Philanthropy and Your Estate Plan: Smart Moves Before 2026

Including philanthropy in your estate plan lets you support meaningful causes and may reduce taxes on your estate. With higher exemption amounts scheduled to expire after 2025, now is an important time to review your options.

Gift and Estate Transfer Taxes

The federal government taxes wealth transfers you make during your life or at death.

The Tax Cuts and Jobs Act of 2017 doubled the gift and estate tax exclusion amount.

Unless Congress acts, this provision will expire after 2025, cutting the exemption roughly in half.

• For 2025, the federal lifetime gift and estate tax exemption is $13.61 million per person. Amounts above this are taxed at up to 40 percent.
• A separate generation-skipping transfer (GST) tax applies to transfers made to grandchildren and later generations, with the same $13.61 million exemption.
• Some states also impose their own estate or inheritance taxes.

Careful planning is needed to minimize transfer taxes. Many individuals are making gifts now while the exemption is historically high. Charitable giving can play a key role in this planning since charitable transfers are fully deductible from the taxable estate.

Easy Charitable Giving: Outright Bequest in Your Will

The simplest way to give is by leaving a cash bequest in your will. A short provision naming the charitable beneficiary and amount is all that’s needed. This option works well for smaller gifts or when you want the funds to go directly to the charity without restrictions.

Name a Charity as Your IRA or Retirement Plan Beneficiary

You can also designate a charity as the beneficiary of your IRA or employer-sponsored retirement plan. This provides double tax savings: the gift is deductible for estate tax purposes, and the charity won’t pay income tax on the funds it receives. This makes retirement accounts especially efficient assets to leave to charity.

Use a Charitable Trust

For larger estates, charitable trusts can help achieve philanthropic and tax goals.

• Charitable Lead Trust (CLT): Pays income to a charity for a set period, then passes the remainder to your heirs. Works well if you expect trust investments to grow and want to keep assets in the family while supporting a cause.
• Charitable Remainder Trust (CRT): Pays income to your beneficiaries for life or a term of years, with the remainder passing to charity. This option removes assets from your estate, provides your family with income, and generates an estate tax deduction.

Both types of trusts require professional setup and planning, but they can provide significant benefits.

Charitable Giving: Make a Plan

Incorporating philanthropy into your estate plan offers financial advantages and allows you to make a lasting impact. Whether through a simple bequest, beneficiary designation, or charitable trust, you can align your giving with your values and provide for the future.

If you’d like guidance on including charitable giving in your estate planning, our team is here to help.