Charitable giving can intersect with investment planning, estate planning, retirement assets, and tax considerations. For advisors, the planning process may involve several professionals and decisions that need to be considered together.
Charitable giving planning requires attention to the type of gift, timing, charitable structure, and applicable tax rules. The appropriate approach will depend on the client's circumstances.
Start With the Client's Giving Plans
A useful starting point is understanding what the client wants the charitable gift to accomplish. Questions may include:
Which charitable organizations does the client want to support?
Is the gift intended during the client's lifetime or through an estate?
What assets are being considered?
Does the client already have a charitable structure?
Are family members or other beneficiaries involved?
Which attorney and tax professional are participating?
These questions can help identify which areas require further professional review.
Consider the Asset Being Donated
The tax treatment of charitable gifts can differ depending on the property involved. Cash, publicly traded securities, closely held interests, real estate, and retirement assets can present different considerations.
For example, a client considering a gift of appreciated property may need to review valuation, holding period, charitable deduction rules, and other tax matters before proceeding.
An advisor can help organize the financial planning discussion, while a qualified tax professional determines the applicable tax treatment.
How Do Charitable Trusts Fit In?
Some clients may consider charitable trusts as part of their estate or philanthropic planning. Charitable remainder trusts and charitable lead trusts have different structures, beneficiaries, and distribution provisions.
A trustee appointed to administer such a trust may have ongoing fiduciary and administrative responsibilities under the governing documents.
Members Trust Company provides fiduciary services that include administration of charitable lead trusts and charitable remainder trusts.
The legal and tax implications of a charitable trust should be reviewed with qualified professionals before the structure is established.
Coordinate the Professional Team
Charitable planning can involve an advisor, attorney, tax professional, trustee, and other specialists. Each may address a different part of the client's planning.
For example, the attorney may address the legal structure, the tax professional may evaluate tax treatment, the advisor may address investment considerations, and the trustee may administer the trust when appointed to that role.
Members Trust Company can serve in fiduciary capacities such as corporate trustee or co-trustee when appointed under the applicable trust arrangement.
Clear communication can help each professional understand the responsibilities assigned to them.
Review the Plan Before the Gift
Charitable strategies can involve documentation, valuation, beneficiary provisions, distribution requirements, and tax considerations. A client may want to review these matters before transferring assets.
Advisors should also consider whether the proposed gift affects other parts of the client's financial or estate plan. Any legal or tax determination should come from the appropriate qualified professional.
Conclusion
Charitable giving planning involves coordinating charitable intentions with asset selection, estate planning, tax considerations, and fiduciary responsibilities. The appropriate strategy depends on the client's circumstances and applicable law.
Members Trust Company provides trust and fiduciary services that may be relevant when charitable trusts or other fiduciary arrangements are part of a client's plan. Advisors should coordinate with qualified legal and tax professionals when evaluating a charitable strategy.
FAQ
Can charitable giving have tax benefits?
Certain charitable gifts may receive favorable tax treatment under applicable law. The treatment depends on the asset, recipient, timing, and donor's circumstances.
What assets can be considered for charitable giving?
Depending on the circumstances, clients may consider cash, securities, real property, business interests, or retirement assets. Each can involve different legal and tax considerations.
What is the advisor's role in charitable planning?
An advisor may address financial and investment considerations within the scope of the advisory relationship while coordinating with legal and tax professionals.
Can a trust company serve as trustee of a charitable trust?
Depending on the trust documents and engagement, a trust company may serve as corporate trustee or co-trustee.
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. Trust and fiduciary services are subject to review, acceptance, applicable law, governing documents, and Members Trust Company's policies and procedures. Investment products and services are not deposits or obligations of, and are not guaranteed 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.
