The Relationship Between Estate Planning and Charitable Giving

Making charitable donations is already a vital part of many high-net-worth individuals’ financial plans, allowing them to reap personal financial benefits while also supporting the causes they care about most. Many choose to leverage the power of incorporating charitable giving into their estate planning. 

Incorporating planned giving into your estate plan can foster a culture of giving among your beneficiaries, offer continued support to causes and organizations you care about most, and cement your family’s lasting legacy. 

By strategically planning charitable donations throughout your lifetime and meticulously constructing a giving infrastructure for after you’re gone, you can potentially maximize your impact, and reduce tax burdens on your estate for generations to come. 

Whether you’re a high-net-worth individual contemplating your estate planning needs or a professional advisor looking to enhance your client’s giving, if you’re interested in incorporating strategic giving into your estate plan, call Greater Houston Community Foundation at 713-333-2210 or email to get started.

Key Insights

• Incorporating planned giving into estate plans offers continued support to meaningful causes, allows you to reap tax benefits, and solidifies a family’s lasting legacy.
• Strategically planning charitable donations can maximize impact and reduce estate tax burdens long into the future. 
• Charitable gifts can significantly reduce estate taxes but must be made to qualified charitable organizations to maximize benefits.
• Various estate planning instruments, including wills, trusts, and beneficiary designations, offer flexibility in making charitable contributions and achieving tax advantages.
• Greater Houston Community Foundation is your trusted partner as you navigate the complexities between estate planning and charitable giving.

Table of Contents

• Charitable giving and its role in estate planning
• Charitable gifts and estate taxes
• Giving-focused estate planning strategies 
• The many tax benefits of charitable giving
• Plan better with a partner

What is charitable giving in estate planning? The importance of estate planning and the role of charitable giving

Estate planning is an essential piece of any individual’s financial plan. Without a comprehensive estate plan in place, how can you be sure that your assets will be distributed according to your wishes? While your financial future without an estate plan is uncertain, a comprehensive estate plan can ensure that your family and your legacy will remain managed for generations to come.

How can contributions to charitable organizations help in estate planning? Charitable giving in your estate plan should play a role similar to that of charitable giving in your financial plan, and look to accomplish three main objectives:

1. Supporting the causes that you care most about. 
2. Reducing overall estate tax liability. 
3. Cementing you and your family’s philanthropic legacy. 
4. Providing clarity to your charitable wishes.

Continue reading about the intersection of charitable giving and financial planning

Do charitable gifts reduce estate taxes?

The short answer is yes, charitable gifts provide an unlimited charitable deduction from your estate and can significantly reduce estate taxes. The federal government provides a charitable deduction for estate tax purposes, allowing the full value of the charitable gift to be deducted from the taxable estate. When you make a charitable gift as part of your estate plan, the value of that gift can be deducted from the gross value of your estate. 

The most significant caveat is that in order to take advantage of these deductions, the gift must be made to a qualified charitable organization. Charitable gifts will lower the overall value of your estate, and therefore, the amount of estate tax owed. It is best to work with a professional advisor to ensure that you’re getting the most value out of, and making the most impact with, your charitable gifts. 

Estate planning strategies that incorporate charitable giving

There are a number of estate planning strategies that incorporate charitable giving, as well as significant flexibility in how you can make charitable donations so that you can make your charitable contributions work for you. 

Deductions and credits can reduce estate taxes

As we mentioned, the most evident way in which charitable gifts can benefit your estate plan is by reducing estate taxes through deductions and credits. The value of your qualified charitable donations can be deducted from the total value of your estate, and bring down the value of your taxable estate.

Flexibility in donation vehicles

Qualified charitable donations can be made through various estate planning instruments, including wills, trusts, and beneficiary designations.

• Wills: Your will can include specific gifts to charitable organizations of your choice, either as a fixed dollar amount, a percentage of the estate, or gifts from the remainder. Wills are one of the simplest ways you can incorporate giving into your overarching estate plan. 
• Trusts: Charitable remainder trusts or charitable lead trusts can be used to provide future financial support to one or more organizations. Trusts allow you to be more specific about the distribution conditions of your gift, and can also give the donation itself more protection, while simultaneously lowering your tax burden. Trusts can also provide loved ones an income stream for a period of years or their lifetime.
• Beneficiary designations: You can also name your favorite charities as beneficiaries of your retirement accounts and life insurance policies. Naming charities as beneficiaries is a simple and incredibly efficient way to make charitable donations. 

Assets

Can you dictate assets you want given to charity in your estate plan? Absolutely, and there are many types of assets that charitable organizations accept, including:

• Cash: Direct cash donations are the simplest form of charitable gift. They can be made during your lifetime or through your estate plan in any of the vehicles previously mentioned.
• Real estate: Donating real estate can provide your estate significant tax advantages, as the value of the property donated is deductible, and you may avoid capital gains tax on its appreciation. 
• Appreciated securities: These assets include stocks, bonds, or options, and can provide two-fold tax advantages much like real estate donations. 
• Tangible personal property: Assets such as jewelry, art, and coins.

Learn more about the range of giving options that enable you to support the causes and organizations that matter most to you

Tax benefits of charitable giving

There are a number of ways in which you can benefit from incorporating planned giving into your larger estate plans. 

Federal income tax deduction for charitable contributions

In addition to lowering your taxable estate, the federal income tax deduction for charitable contributions allows you to deduct the value of your charitable gifts from your taxable income. You may take this deduction only for contributions to qualified charitable organizations, which can include public charities, private foundations, and some governmental entities. 

Continue reading about staying on top of legal developments in charitable giving

Partner with Greater Houston Community Foundation to unite your estate planning and charitable giving

The relationship between estate planning and charitable giving is a complex, but mutually beneficial one. Developing philanthropic goals is just the first step in leaving behind your legacy. Next comes careful planning, and, along with the help of trusted professional advisors, the unifying of your current financial situation and your vision for the future.

Whether you’re interested in opening a donor advised fund, starting a scholarship fund, or are an advisor looking to enhance your client’s charitable capabilities, Greater Houston Community Foundation can help. 

The Foundation can act as an extension of your philanthropic efforts, helping to maximize your impact and make sure you’re reaping the benefits. Call us at 713-333-2210 or email to get started.

More Helpful Articles by Greater Houston Community Foundation: 

• Wealth with a Purpose: 6 Questions to Ask Your Clients About Legacy Giving and Beyond
• The Surprising Benefits of Philanthropy on Your Well-being
• What Are Qualified Charitable Distributions?
• What to Do with an Inheritance
• The Future Is Now: What Is Next-Gen Philanthropy?

This website is a public resource of general information that is intended, but not promised or guaranteed, to be correct, complete and up to date. The materials on this website, including all comments and responses to comments, do not constitute legal, tax, or other professional advice, and is not intended to create, and receipt or viewing does not constitute, nor should it be considered an invitation for, an attorney-client relationship. The reader should not rely on information provided herein and should always seek the advice of competent legal counsel and/or a tax professional in the reader’s state or jurisdiction. The owner of this website does not intend links on the website to be referrals or endorsements of the linked entities.