Advanced Gifting Strategies | Baird Private Wealth Management

Advanced Gifting Stategies

For individuals looking to make a more substantial philanthropic impact, advanced gifting strategies offer powerful tools to align charitable goals with financial planning. These approaches include donor-advised funds, charitable remainder trusts, charitable lead trusts, and charitable gift annuities. They are typically best suited for those planning to give larger amounts or seeking more structured, tax-efficient ways to support causes they care about. These strategies often require thoughtful planning and professional guidance, making them ideal for investors with complex financial situations or long-term charitable intentions.

Donor Advised Funds

What is it? An investable account with a sponsoring charity that holds the funds for the donor’s later advised distribution.

Advantages: There’s an immediate charitable deduction, including the ability to bunch deductions in a single year. Plus, assets can grow tax-free for future distributions to charity.

Disadvantages: You may have fewer investment options, and you may cede control on how to direct distributions to charity to a future advisor. You’ll also likely incur investment and administrative costs.

When to use it: A donor advised fund might be especially useful if you want (1) maximum deductibility today, based on AGI limitations, and (2) flexibility on when gifts can be distributed to charity (as well as the ability to invest those funds until that time).

Charitable Remainder Trust

What is it? A trust that makes a fixed or percentage payment to an individual for the initial term and pays the remainder to charity.

Advantages: A CRT creates an immediate charitable deduction and an income stream for donors or other individuals. It also carries with it the potential to defer capital gains.

Disadvantages: A CRT also requires you to draft legal documents to create the foundation and ongoing tax filings.

When to use it: A CRT might be especially useful if you have significant concentrated, low-basis assets that you are looking to diversify, such as a closely held business, farm or real estate, or company stock.

Charitable Lead Trust

What is it? A trust that pays an income stream to the charity for the initial term and pays the remainder to an individual.

Advantages: A CLT allows assets inside the trust grow outside the donor’s estate, thus reducing potential estate tax.

Disadvantages: A CLT also requires drafting of legal documents to create the foundation and ongoing tax fi lings.

When to use it: A CLT might be especially useful if you will be subject to a taxable estate at your death.

Charitable Gift Annuity

What is it? A contract between the donor and charity to pay a fixed periodic payment over the life of an individual.

Advantages: Charitable gift annuities are easy to set up and administer, plus they offer an immediate charitable deduction, an income stream for donors and the potential to defer capital gains.

Disadvantages: CGA assets are typically controlled and invested by the charity and thus are subject to their solvency. It also only applies with an active charity that has already established the annuity program.

When to use it: A CGA might be especially useful if you want a fixed income stream for life and have concentrated low-basis assets which you are looking to diversify.

I'm Interested! Where do I Start?

If you're considering any of these strategies or simply want to learn more, the first step is to clarify your charitable goals and evaluate your financial situation. These approaches require careful planning and are best pursued with guidance from a qualified advisor. If you don’t currently have one, Baird can help you get started and connect you with the right resources to move forward confidently.

Have a Question?

Name

Email

Address

Phone

Question

Thank you!

Oops!