The majority of charitable organizations look forward to the months between October and December as the time of year when patrons are most likely to open their hearts and subsequently their wallets.[1] Non-profit organizations, public charities, and private foundations report that nearly 50 percent of their yearly contributions are received in the final quarter of the year.

 

It is not when you give that matters or even how much but the act of giving itself that is important. Research that combines social science with neurobiology shows that giving actually rewires our brains, particularly in the area that connects social contact to positive emotions. Giving adds meaning to our lives, distracts us from our own problems and helps us feel valued by others.[2]

 

While the factors of when, how much and what you give are important, it is how you give that can have lasting implications for both you and the charity of your choice. A little forethought in combining charitable contributions and estate planning can have sizeable benefits for both the giver and the recipient.

 

One benefit of charitable giving is that it reduces the size of your taxable estate, either through gifts made while one is living or through gifts to charities included in one’s will. Structuring giving through Charitable Remainder Trusts provides benefits for both the giver and the receiver. Charitable Remainder Trusts are vehicles that transfer assets to the charity when the trusts are set up while allowing the donor to retain the benefit of receiving the income from the asset for the remainder of the donors life. Charitable Remainder Trusts are especially beneficial for highly appreciated assets such as a stock that has increased significantly in price. Once placed in the trust the donor gets a current income tax deduction on the amount donated and the charity can sell the asset without having to pay any capital gains tax. The principal amount of the trust appreciates tax-free.

 

Donors can choose a charitable remainder unitrust, or CRUT, which ties the donor’s annuity to a percentage of the fair market value of the donated assets or a charitable remainder annuity trust, or CRAT, which sets the donors lifetime payments at a fixed percentage of the donated assets. The trust can also be set up to provide income for the lifetime of a spouse or heir as well.

 

Don’t let the complexity of charitable giving dissuade you from exploring the options for giving as part of your estate planning. With a little planning you can simultaneously increase the impact of your giving for your favorite charity in the future while decreasing your personal tax burden today.