Charitable Planning
Vehicles and their fits
Match the vehicle to the asset and the goal: outright gifts, donor-advised funds (low cost, immediate deduction, flexible grant timing), private foundations (control, employment, perpetual family involvement, 5% minimum distribution, excise tax on net investment income, self-dealing rules), charitable remainder trusts (income stream to donor, remainder to charity; minimum 5% payout and a 10% minimum remainder value), charitable lead trusts, and gift annuities.
Deduction mechanics
Know AGI limits and the five-year carryforward: generally 60% of AGI for cash to public charities, 30% for appreciated long-term capital gain property to public charities, and 20%/30% for gifts to private foundations. Deductions for long-term appreciated property are at fair market value; short-term or ordinary income property is generally limited to basis. Substantiation rules and qualified appraisals for noncash gifts are frequently tested; a quid pro quo contribution requires disclosure of the value received.
QCDs
Qualified charitable distributions from an IRA are available at age 70½, up to $108,000 per person in 2025, count toward RMDs, and bypass AGI - valuable for clients near IRMAA or Social Security taxation thresholds.
Traps
- Claiming full fair market value for property that would have produced ordinary income.
- Ignoring that a CRT is tax-exempt, so the trust pays no tax on sale - but the donor must transfer the asset before a binding sale agreement.
- Confusing a CLAT (charity first, heirs later) with a CRT.
Rule of thumb
For a client with a highly appreciated, low-basis position and a charitable intent, a donor-advised fund captures the deduction and diversification immediately; a CRT adds an income stream when the client needs cash flow.