Broker Check

Giving Vehicles

“Mankind was my business; charity, mercy, forbearance, and benevolence, were, all, my business.  The deals of my trade were but a drop of water in the comprehensive ocean of my business!” The Ghost of Jacob Marley, A Christmas Carol by Charles Dickens


Following is a very brief discussion of the more prominent giving vehicles that help avoid taxes.

Gifts of almost any type of asset may be given to a charity, including cash, securities, real estate and life insurance.  There are also different vehicles that can be employed in charitable giving programs.  There are income and estate tax benefits associated with these vehicles.  The exact benefit depends upon variables such as the type of charity, the giving vehicle utilized, the type of asset being given, and your AGI (adjusted gross income). 

Following is a brief discussion some of the more prominent giving instruments: 

Donor Advised Funds

These are probably the fastest-growing charitable giving vehicles in the United States because they provide one of the easiest and favorable tax advantaged ways to give.  It is a charitable investment account that you can invest cash, securities, or other assets and you are generally eligible to take an immediate income tax deduction.  Even though the tax deduction is received up front, donations may be made over time while the investment account grows tax free. 

Pooled Income Fund

This is a type of charitable trust established and maintained by a non-profit organization.  Contributions are irrevocable and donors may receive an immediate partial tax deduction based on their life expectancy and anticipated income stream, but they must pay income tax on the income stream from the fund each year. 

Charitable Gift Annuity

This is where an asset is given directly to the charity in return for an unsecured promise by the charity to pay a guaranteed fixed sum each year for the life of one or more beneficiaries.  

Charitable Remainder Trust (CRT)

A person is able to convert appreciated, low-yielding assets into a sizeable income stream and at the same time avoid potential capital gains on appreciated property.  When the trust ends, the remaining assets will be disbursed to one or more charities.  The grantor receives a tax deduction for the present value of the remainder interest that goes to the charity.  There are two types: the charitable remainder annuity trust and the charitable remainder unitrust. 

Private Foundation

It is a charity set up as a corporation or a charitable trust.  It must apply for its tax exempt status and is usually administered by one or more people.  Due to its complexities and operating costs, it might be more appropriate for a donor making substantial gifts. 

Charitable Life Estate

This is a way to make charitable gifts without giving up the assets today.  For instance, you could deed your home to the charity, but retain the right to live in it for your lifetime. 

Note: it’s recommended that you discuss these with a qualified financial advisor and that you utilize experienced tax and legal professionals to implement these tax planning vehicles.