Make Charitable Giving a Win-Win Part Of Your Wealth Plan
You can do a lot of good while getting a good tax break, but the details of the setup are important, and so is how you communicate your wishes to your heirs.


There are tremendous breaks and incentives written into the tax code for charitable giving, and you don’t have to be wealthy to take advantage of them. But they’re most successful for people who truly have a charitable bent — those who sincerely want to see some of their money go to the charity or charities they care about.
That’s because most charitable-giving strategies require a fair amount of planning, paperwork, and set-up and maintenance costs. The tax benefits being what they are, though, it’s worth the effort.
They include:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- You can sell highly appreciated assets — real estate, stocks, etc. — within a trust and preserve the full fair-market value instead of losing money to capital gains taxes.
- When an asset is sold, there are income tax benefits upfront, based on the value of the gift you’re making to charity, and possibly in the future, depending on how the gift is set up and if it includes an income stream.
- Generally, once you set up your fund or trust, the value of the donated assets comes out of your estate, reducing the amount of money your estate must pay in taxes when you die. That’s helpful because while the exemption for federal income taxes on estates is $5.49 million, several states start taxing estates at limits much lower than that. Oregon’s estate tax, for example, kicks in at $1 million.
The biggest disadvantage to some of the more common forms of charitable giving is that you are, in a way, disinheriting your children. Basically, the charity gets their inheritance. But fear not: There are strategies for “re-inheriting” them — including using the income stream you’ve created within a trust to pay for life insurance premiums. So you can give to your favorite charity and still provide for your heirs — a win-win.
There are many kinds of charitable-giving vehicles: donor-advised funds, pooled-income funds, charitable trusts, life-estate agreements, private foundations and more. When making your choice, you’ll want to consider both the tax implications and how much flexibility you’ll have as a donor — especially if you’re the type of person who likes to have a say in how your money is spent.
It’s important to use a qualified financial professional who can help you plan out your finances, assets, allocations, legacy plans and charitable giving. Planning your finances the right way is vital and is not a do-it-yourself project. With much of your future riding on your income, relying on a professional with adequate experience is a must.
It’s also a good idea to communicate your wishes to your children or any other family members who might be affected by your plans. A conversation now could avoid turmoil down the road, especially if they are expecting to inherit specific assets.
For some families, philanthropy is a way of life, passed down from one generation to the next. But if it’s new to your family, you’ll want to be clear about what you’re doing and why.
Obviously, this is a complicated matter. If you’re considering making charitable giving part of your wealth plan, consult with a specialist — better yet, a team of specialists, including a financial professional, a tax attorney and an estate-planning attorney with experience in charitable contributions.
They can walk you through any complex legal matters, and around any obstacles that could get in the way of your success.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Don Bergis is an Investment Adviser Representative (IAR) and the founder of Authentikos Advisory, a full-service fiduciary firm focused on the protection and growth of client assets toward and through retirement.
-
Ask the Editor — Tax Questions on Inherited IRAs
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
I Asked Experts When It's Worth Splurging on Beauty and Skincare — and When You Can Save
Smart Shopping Experts agree that while you don't have to spend three figures on your products, some higher-priced items have value.
-
Retiring Early? This Strategy Cuts Your Income Tax to Zero
When retiring early, married couples can use this little-known (and legitimate) strategy to take a six-figure income every year — tax-free.
-
Ditch the Golf Shoes: Your Retirement Needs a Side Gig
A side gig in retirement can help combat boredom, loneliness and the threat of inflation eroding your savings. And the earlier you start planning, the better.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet Spot
Converting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on Vacation
Here are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right Now
Big portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This Instead
Yes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.