How to Incorporate Charitable Giving into Your Estate Plan

Why Charitable Giving Should Be Part of Your Estate Plan

Aligning Your Legacy with Your Values

Incorporating charitable giving into your estate plan allows you to leave a legacy that reflects your values, passions, and life’s mission. Whether you support education, medical research, religious institutions, or local nonprofits, your estate plan can make a meaningful impact well beyond your lifetime.

Tax Benefits and Estate Efficiency

Charitable gifts may reduce estate taxes, capital gains, and income taxes, depending on the type of asset and structure used. These strategies not only benefit your chosen organizations but also help preserve more wealth for your heirs and beneficiaries.

Common Charitable Giving Strategies in Estate Planning

1. Bequests in Your Will or Trust

One of the simplest ways to give is by naming a charity as a beneficiary in your will or revocable living trust. You can designate a specific dollar amount, a percentage of your estate, or the remainder (residuary) after other bequests have been made. This ensures your favorite organization receives support while giving you complete control during your lifetime.

2. Beneficiary Designations

You can name a nonprofit as a beneficiary of retirement accounts (like IRAs or 401(k)s), life insurance policies, or payable-on-death bank accounts. This approach bypasses probate, simplifies the transfer process, and can offer significant tax advantages. For example, charities pay no income tax on IRA distributions, making these accounts highly tax-efficient for charitable giving.

3. Charitable Remainder Trusts (CRTs)

A Charitable Remainder Trust allows you to provide income to yourself or others for a set period, with the remainder going to a designated charity. You may receive an immediate charitable deduction and defer or eliminate capital gains taxes if you fund the trust with appreciated assets. CRTs are ideal for individuals looking for income generation, estate tax reduction, and philanthropic impact all in one vehicle.

4. Charitable Lead Trusts (CLTs)

In a Charitable Lead Trust, the charity receives income for a set number of years, and the remainder goes to your heirs. This technique can reduce the taxable value of the gift to your heirs, providing a dual benefit of charitable support and estate tax planning.

5. Donor-Advised Funds (DAFs)

DAFs allow you to make a charitable contribution, receive an immediate tax deduction, and recommend grants to charities over time. While not technically part of an estate plan, DAFs can be a strategic pre-planning tool and can be funded through your estate for ongoing charitable giving under your family’s guidance.

Choosing the Right Assets for Charitable Gifts

Appreciated Securities

Donating appreciated stocks, mutual funds, or real estate avoids capital gains taxes and gives you a full-value charitable deduction. This is especially beneficial for donors with low basis investments.

Retirement Accounts

Because traditional IRAs and 401(k)s are taxable when distributed to individuals, leaving these accounts to charities is often smarter from a tax perspective. Heirs may benefit more from receiving Roth accounts or non-retirement assets instead.

Cash and Tangible Personal Property

Cash donations are always welcome, but you can also gift valuable personal property—like artwork, collectibles, or vehicles. Make sure these assets are properly appraised and that the receiving organization can accept them.

Legal and Tax Considerations for Charitable Estate Planning

IRS Requirements

To qualify for tax deductions, your chosen charity must be a qualified 501(c)(3) organization. The IRS requires proper documentation, including written acknowledgments for large gifts and IRS Form 8283 for certain non-cash donations. Failing to meet these requirements can result in disallowed deductions or IRS penalties.

Estate Tax Deductions

Charitable gifts made through your estate plan are fully deductible from the value of your estate, potentially lowering or eliminating federal estate taxes. Pennsylvania does not impose an estate tax, but it does impose an inheritance tax—charities, however, are generally exempt.

Coordinating with Other Estate Goals

Charitable giving should not compromise your ability to meet other legacy goals, such as providing for a surviving spouse, children, or other loved ones. A balanced estate plan considers all your objectives and uses tools that achieve them efficiently.

Involving Family in Charitable Giving

Creating a Legacy of Generosity

Your estate plan can be an opportunity to instill philanthropic values in your children and grandchildren. Involving your family in decisions about giving—whether through donor-advised funds, family foundations, or shared trusts—creates a multigenerational legacy of generosity.

Family Foundations and Giving Circles

Establishing a private foundation offers greater control over grants and long-term giving. While it requires more administration than a donor-advised fund, a foundation can serve as a lasting educational tool and vehicle for shared family decision-making. Giving circles, on the other hand, allow multiple family members to contribute jointly to a charitable effort, fostering connection and purpose.

How an Estate Planning Attorney Can Help

Tailored Legal Strategies

An experienced estate planning attorney can analyze your financial situation, philanthropic goals, and family dynamics to craft a charitable giving plan that’s both legally sound and tax-efficient. Every situation is unique—there is no one-size-fits-all approach.

Document Preparation and Compliance

Properly drafted legal documents—wills, trusts, beneficiary designations, and gift agreements—are essential to ensuring your charitable intentions are honored. Attorneys also ensure compliance with Pennsylvania laws and IRS regulations, avoiding unintended legal issues or tax liabilities.

Ongoing Plan Updates

Your charitable and estate planning goals may evolve. A good attorney provides regular updates and makes changes to your plan as your finances, family, and preferred charities change over time.

Case Study: A Real-Life Charitable Estate Plan

Scenario: Leaving a Legacy for Education

Jane, a retired teacher in Pennsylvania, wanted to support her alma mater after her death. Working with her estate attorney, she established a charitable remainder trust funded with appreciated securities. The trust pays income to her nephew for 15 years, then the remainder funds a scholarship endowment at her university. Jane received an immediate tax deduction, avoided capital gains, and left a lasting legacy.

Get Started with Charitable Estate Planning Today

Your Legacy, Your Impact

Charitable giving through estate planning is a powerful way to make a lasting difference in the world. It reflects your passions, provides tax benefits, and fosters a legacy your family will be proud of. But to do it effectively, it requires legal knowledge, strategic planning, and thoughtful execution.

Thinking about including charitable giving in your estate plan? Don’t navigate it alone. Call the attorneys at Ament Law Group, PC today at (724) 733-3500 to schedule a personalized consultation. Our team will guide you through every option and help you leave a legacy that lasts for generations.