What are Planned Giving Options for Donors and Families?

Planned giving covers a set of charitable strategies donors and families use to make gifts now or at death while managing taxes, generating income, or preserving assets for heirs. Unlike one-time cash donations, planned gifts are integrated with estate and financial plans and can be structured to reflect liquidity needs, tax positions, and long-term legacy goals.

Why planned giving matters

Planned giving turns philanthropy into a tool for broader financial planning. For many clients I work with, a planned gift achieves two or three objectives at once: it supports causes they care about, reduces estate or income tax liability, and—when structured correctly—provides predictable income or retains use of important assets. The key is choosing the right vehicle for your family’s timing, cash flow needs, and estate tax exposure.

(Authoritative guidance: IRS guidance on charitable contributions and estate-related charitable deductions can be found at the IRS Charities & Nonprofits pages and Publication 526.)

Source links: IRS — Charitable Giving (https://www.irs.gov/charities-non-profits) and IRS Publication 526 — Charitable Contributions (https://www.irs.gov/forms-pubs/about-publication-526). Also see consumer-facing estate planning basics at Consumer Financial Protection Bureau (https://www.consumerfinance.gov/consumer-tools/estate-planning/).

Core planned giving vehicles — how they work, benefits, and tradeoffs

  1. Bequests (Wills and Revocable Trusts)
  • How it works: A donor names a charity as beneficiary of a portion of a will or revocable trust. The gift is made at death and is usually free to change during the donor’s lifetime.
  • Benefits: Simple to implement, preserves lifetime cash flow, provides an estate tax charitable deduction when applicable.
  • Considerations: Requires regular estate-plan reviews to reflect changing circumstances; effectiveness depends on estate-tax exposure at death.
  1. Charitable Remainder Trusts (CRTs)
  • How it works: Donor transfers appreciated assets into an irrevocable trust. The trust pays income to the donor (or other beneficiaries) for life or a set term; the remaining assets pass to charity when the trust ends.
  • Benefits: Avoids immediate capital gains tax on appreciated assets, provides an income stream, and creates a present-value charitable deduction.
  • Considerations: Irrevocable; setup and administration require legal and tax help; payout rates affect tax deduction and income.
  1. Charitable Gift Annuities (CGAs)
  • How it works: Donor transfers cash or securities to a charity and the charity promises a fixed lifetime payment to the donor or a beneficiary. At the donor’s death, the remainder stays with the charity.
  • Benefits: Simple contract-based arrangement that converts part of a gift into predictable lifetime income and often provides an immediate partial charitable income tax deduction.
  • Considerations: Payments depend on the charity’s financial strength. Rates are usually fixed and may be lower than market alternatives; not all charities offer CGAs.
  1. Retained Life Estate (RLE)
  • How it works: Donor deeds a property to a charity but retains the right to live in and use the property until death (or a term). The charity receives the property later.
  • Benefits: Donor gets an immediate income tax charitable deduction for the present value of the remainder interest and can continue living in the property.
  • Considerations: Property maintenance and unexpected long life can change the net benefit; ensure clear title and rights before transfer.
  1. Donor-Advised Funds (DAFs)
  • How it works: Donor contributes cash, securities, or other assets to a sponsoring public charity that operates the DAF, receives an immediate tax deduction, and recommends grants to qualified charities over time.
  • Benefits: Fast tax deduction, low initial cost, flexible timing for grants, and simple administration.
  • Considerations: Grants are advisory, not legally binding; DAFs generally do not provide direct income to the donor and are less ideal for legacy-control needs than a bequest or private foundation.
  1. Gifts of Retirement Plan Assets
  • How it works: Naming a qualified charity as beneficiary of an IRA or other retirement account avoids income tax that non-charitable beneficiaries would pay upon distribution.
  • Benefits: Efficient way to transfer tax-inefficient retirement assets to charity; preserves other estate assets for heirs.
  • Considerations: Charitable beneficiary designations must be coordinated with wills and trusts to avoid conflicting instructions.

Real-world examples (illustrative, anonymized)

  • A 72-year-old client owned highly appreciated stock and needed supplemental retirement income. We funded a CRT with the stock. The trust sold the stock without immediate capital gains tax, generated a lifetime income stream for the client, and left the remainder to a scholarship fund — meeting income and legacy goals in one plan.

  • A family with modest estate size used a bequest through their wills to fund annual scholarships at a local nonprofit. The bequest allowed them to maintain cash for living expenses while still making a lasting impact.

  • A homeowner who wanted to remain in the family home transferred the property to charity with a retained life estate. They received a current partial charitable deduction and the security of staying in their home for life.

Who benefits and who should consider planned giving

  • Donors with appreciated assets who want to avoid capital gains taxes (CRTs and gifts of securities).
  • Older donors seeking predictable income while supporting charity (CGAs and CRTs).
  • Families seeking to create a multi-generational legacy or fund long-term programs (bequests, family foundations).
  • Middle-income donors who want to give strategically without the complexity of a private foundation (DAFs and bequests are common options).

For additional guidance tailored to middle-income households, see our related article: Planned Giving Options for Middle-Income Donors.

Also see practical explanations of remainder-interest gifts: Planned Giving: Understanding Remainder Interest Gifts.

Practical step-by-step checklist to get started

  1. Define the goal: income, tax reduction, legacy, or a combination.
  2. Inventory assets: cash, retirement accounts, real estate, appreciated securities.
  3. Run tax scenarios: compare charitable deduction timing, capital gains impacts, and estate-tax consequences. Use a licensed advisor or CPA.
  4. Choose a vehicle: bequest, DAF, CRT, CGA, or retained life estate based on needs.
  5. Coordinate beneficiary designations with estate documents to avoid conflicts.
  6. Document the plan in legal instruments and notify the chosen charity (if desired).

In my practice, starting with a short-term cash-flow model and a long-term estate projection makes the comparison between options (for example, CGA vs CRT) far more concrete for clients.

Common mistakes and misconceptions

  • “Planned giving is only for the wealthy.” Not true. DAFs and bequests let a wide range of donors participate. The right vehicle depends on assets and goals, not a single net-worth threshold.
  • Forgetting to update beneficiary designations and wills after life changes (marriage, divorce, births).
  • Overlooking the charity’s ability to administer complex vehicles—smaller nonprofits may not offer CGAs or accept certain assets.

Quick comparison table

Vehicle Best for Primary benefit Main tradeoff
Bequest Donors who want simplicity Flexibility during life, legacy at death No current income or tax benefit now
CRT Donors with appreciated assets Income, capital gains deferral, remainder to charity Irrevocable, setup complexity
CGA Donors wanting lifetime income Fixed lifetime payments + partial deduction Dependent on charity’s reserves; lower flexibility
Retained Life Estate Homeowners who want to give property Live in home; obtain current deduction Property transfers at death; maintenance concerns
DAF Donors wanting flexible grant timing Immediate tax deduction, easy administration Grants are advisory; no payout requirement

Tax and legal considerations (short primer)

  • Income tax charitable deductions for lifetime gifts and certain remainder interests are governed by IRS rules; see Publication 526 for details.
  • Gifts made through an estate generally qualify for an estate tax charitable deduction (IRC section 2055) if properly documented in estate tax filings.
  • Naming charities as retirement-account beneficiaries can avoid income tax on funds that would otherwise be taxable to non-charitable heirs.

Always consult a qualified estate attorney and tax advisor before implementing irrevocable gifts. Rules change and individual tax outcomes depend on your full financial picture (IRS; Consumer Financial Protection Bureau).

Frequently asked questions

Q: Can I change a planned gift after I create it?
A: It depends. Bequests are revocable until death. Most CRTs and CGAs are irrevocable once funded. Donor-advised fund grant recommendations are flexible, but once contributed to the DAF the gift is irrevocable.

Q: Does a charitable gift reduce estate taxes?
A: Yes — charitable bequests and other qualifying transfers can reduce the taxable estate and may result in an estate tax charitable deduction when applicable. This only affects estate tax liability, not income tax. (IRS guidance applies.)

Q: Are CGAs safe?
A: CGAs are backed by the charity’s general resources, not by FDIC or state guaranty funds. Use charities with strong financial ratings and confirm reserve policies.

Professional disclaimer

This article is educational and does not replace personalized legal, tax, or financial advice. Rules and rates change; consult a qualified tax advisor and estate attorney before making or finalizing planned gifts.

Selected authoritative sources

Internal articles for further reading

If you want a one-page checklist or sample language for a bequest or beneficiary designation, I can provide templates and talking points to bring to your attorney or advisor.