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Planned Charitable Giving

A Boyd 2014
Amy K. B. Ertel, Esq., CTFA
Senior Vice President, Senior Trust Officer - Team Leader
[email protected]
(585) 419-0670 x41960

Charitable institutions stand to benefit as the first wave of baby boomers reach the stage where they are able to make significant charitable gifts. If you're like many Americans, you may have also considered donating to charity. While writing a check at year-end is one of the most common ways to give, planned giving may be even more effective.

What is planned giving?

Planned giving is the process of strategically thinking about charitable giving to maximize the personal, financial, and tax benefits of your gifts. For example, you may need to receive income in exchange for the assets you donate, or you may want to be involved in deciding how your gift is spent; all aspects that cannot be typically be done with standard checkbook giving.

Questions to consider

To help you start thinking about your charitable plan, consider these questions:

  • Which charities do you want to benefit?
  • What kind of property do you have available to donate (e.g., cash, low-basis stocks, retirement assets, life insurance)?
  • Do you want the gift to take effect during your life or at your death?
  • Do you want to retain an interest in the property you donate?
  • Do you want to be involved in deciding how your gift is spent?
  • Do you have a specific tax-benefit goal in mind for your gift?

Gifting strategies

There are many ways to donate to charity, from an outright cash gift to a more complex trust arrangement. Each option has strengths and tradeoffs, so it is a good idea to consider which strategy is best for you. Here are some common choices:

Outright gift. An outright gift is an immediate gift for a charity's benefit only. It can be made during your life or at your death through a specific bequest in your estate planning document, like your Will. With outright gifts, you retain the least amount of control compared to the other methods.

Charitable trust. A charitable trust allows you to split a gift between charitable and non-charitable beneficiaries, allowing you to integrate your financial needs with your philanthropic desires. The two main types of charitable trusts are charitable remainder trusts and charitable lead trusts. A typical charitable remainder trust provides an annuity or unitrust amount for a person or persons for life. An annuity interest provides fixed payments, while a unitrust amount provides for payments of a fixed percentage of trust assets that are valued annually, such as a 5% unitrust. At the end of the trust term, usually a time span or for an income beneficiary’s life, the assets remaining in the trust pass to the charity. This can be an attractive strategy for charitably inclined individuals who still need to retain an income stream. With a charitable lead trust, the order is reversed; the charity gets the first, or lead, interest and the non-charitable beneficiary receives the remainder interest at the end of the specified trust term.

Charitable gift annuity. A charitable gift annuity provides a fixed annuity for one or two persons for life. It may be easier to establish than a charitable remainder trust because it does not require a formal trust document.

Private foundation. A private foundation is a separate legal entity you create that makes grants to charities. You and/or your family members, with the help of professional advisors, run the foundation determining how assets are invested and how grants are made. But, private foundations are obliged to follow many rules and regulations for governance, which can be costly.

Donor-advised fund. A donor-advised fund is similar to a private foundation, but less burdensome and less costly. It is an account held by a public charity who manages the assets for you. You surrender ownership and control of the funds but retain the ability to advise, but not direct, how your assets will be invested and how grants will be made.

Tax benefits

Charitable giving can provide you with great personal satisfaction, but the tax benefits are valuable, too. When you make the donation, you can claim a charitable deduction on your personal income tax return to significantly reduce your income tax. Also, you can reduce your capital gains taxation if you gift low-basis stock to a charity. Rather than selling stock initially purchased at a low amount and realizing capital gains, you gift the low basis stock directly to charity and not have to realize those gains. Planned giving can be valuable when estate tax planning. Any amount gifted during life reduces your estate which in turn reduces estate tax exposure. Any charitable gifts after death can be used for charitable deductions on the estate tax return. With a charitable remainder trust, you generally receive an up-front income tax deduction equal to the estimated present value of the interest that will eventually go to charity. There are general limits on charitable contribution deductions based on your adjusted gross income, the type of charity and the property donated. Please consult your tax professional for specific details.

The charity must be a qualified public charity in order for you to enjoy these tax benefits. Not all tax-exempt charities are qualified charities for tax purposes. To verify a charity's status, check IRS Publication 78, or visit

Please feel free to contact us with any questions at (585) 419-0670.

Source: ©2015 Broadridge Investor Communication Solutions, Inc. This material provided by Amy K. Boyd Ertel, Esq.

This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.

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