Giv­en that, on aver­age, women are bet­ter edu­cat­ed and are finan­cial­ly self-suf­fi­cient, it is easy to see that women’s socio-eco­nom­ic sta­tus in the U.S. has changed sig­nif­i­cant­ly over the past two gen­er­a­tions.  Numer­ous stud­ies have shown that women are more altru­is­tic, empa­thet­ic, and char­i­ta­ble than men (Andreoni & Vester­land, 2001; Cox & Deck, 2006; Cro­son & Buchan, 1999; Eagly & Koenig, 2006).  As a result, women are far more like­ly to give to a char­i­ty and in larg­er amounts than men.  

Char­i­ta­ble giv­ing can plan an impor­tant role in many estate plans.  Phil­an­thropy  can­not only give you great Healthy Wealthy and Wise womenper­son­al sat­is­fac­tion, it can also give you a cur­rent income tax deduc­tion, let you avoid cap­i­tal gains tax, and reduce the amount of tax­es your estate may owe when you die.  

There are many ways to give to char­i­ty.  You can make gifts dur­ing your life­time or at your death.  You can make gifts out­right or use a trust.  You can name a char­i­ty as a ben­e­fi­cia­ry in your will, or des­ig­nate a char­i­ty as a ben­e­fi­cia­ry of your retire­ment plan or life insur­ance pol­i­cy.  Or, if your gift is sub­stan­tial, you can estab­lish a pri­vate foun­da­tion, com­mu­ni­ty foun­da­tion, or donor-advised fund.  

 

 

Making Outright Gifts

An out­right gift is one that ben­e­fits the char­i­ty imme­di­ate­ly and exclu­sive­ly.  With an out­right gift you get an imme­di­ate income and gift tax deduc­tion.  

**Tip:  Make sure the char­i­ty is a qual­i­fied char­i­ty accord­ing to the IRS.  Get a writ­ten receipt or keep a bank record for any cash dona­tions, and get a writ­ten receipt for any prop­er­ty oth­er than mon­ey.  

 

Will or Trust Bequests and Beneficiary Designations

These gifts are made by includ­ing a pro­vi­sion in your will or trust doc­u­ment, or by using a ben­e­fi­cia­ry des­ig­na­tion form.  The char­i­ty receives the gift at your death, at which time your estate can take the income and estate tax deduc­tions.  

 

Charitable Trusts

Anoth­er way for you to make char­i­ta­ble gifts is to cre­ate a char­i­ta­ble trust.  You can name the char­i­ty as the sole ben­e­fi­cia­ry, or you can name a non-char­i­ta­ble ben­e­fi­cia­ry as well, split­ting the ben­e­fi­cial inter­est (this is referred to as mak­ing a par­tial char­i­ta­ble gift).  The most com­mon types of trusts used to make par­tial gifts to char­i­ty are the char­i­ta­ble lead trust and the char­i­ta­ble remain­der trust.  

 

Char­i­ta­ble Lead Trust

A char­i­ta­ble lead trust pays income to a char­i­ty for a cer­tain peri­od of years, and then the trust prin­ci­pal pass­es back to you, your fam­i­ly mem­bers, or oth­er heirs.  The trust is known as a char­i­ta­ble lead trust because the char­i­ty gets the first, or lead, inter­est. 

A char­i­ta­ble lead trust can be an excel­lent estate plan­ning vehi­cle if you own assets that you expect will sub­stan­tial­ly appre­ci­ate in val­ue.  If cre­at­ed prop­er­ly, a char­i­ta­ble lead trust allows you to keep an asset in the fam­i­ly and still enjoy some tax ben­e­fits.  

Exam­ple:  Mary, who often donates to char­i­ty, cre­ates and funds a $2 mil­lion char­i­ta­ble lead trust.  The trust pro­vides for fixed annu­al pay­ments of $100,000 (or 5% of the ini­tial $2 mil­lion val­ue) to ABC Char­i­ty for 20 years.  At the end of the 20-year peri­od, the entire trust prin­ci­pal will go out­right to Mary’s chil­dren.  Using IRS tables and assum­ing a 2.0% Sec­tion 7520 rate, the charity’s lead inter­est is val­ued at $1,635,140, and the remain­der inter­est is val­ued at $364,860.  Assum­ing the trust assets appre­ci­ate in val­ue, Mary’s chil­dren will receive any amount in excess of the remain­der inter­est ($364,860) unre­duced by estate tax­es.  

 

Char­i­ta­ble Remain­der Trust

A char­i­ta­ble remain­der trust is the mir­ror image of the char­i­ta­ble lead trust.  Trust income is payable to you, your fam­i­ly mem­bers, or oth­er heirs for a peri­od of years, after which the prin­ci­pal goes to your fam­i­ly char­i­ty.  

A char­i­ta­ble remain­der trust can be ben­e­fi­cial because it pro­vides you with a stream of cur­rent income—a desir­able fea­ture if there won’t be enough income from oth­er sources. 

Exam­ple:  Jane, an 80-year-old wid­ow, cre­ates and funds a char­i­ta­ble remain­der trust with real estate cur­rent­ly val­ued at over $1 mil­lion, and with a cost basis of $250,000.  The trust pro­vides that fixed quar­ter­ly pay­ments be paid to her for 20 years.  At the end of that peri­od, the entire trust prin­ci­pal will go out­right to her favorite char­i­ty.  Using IRS tables and assum­ing a 2.0% Sec­tion 7520 rate, Jane receives $50,000 each year, avoids cap­i­tal gains tax on $750,000, and receives an imme­di­ate income tax char­i­ta­ble deduc­tion of $176,298, which can be car­ried for­ward for five years.  Fur­ther, Jane has removed $1 mil­lion, plus any future appre­ci­a­tion, from her gross estate.  

 

Private Family Foundation

A pri­vate fam­i­ly foun­da­tion is a sep­a­rate legal enti­ty that can endure for many gen­er­a­tions after your death.  You cre­ate the foun­da­tion then trans­fer assets to the foun­da­tion, which in turn makes grants to pub­lic char­i­ties.  You and your descen­dants have com­plete con­trol over which char­i­ties receive grants.  But, unless you can con­tribute enough cap­i­tal to gen­er­ate funds for grants, the costs and com­plex­i­ties of a pri­vate foun­da­tion may not be worth it.  

**Tip:  One rule of thumb is that you should be able to donate enough assets to gen­er­ate at least $25,000 a year for grants.  

 

Community Foundation

If you want your dol­lars to be spent on improv­ing the qual­i­ty of life in a par­tic­u­lar com­mu­ni­ty, con­sid­er giv­ing to a com­mu­ni­ty foun­da­tion.  Sim­i­lar to a pri­vate foun­da­tion, a com­mu­ni­ty foun­da­tion accepts dona­tions from many sources, and is over­seen by indi­vid­u­als famil­iar with the community’s par­tic­u­lar needs, and pro­fes­sion­als skilled at run­ning a char­i­ta­ble orga­ni­za­tion. 

 

Donor-advised Fund

Sim­i­lar in some respects to a pri­vate foun­da­tion, a donor-advised fund offers an eas­i­er way for you to make a sig­nif­i­cant gift to char­i­ty over a long peri­od of time.  A donor-advised fund actu­al­ly refers to an account that is held with­in a char­i­ta­ble orga­ni­za­tion.  The char­i­ta­ble orga­ni­za­tion is a sep­a­rate legal enti­ty, but your account is not—it is mere­ly a com­po­nent of the char­i­ta­ble orga­ni­za­tion that holds the account.  Once you trans­fer assets to the account, the char­i­ta­ble orga­ni­za­tion becomes the legal own­er of the assets and has ulti­mate con­trol over them.  You can only advise—not direct—the char­i­ta­ble orga­ni­za­tion on how your con­tri­bu­tion will be dis­trib­uted to oth­er char­i­ties.  

Read the Worth­while Women Series