Charitable giving can be part of a client's financial and estate planning. Clients may want to support charitable organizations during their lifetime, include charitable gifts in an estate plan, or consider how different assets may be used for charitable purposes.
Helping clients give to charity tax efficiently requires careful coordination because the tax treatment of a charitable gift can depend on the type of asset, charitable structure, timing, and individual circumstances.
Start With the Client's Charitable Intentions
The planning conversation can begin with the client's goals. An advisor may ask which organizations the client wants to support, whether gifts are intended during life or at death, and whether the client has an existing charitable or estate planning structure.
The type of asset being considered can also be relevant. Cash, securities, retirement assets, and other property may have different tax considerations.
These questions can help identify when an attorney or tax professional should become involved.
What Charitable Structures May Be Considered?
Depending on the circumstances, charitable planning may involve direct charitable gifts, donor-advised funds, charitable trusts, private foundations, or charitable provisions within an estate plan.
Each structure has different legal, administrative, and tax considerations. The appropriate structure depends on the client's circumstances and should be evaluated with qualified professionals.
Financial advisors can coordinate the planning process while staying within the scope of their services.
Where Can a Trust Company Fit?
A trust company may have fiduciary or administrative responsibilities when a charitable trust or estate-related trust is established and the trust company is appointed to serve in that capacity.
For example, responsibilities may include administering trust provisions, maintaining records, processing distributions, and communicating with beneficiaries or other parties as required by the governing documents.
For example, Members Trust Company provides trust and estate services and works with financial professionals in connection with trust-related planning.
Questions Advisors Can Raise
When discussing charitable giving, advisors may consider asking:
What is the client's charitable intention?
Which assets are being considered for the gift?
Is the gift intended during life or through an estate plan?
Does an existing trust or charitable structure apply?
Which attorney and tax professional are involved?
Who will administer the arrangement if a trust is used?
These questions do not replace legal or tax advice. They can help establish which professionals should participate in the planning process.
Tax Considerations Require Individual Review
Charitable tax rules can be affected by the type of property donated, the recipient organization, the timing of the gift, valuation requirements, and other factors.
For that reason, advisors should avoid assuming that one charitable strategy will have the same tax treatment for every client. A qualified tax professional can evaluate the applicable rules based on the client's circumstances.
Conclusion
Helping clients give to charity tax efficiently involves coordinating charitable intentions with financial, estate, and tax considerations. Advisors may help organize the planning conversation, while attorneys and tax professionals address legal and tax matters.
When a charitable trust or other fiduciary structure is involved, Members Trust Company may provide trust and estate services within its defined role. The appropriate arrangement depends on the governing documents, client circumstances, and applicable requirements.
FAQ
Can charitable giving have tax benefits?
Certain charitable gifts may receive tax treatment under applicable law. The treatment depends on the gift, the recipient, the donor's circumstances, and other factors.
What assets can clients donate to charity?
Depending on the circumstances, clients may consider cash, securities, retirement assets, or other property. Tax and legal treatment can differ among asset types.
Can a trust company administer a charitable trust?
A trust company may serve as trustee or provide administrative services when appointed and authorized under the applicable trust documents.
Should a tax professional be involved?
Tax professionals can evaluate the applicable tax rules and the potential tax treatment of a proposed charitable gift.
This article is provided for educational purposes only and does not constitute legal, tax, accounting, or investment advice. Trust, estate, retirement, and tax considerations vary based on individual circumstances and applicable law. Investment products and services are not deposits or obligations of, and are not guaranteed or endorsed by, Members Trust Company, any credit union or government agency. They are not federally insured and are subject to investment risk, including possible loss of principal. Readers should consult qualified professionals regarding their specific circumstances.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
