You’ve spent a lifetime building wealth. If you’re like many people, you probably want to pass down some of that wealth to your loved ones. However, if philanthropy has been part of your financial journey thus far, you might also consider legacy giving. Laura Kuntz, CPA/PFS, MBT, Senior Wealth Manager, shares, “As people are successful in accumulation and investing, they can come to the point they feel they have ‘extra,’ and they often look for ways to share with others—family members, friends, community, or charities.”
When you donate a portion of your assets to qualifying charities, you create a legacy that lasts long after you’re gone. If you want your gift to have as much of a positive impact as possible, it’s important to carefully consider your giving strategy.
What Is Legacy Giving?
Legacy giving involves arranging for money or other assets to be donated to charitable organizations after your death. Typically, you create a legacy giving plan as part of the estate planning process. “Many of our clients have included a charitable legacy in their estate plan,” Laura says. “There is no right or wrong in including a charitable legacy. It comes down to your preferences, and what is deeply important to you.”
Strategies for Legacy Giving
Giving money to your preferred charities can be very fulfilling. However, depending on the size of your estate and other factors, the giving strategy you choose may have substantial tax benefits.
Although this is not an exhaustive list, here are some of the most common legacy giving strategies:
Bequests
A bequest is one of the most straightforward legacy giving strategies. To make a bequest, you just need to include a clause in your will gifting a specific sum of money (or piece of property) to a charitable organization.
Giving this way may not always be ideal. It comes with a few distinct disadvantages:
- The will must go through probate before the charity receives the gift.
- The amount of the gift may be reduced due to taxes or claims against the estate.
However, if you are gifting a relatively small amount to a specific charity, a bequest may be the most appropriate choice.
IRA Beneficiary Designation
You can avoid probate by making your desired charity(s) the beneficiary(s) of your IRA. You may also be able to reduce after-death income tax because the charity pays no income tax on the IRA distributions. Let’s compare that to an IRA that goes to a family or friend beneficiary—that beneficiary would likely have to pay income tax on the IRA distributions. Laura comments, “Leaving money to charities through an IRA beneficiary designations is easy, highly tax-advantaged, and flexible—you can change it any time. This is the most common way our clients leave a charitable legacy.”
Charitable Trusts
Some people who are interested in legacy giving turn to charitable trusts. When you transfer assets into a trust, you are no longer the legal owner. This means the assets are not counted as part of your estate. And you can receive tax deductions today for amounts that will ultimately pass to charities as your legacy. In some cases, you can even keep an income for the rest of your life; this acts much like a pension.
For 2025, the federal lifetime gift and estate tax exemption is $13.99 million. In 2026, the amount increases to $15 million. But the exemption for Minnesota residents is much lower, only $3,000,000 (each state is different). If you anticipate that your estate might exceed the exemption, setting aside charitable gifts in one or more trusts can reduce the value of your taxable estate. In addition, assets held in a trust do not have to go through probate.
Donating Appreciated Stock
If you have appreciated stocks in a brokerage account, donating them to a charity may stretch your money further. As long as you’ve held the stocks for more than a year, you don’t have to pay capital gains tax, and the charity receives the stocks’ full appreciated value. Per Laura: “This is also another common way our clients make charitable gifts. This method avoids the capital gains tax and may also offer a current income tax deduction. I call these benefits a ‘twofer,’ i.e., two tax benefits with just one gift.”
Donor-Advised Funds
If you aren’t sure which charities you want to support, or if you want to involve your family in your legacy giving, you might consider a donor-advised fund. When you create one of these funds, you can deposit money or securities immediately and receive a tax deduction right away.
Once the funds are in the trust, you (or your family members) can make gifts to different charities over time or as part of your legacy. If you create a donor-advised fund, you may name your adult children or other heirs as successors to dole out the funds. Your donation becomes a gift that keeps on giving, and as a bonus, you can introduce your heirs to the world of charitable giving. For many families, the donor-advised fund acts as a “Family Foundation.”
Laura shares, “I use a donor-advised fund myself and many of our clients do as well. It can offer many tax benefits, is easy to use, and even offers the opportunity to give anonymously, which feels right for some gifts.”
Ready to Create Your Giving Strategy?
For many clients at Laurel Wealth Planning LLC, charitable giving is part of their wealth management strategy. As they make a plan to pass their wealth down to the next generation, legacy giving is a key part of the picture.
If legacy giving is part of your estate plan, choosing the right strategy is essential. Laurel Wealth Planning LLC has helped countless clients build charitable giving plans.
To schedule a complimentary meeting, send a message online, email laurel.wealthplanning@laurelwealthplanning.com, or call (952) 854-6250. Find out whether the Laurel Wealth Planning team is the right financial advisor for you based on your wants and needs.
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