HOW TO INCLUDE CHARITABLE

GIFTING IN YOUR ESTATE PLAN

ROBERT N. NASH ILLINOIS ESTATE PLANNING ATTORNEY

“Some general information about charitable gifting may be beneficial if you are considering the inclusion of philanthropy in your overall estate plan.”

How to Include Charitable Gifting in Your Estate Plan www.nashbeanford.com 2

Your comprehensive estate plan offers you

the ability to do much more than simply

decide who will receive your assets when

you die. If you so choose, your estate plan

can become part of the legacy you leave

behind. That legacy, for many, includes

charitable gifting both during their lifetime

and after death. If you are one of those people, incorporating philanthropy into

your estate plan is important. Because of the numerous options available for

charitable gifting in your estate plan it is always best to consult with an Illinois

estate planning attorney before deciding on a course of action; however, some

general information about charitable gifting may also be beneficial if you are

considering the inclusion of philanthropy in your overall estate plan.

CAN’T I JUST MAKE CHARITABLE GIFTS IN MY LAST WILL

AND TESTAMENT?

Throughout your estate plan you will likely make numerous gifts to family

members, loved ones, and even close friends. Charitable gifts are conceptually

the same as gifts made to non-charitable beneficiaries; however, the way

charitable gifts are treated for tax purposes is often significantly different than

gifts made to non-charitable beneficiaries. For this reason, it is rarely advisable

to simply bequeath assets to a charity in your Last Will and Testament,

particularly if the assets are valuable. If you are fortunate enough to have a

valuable estate, you may miss significant tax avoidance opportunities if you

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simply gift assets to a charity directly using your Will instead of using one of the

many other charitable gifting options.

THE TAX BENEFITS OF CHARITABLE GIFTING

Without careful estate planning, taxes can significantly diminish the value of your

estate after your death. One benefit to including charitable gifting in your estate

plan is that many charitable gifts offer tax avoidance benefits or provide a tax

deduction for the taxpayer.

First, gifts made to a charity or non-

profit organization may qualify for the

annual gift tax exemption which allows a

taxpayer to make gifts of up to $14,000

a year to an unlimited number of

beneficiaries tax-free. Best of all, gifts made using the annual exemption do not

count toward the lifetime exclusion limit for gift and estate tax purposes.

Charitable gifts may also offer a tax deduction to the taxpayer in the year the gift

is made. Whether or not a gift qualifies for a tax deduction will depend on a

number of factors, such as whether the interest gifted is a present interest or not

and the precise legal status of the beneficiary.

Federal gifts and estate taxes as well as capital gains taxes can dramatically

impact the value of your estate at the time of death as well as the value of gifts

made to beneficiaries. Strategic use of charitable gifting can help decrease your

How to Include Charitable Gifting in Your Estate Plan www.nashbeanford.com 4

gift and estate tax exposure as well as limit the amount of capital gains tax you

and/or your beneficiaries pay.

USING CHARITABLE GIFTS TO CREATE YOUR LEGACY

Along with the tax benefits your estate plan may receive by the inclusion of

charitable gifting in your overall plan, philanthropic gifting also offers you the

chance to leave behind a legacy. Your legacy includes the ideals, principles,

beliefs, and values that you cherish and that you wish to pass down to future

generations. Gifts made to charity can further your legacy in a wide variety of

areas, including:

Education

Religion

Humanitarian endeavors

Ecological issues

Animal rights

By including gifts to charities that focus on these issues you have the ability to

exert influence in the areas that are important to you both during your lifetime

and after your death. Depending on the type of charitable gift you make, you

may even be able to get future generations involved in the issues that matter to

you.

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COMMON CHARITABLE GIFTING OPTIONS

Although there are a number of ways in which you can include charitable gifts in

your estate plan, some of the more common options include:

Charitable Trusts –you may wish to create a trust devoted entirely to

charitable beneficiaries or you may combine charitable gifting with non-

charitable gifting by creating a charitable remainder or charitable lead trust

(CRT or CLT). CRTs and CLTs work by allowing you to designate both a

charitable and a non-charitable beneficiary. Distributions are then made to

a non-charitable beneficiary for a specific period of time (CRT) after which

the remainder is gifted to the charitable beneficiary. With a CLT the

charitable beneficiary receives the initial distributions for a set period of

time after which the non-charitable beneficiary receives the assets

remaining in the trust.

Private Foundations – a private foundation

is a non-governmental, non-profit organization

that managed its own funds. This option should

only be considered when the amount to be

gifted is large enough to justify the expense

involved in running the foundation. Along with

tax benefits, a significant benefit to establishing a private foundation is that

it allows you to involve family members in management roles within the

foundation.

Donor Advised Fund –this option allows you to make an irrevocable, tax-

deductible contribution to a professionally managed fund. You then make

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recommendations for grants to qualified non-profit organizations. Because

you retain no ownership interests in the gift once it is made, you are only

allowed an advisory role within the fund, meaning the fund managers will

make the final decision with regard to how the fund assets are distributed.

Charitable Gift Annuities –with a CGA, you contribute cash or other

property acceptable to the charity in exchange for fixed annuity payments

to one or two designated individual beneficiaries. The concept is similar to

a trust but no trust agreement is required.

If philanthropy is part of your life now, make sure you make it part of your

comprehensive estate plan. Given the numerous ways in which charitable gifting

can be incorporated into your estate plan and the complex tax laws that should

be considered when making charitable gifts, it is in your best interest to consult

with your Illinois estate planning attorney before deciding which options to

incorporate into your estate plan.

Fidelity, Charity

Planned Giving Design Center, Charitable Remainder Trust

T. Rowe Price, Giving to Charity

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About the Author

Robert N. Nash

Robert N. Nash is a partner in the law firm of Nash Nash Bean & Ford, LLP. The law firm has

offices in Geneseo and Moline, Illinois and conference facilities available throughout

Northwestern Illinois. Mr. Nash chose the estate and business planning arena because he

believes it provides a positive force in his clients’ lives. He practices preventative, rather

than remedial law. Robert Nash focuses on all aspects of estate planning, including estate,

gift and income taxes, trust and probate administration, real estate, and business.

Nash Nash Bean & Ford, LLP

www.nashbeanford.com

Geneseo

445 US Highway 6 East

Geneseo, IL 61254 Phone: (309) 944-2188

Fax: (309) 944-3960

Moline

5030 38th Avenue, Suite 2

Moline, IL 61265 Phone: (309) 762-9368

Fax: (309) 944-3960