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Estate planning is more than distributing assets—it is about preserving values and creating a legacy that benefits both heirs and the causes you care about. Strategic charitable giving can reduce taxes, provide income streams, and ensure that philanthropy remains central to your family’s wealth story.
Why Philanthropy Matters in Estate Planning
Philanthropy woven into an estate plan ensures that charitable impact extends beyond a single lifetime. Legacy planning allows wealth to reflect personal values while fostering a culture of giving among heirs. For high-net-worth families, this approach strengthens both family identity and community impact.
Charitable Remainder Trusts (CRT)
A charitable remainder trust (CRT) is an irrevocable trust that provides income to you or another beneficiary during a fixed term or lifetime. The remainder then transfers to charity.
Key benefits include:
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Income and tax relief – Contributions generate partial tax deductions and avoid immediate capital-gains tax when appreciated assets are sold.
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Flexible structures – Choose between a charitable remainder annuity trust (CRAT), paying a fixed amount, or a charitable remainder unitrust (CRUT), paying a revalued percentage annually.
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Estate planning efficiency – Assets moved into a CRT are removed from the taxable estate, lowering estate tax exposure and securing philanthropic impact.
Charitable Lead Trusts (CLT)
A charitable lead trust (CLT) reverses the model: it pays income to charity first, with the remainder later passing to heirs.
Advantages include:
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Gift and estate tax benefits – The charitable portion is fully deductible; only the remainder portion is subject to tax.
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Flexible structures – Payments can be structured as a fixed annuity (CLAT) or as a percentage of trust assets (CLUT).
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Wealth transfer efficiency – Proper structuring can minimize or even eliminate taxable remainders, passing future appreciation to heirs at a reduced cost.
Other Charitable Tools
Donor-Advised Funds (DAFs)
DAFs enable large charitable contributions in high-income years while allowing grantmaking flexibility over time. They provide immediate tax deductions, involve heirs in philanthropy, and do not require minimum annual distributions.
Qualified Charitable Distributions (QCDs)
For individuals aged 70½ or older, QCDs allow up to $100,000 annually to be transferred tax-free from IRAs to charities. This satisfies required minimum distributions, reduces taxable income, and lowers estate tax exposure.
Conclusion: Aligning Wealth with Values
Charitable giving strategies—including CRTs, CLTs, DAFs, and QCDs—provide tax efficiency, income flexibility, and a way to embed philanthropy in your estate plan. By aligning charitable goals with wealth transfer, you preserve both family legacy and societal impact.
Paulson & Partners helps clients design estate plans that integrate charitable vehicles while optimizing tax outcomes. Contact us to explore how philanthropy can strengthen your estate-planning goals.
