Doing Good and Doing It Well: An Overview of Options for Charitable Giving

Charitable planning during your lifetime is an opportunity to use your assets for good and see the impact. While you may give as much as you wish to any cause or charity you choose, it is wise to consult with your comprehensive planning team to think through the most tax-effective means of giving. If you wish to do good, do it well! There are various options to consider. A brief overview of common approaches is below.

Direct Gifts to a Public Charity

• Many non-profit organizations have obtained verification from the IRS that they are tax-exempt under IRC c. 26 § 501(c)(3) (a “tax-exempt organization” or a “tax-exempt non-profit”). This means that the organization will not be required to pay income tax on your donation, and it may allow you to claim a deduction for the donation that you make.
• There is no limit on the size of the gift you will make. Most organizations will prefer unrestricted gifts that can be spent on current operating needs.
• If you plan to make a “major gift” (usually anywhere from $10,000 to $1,000,000+, depending on the organization), you often have more ability to influence how the organization can spend your gift. Your counsel can negotiate a gift agreement or restricted fund agreement to ensure the funds will be used for a purpose and over a timeline that is acceptable to you now and in the future. Common restrictions include endowments (preserving the principal of the gift), capital improvements (such as for a new building), and specific operational uses (such as annual scholarships).
• All organizations accept cash or checks, and many are willing to accept non-cash assets (such as securities or crypto). It is often worth exploring whether it makes sense to donate assets that have a lot of gains built up. This will allow you to avoid triggering any income tax that you must otherwise pay if you sought to sell the asset.
• You should work with your financial advisor to determine from which asset to make the gifts, and you should keep your lawyer and accountant informed of your charitable giving.

Pro Tip: Make sure you get a receipt from the organization confirming that your donation is tax-deductible, if that is your goal.

Irrevocable Transfer to Donor Advised Funds (aka “DAFs”)

A donor-advised fund (“DAF”) is a fancy name for a non-profit organization with a specific mission of holding, investing, and managing funds for the benefit of other tax-exempt non-profit organizations. The controlling board members are generally not local. DAFs are often affiliated with a large financial institution, although some charities may have their own DAF program. A donor-advised fund allows the donor to “front load” the donor’s charitable giving by making an irrevocable gift in the current year to the DAF and then deciding in the months or years to come to which organization to pay out the funds.

• DAFs are great “in a pinch” when you need to make a year-end donation for the deduction, but you aren’t sure to which organization you wish to give.
• DAFs are also a helpful place to put cash from which you can make smaller donations as needed (such as annual gifts to favorite charities).
• DAFs can agree to be an intermediary and take steps to keep the source of charitable donations anonymous, which is a plus for clients who want to make gifts to certain charities or causes without their name being attached to the donation.

Pro Tip: Clients who are charitably inclined should speak with their accountants ASAP about making contributions in 2025 to take advantage of certain advantages that will not be available in 2026 under the One Big Beautiful Bill Act.

For legacy giving, clients should consider whether a DAF is the best option. Once the gift is made, the donor or the donor’s family or successors are mere advisors as to what happens to the money. Each DAF has its own contract that states who gets to advise the DAF after the death of the donor, and there are usually strict time limits. Failure to adhere to these time limits could result in the advisory role of the family completely disappearing.

Pro Tip: Have your lawyer review your DAF contract and work with the DAF to make sure you get all the customized terms you want, especially regarding what happens to the funds after your death.

Irrevocable Transfer to Community Foundations

A community foundation is categorized by the IRS as a public charity (it gets most of its support from the public). It is generally created by state law with a mission of serving a particular geographical area. It facilitates and pools donations and uses them to serve its community and the non-profits within it. Community foundations generally have professional development and investment teams with boards populated by local community leaders. Community foundations are a middle ground between gifts to stand-alone DAFs run by financial institutions and direct gifts to local non-profits. Like DAFs, the community foundation board may ultimately decide what happens to donations, and the donor’s role is merely advisory, so establishing good relationships and clear written administrative guidelines for any major gift is very important.

Pro Tip: To achieve long-term impact and legacy goals, make sure the non-profit has a seat at the table when you are working with the community foundation on a major gift, or consult a lawyer who understands charitable giving from the point of view of the donor and the non-profits you wish to benefit.

Maintaining Control Through a Private Foundation

For high-net-worth clients who wish to make an impact in a particular field or community or who are planning to give in such sums that it makes sense to establish a standalone giving entity, a private foundation may be the right choice. Private foundations are giving vehicles that are funded primarily by a single donor, family, corporation, or small group. They generally make grants to operational, direct service public charities that qualify as tax-exempt. They are set up to exist into perpetuity (think: the Gates Foundation, Howard Hughes Medical Foundation, the Ford Foundation).

Since it does not get most of its funds from the general public, it is not a “public charity”. They usually have their own governance structures, and family members, including children and grandchildren, can get involved and work together through the generations. Funds are invested and stewarded by the directors of the foundation with the goal of growing the assets over time, allowing for a charitable legacy that will last for generations.

Private foundations allow donors to run their own programs and make grants to fund other organizations’ programs. Staff can include family members, and all expenses of the foundation are tax-deductible.

Pro Tip: Coordinate a team of professionals to establish and run your private foundation, including estate planning counsel to manage initial gifting, corporate/non-profit counsel to coordinate the board and gift request process, and investment professionals to manage the foundation assets.

Legacy Giving Through a Charitable Trust

A useful but often overlooked method of giving is through a charitable trust. For clients who are not in a position to establish a private foundation but wish to retain the control and certainty that is offered by keeping charitable giving “in the family,” a simple charitable trust established as part of an estate plan can be a great fit. You need only work with your estate planning lawyer to name a tax-exempt non-profit as a beneficiary of your estate plan, and your estate will be able to take a deduction for that gift when the time comes to pay estate taxes. Charitable remainder trusts allow clients to set aside assets for a charity while also generating income during life. Charitable lead trusts allow clients to make annual gifts to a non-profit during life while leaving the assets to a beneficiary of the donor’s choice (including to family) at death.

Charitable trusts enjoy the protection of oversight by the Attorney General. An organization or board cannot change the purpose or use of the funds in your charitable trust without going through a special process called a cy pres petition, even after you die. Therefore, in addition to its simplicity, a charitable trust is the best option to ensure that your wishes are carried out to the letter for as long as the trust exists. Businesses can set up charitable trusts or public charities as part of the company’s charitable giving efforts.

Pro Tip: Consider who will be the trustee of your charitable trust, whether a family member, trust friend, or professional fiduciary. You may write a “side letter” to your trust stating your specific wishes for the administration of the charitable trust.

Determining the Charitable Deduction

The size of the charitable deduction depends on a lot of factors. Consideration can include the nature of the contemplated gift (whether it is cash or another asset), whether the donor itemizes deductions, the fair market value of the gift and whether it is appreciated, the tax bracket of the donor, the fees and costs associated with processing the gift, and various other facts and circumstances. As a general rule, up to 60% of adjusted gross income (AGI) is deductible for cash donations to public charities and for donations to certain private foundations. Gifting appreciated non-cash assets also has benefits: the gift will avoid triggering a capital gains tax and increase the basis for the purpose of the donation. Making gifts of unusual assets like crypto adds complexities (such as the need for an intermediary to make the gift and associated fees).

Pro tip: Make sure your accountant, financial advisor, and estate planning lawyer confer on which assets to donate and when to make the gift, and make sure there is enough lead time to accomplish the donation of a non-cash asset.