attorney to learn how these charitable methods may complement your estate plan and financial plans. They offer excellent tax advantages, while building a legacy for the future—a win-win for all concerned.
Reference: Citizens Private Bank (July 2025) “Incorporating charitable giving into your estate plan”