There Are Many Options for Charitable Giving in WV Estate Plans

In 2016, Americans gave over $360 billion to charity and shattered the record for charitable donations. Some people prefer to give to organizations with whom they share an association, such as a church. Others like to give to national organizations, such as the American Red Cross, and still others prefer to donate to local charities registered with the WV Secretary of State.

There are numerous forms of charitable giving like these:

• Direct gifts;

• Charitable gift annuities, which are regulated by W. Va. Code § 33-13B-1 et seq.;

• Pooled income funds;

• Donor-advised funds; and,

• Gifts in trust.

Direct gifts are the most straightforward donation. With this type of charitable giving, the donor gives money or items directly to the charity. For example, you might decide to donate money to Recovery Point West Virginia or a car to Good News Mountaineer Garage. Depending on your individual financial situation as a donor, you may receive a tax benefit from a direct gift.

Some of the more complex options for charitable giving in WV estate planning are described in more detail below.

Charitable Gifts in Trust

When considering charitable giving in WV estate plans, you should consider charitable gift annuities. With this type of gift, the donor enters into a contract with an organization. The donor donates money or securities, and then the organization pays income to the donor on that investment. The amount of income is usually dependent on the age of the donor; the older the donor, the larger the percentage of income.

Depending on the type of asset donated, the donor could receive a substantial tax deduction, as well. This form of giving is very popular for alumni donating to their alma maters. For example, Marshall University accepts charitable gift annuities.

The income received with this option is usually relatively small. If a donor seeks higher income, a traditional insurance annuity may be a better option. While philanthropy in your estate plan is important, overall financial health is also important.

Pooled Income Funds

Pooled income funds are yet another avenue to consider for charitable giving in WV estate plans. A pooled income fund is a charitable trust maintained by a qualified non-profit organization. Several donors donate approved assets into the fund. This donation is irrevocable. This means that after the donation is made, it cannot be taken back.

With a pooled income fund, the donor receives income from the fund while he or she is still living. The amount of income varies as it is based on how well the investment performs in the market. The donor can also opt for a beneficiary to continue to receive income after the donor dies. After the beneficiary’s death, the donation principal is transferred to a charity of the donor’s choice. This form of giving generates an immediate income tax deduction and helps the donor avoid both capital gains and estate taxes.

Donor-Advised Funds

Donor advised funds are somewhat like pooled income funds; however, these donors do not receive income. This aspect should be carefully weighed when evaluating options for charitable giving in your estate plan. Like pooled income funds, the donation is irrevocable. However, donors receive an immediate tax deduction for their donation.

With a donor-advised fund, the donor names the account, advisors, and beneficiaries. The primary advantages of this method are that it allows donations to grow tax-free over time and that the donor has some control over how the money is managed (hence the name "donor-advised" fund). The donor directs disbursements to the charities of his or her choice. Donor-advised funds can be advantageous to investors with relatively small amounts of money to give.

Charitable Gifts in Trust

Gifts in trust are another strategy to consider when planning charitable giving in your estate plan. The two main types of charitable trusts are charitable lead trusts (CLTs) and charitable remainder trusts (CRTs). For both, the donor creates an irrevocable trust that lasts for a period of time such as someone’s lifetime (either the donor or a beneficiary). It could also be for a term of 20 years. 

The two types of trusts mirror each other. In the case of a charitable lead trust (CLT), the interest on the body of the trust goes to the designated charity. At the end of the designated period, the assets that comprise the body of the trust pass to the beneficiary of choice. In the case of a charitable remainder trust (CRT), the beneficiary receives the interest on the body of the trust. At the end of the proscribed period, the assets that comprise the body of the trust pass to the designated charity.

Expertise for Charitable Giving in WV Estate Plans

Contact Anna M. Price at Jenkins Fenstermaker, PLLC to learn more about charitable giving in WV estate plans. Anna specializes in WV estate planning strategies, including helping people meet philanthropic goals wisely. Reach out for more information or for a consultation by completing Anna's online contact form or by calling 304.521.4571 or toll-free at 866.617.4736.