Common types of charitable giving tools

 

This page contains information on the types of commonly used charitable giving tools. See a pdf of Types of charitable giving tools (2018) for a side-by-side comparison of these tools. For more details on the tax features associated with each tool, please consult a tax advisor if you are not one.

This page reflects the 2018 tax treatment of these tools. For 2017 tax information, please see Types of charitable giving tools (2017).

 

  • Donation made directly from individual to charity, usually via cash.
  • Donor responsible for paperwork and other administrative details for each gift
  • Donation can be any amount

For donors who...

Want fast and easy way to give and maximum control over donations
 

Tax features

Donated in lifetime:
Full income tax deduction based on value of gift¹

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Cost

None or low

Level of control/input

  • Donors manage all donation decisions
  • Donors can donate to any charity
  • Donors choose when and how donation is represented
  • No legacy options, unless donors establish a deferred gift through estate

Complexity

Low

  • A contract established with a charity that allows individuals to transfer assets to that charity in return for income and estate tax deduction and fixed income stream for lifetime of up to 2 people. After donor dies, charity keeps remainder of gift.
  • CGAs can be established for as little as $10,000 with some charities

For donors who...

Want to receive income while supporting charities
 

Tax features

Donated in lifetime:

  • Immediate partial income tax deduction equal to amount of contribution minus present value of payments to donor during life
  • Income stream subject to tax
  • No capital gains tax on assets transferred to annuity

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Cost

Moderate

Level of control/input

  • Donors choose charity to receive donation; charity then controls assets and decision-making
  • Donors can remain anonymous to public but not to charity

Complexity

Moderate

 
  • Individuals can transfer assets to trust for income and estate tax deduction, receive income from trust for set period of time, and name a charitable beneficiary to receive residual principal of trust
  • Established as charitable remainder annuity trust, charitable remainder unitrust, or charitable pooled income fund
  • While startup costs and minimums vary, contributions to a CRT typically exceed $100,000

For donors who...

Want to receive income while fulfilling charitable goals and give to charity after they die
 

Tax features

Donated in lifetime:

  • Immediate income tax deduction for actuarial value of remainder interest
  • Income stream subject to tax
  • Trust must file annual tax return
  • Deferred capital gains tax on assets transferred to trust

Donated as estate bequest:
Full value of present value of remainder interest removed from estate, reducing estate tax for heirs

Cost

High but varies by type of trust

Level of control/input

  • Donor chooses level of income, remainder beneficiary, and trustee.
  • Donors can change charitable beneficiary, in some cases.
  • Donors can remain anonymous to public but not to charity.
  • Donors choose charities as beneficiaries.

Complexity

High

  • Individuals can transfer assets or property to trust for possible income and estate tax deduction, depending on type of trust, and grant income from trust to designated charity for fixed period of time. Remaining funds are then passed to non-charitable beneficiaries named by donor.
  • Established as either grantor or non-grantor trust
  • CLTs often require $500,000-$1 million to establish

For donors who...

Want to pass assets to beneficiary in future and charity to receive income stream in meantime
 

Tax features

Donated in lifetime:

  • Grantor CLT: Immediate income tax deduction equal to present value of income stream paid to charity at time trust is funded
  • Non-grantor CLT: Trust receives tax deduction as income is distributed to charity
  • Trust must file annual tax return
  • No capital gains tax on assets at the time transferred to trust

Donated as estate bequest:
Entire amount donated to trust and subsequent growth is removed from estate

Cost

High but varies by type of trust. Generally more expensive than CRT.

Level of control/input

  • Donor chooses level of income, remainder beneficiary, and trustee.
  • Donors can change charitable beneficiary, in some cases.
  • Donors can remain anonymous to public but not to charity.
  • Donors choose charities as beneficiaries.

Complexity

High

  • Donors contribute to account and take immediate tax deduction, in return turning those assets over to DAF
  • Donors or advisors recommend investment options and DAF invests assets, which grow tax-free
  • Donors recommend grants to DAF sponsor, which conducts due diligence, issues check, and performs other administrative duties on behalf of donors
  • DAF accounts are generally not subject to annual spending requirements, although many are required to make at least 1 grant every few years
  • Minimum initial contributions vary, but are typically $5,000-$25,000

For donors who...

Want to consolidate their giving, have option to contribute all types of assets, and ability to separate contribution from grants
 

Tax features

Donated in lifetime:
Full income tax deduction based on value and type of gift¹—for instance, 50% of AGI for cash and 30% for securities held more than 1 year

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Cost

Low

Level of control/input

  • Donors choose investments and recommend grants but do not have direct control over assets
  • Donors can generally support any public charities in good standing with IRS
  • Donors choose recognition or anonymity when they recommend grants
  • Donors can create a personalized succession plan that passes/splits account privileges and/or grants remaining assets to charity

Complexity

Low

 
  • An independent charitable organization with governing legal documents and governing body with complete control over investment and grantmaking decisions
  • IRS requires 5% distribution of net investment assets yearly
  • PFs are generally started with $5 million-$10 million or more

For donors who...

Want total control over charitable activity, wish to involve family members in management of charitable assets, and are comfortable following strict compliance and granting regulations
 

Tax features

Donated in lifetime:

  • Full income tax deduction based on value of gift¹--for instance, up to 30% of AGI for cash gifts and 20% for securities held more than 1 year (so not a good vehicle for donating appreciated securities)
  • Most PFs are subject to stricter deductibility limits than other charitable organizations
  • PF must file annual tax return
  • Subject to 1-2% excise tax on annual net investment income

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Cost

High

Level of control/input

  • Donors manage contributions, investments, grants, and legal documents
  • Donors can support any charitable cause subject to certain tax regulations although some foundations do not allow grants outside mission
  • PF required to publicize information about trustees or directors, certain employees, grants, income, and investments
  • Donors create succession plan to involve future generations, or remaining assets can be granted directly to public charity

Complexity

High

  • Grantmaking public charities dedicated to a defined local geographic area
  • Some CFs sponsor DAFs
  • Generally established with $10,000 or more

For donors who...

Generally want to contribute in specific geographic or issue area and value local or specialized insight on community or issue
 

Tax features

Donated in lifetime:
Full income tax deduction based on value and type of gift¹—for instance, 50% of AGI for cash and 30% for securities held more than 1 year

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Cost

Moderate

Level of control/input

  • Grants must support public good within defined geographic area, limiting charities that can receive funds
  • With CF DAFs, donors can recommend grants but do not control assets. In other cases, donors may only select general interest area for granting, but not specific charities.
  • If giving through a CF DAF, donors can remain anonymous to charity, but not to CF
  • Donors can work with CF to develop ongoing legacy but may need board approval

Complexity

Moderate

See a pdf of Types of charitable giving tools (2018) for a side-by-side comparison of these tools.

1 Donors may take a full income tax deduction up to a certain percentage of their adjusted gross income (AGI). This limit is generally 50%, but is lower for certain types of contributions and for certain types of recipient organizations, including some of these giving tools. For example, contributions of capital gains property are limited to 30% of AGI. Cash contributions made to private non-operating foundations are also limited to 30% of AGI. Contributions of capital gains property to private non-operating foundations, meanwhile, are limited to 20% of AGI. Any charitable contribution exceeding an individual’s AGI limitation may be carried forward and used over a five-year period.

For more details on the tax implications of donating these types of charitable assets, please consult a tax advisor if you are not one.