There are many ways you can choose to give back to charitable causes, whether it’s donating money directly or volunteering your time. If you want to make a more significant contribution, you may consider the five following ways to gift your assets to a charity of your choice.
Charitable gift annuity
A charitable gift annuity is when you make a sizable gift to a charity. This gift makes you eligible for a partial tax deduction, and you receive a fixed income stream from the charity for the rest of your life. The money you give is set aside in a reserve account and invested. After you pass away, the charity receives the remainder of the money. Charitable gift annuities can be set up by individuals or couples. The minimum amount of money required for this type of giving is usually $5,000, but are often much larger than that.
A donor-advised fund is an account set up through a charitable organization. Donors make a charitable deduction and receive an immediate tax deduction from the gift. You can continue to contribute personal assets to the fund, where the money will be invested and grow tax-free until you’re able to make a grant to a qualified charity. Donors are able to give to the fund as frequently as they’d like and recommend grants when they make sense.
Retained real estate
In this type of giving, the donor gifts a residence, farm or another kind of property to a charitable organization. The donor retains the right to live on the property for a designated period or throughout your life, with the property going to the charity at the end of the term, or after the death of the last person with a retained interest in the property.
A family foundation is a private wealth fund established for charitable reasons. Often, the donor has full control over grantmaking and passes that authority to a relative or other trusted party after their death. Starting a family foundation is not practical for smaller donors. Family foundations require significant administrative overhead and have large establishment costs up front.
Charitable remainder trust
A charitable remainder trust is a tax-exempt trust that pays a stream of income to the grantor or other non-charitable entity for a designated amount of time. The remaining value is then paid to a charity at the end of a period of time. The trustee takes on the administrative burden, meaning they’re responsible for preparing and filing tax returns, tracking the categories of income and calculating the annual payout. The grantor typically receives an income tax deduction that is equal to the value of the remainder interest in the trust.