Our firm advises clients on various charitable giving techniques. We counsel our clients in simple or sophisticated charitable giving plans based on each client’s goals, and we assist clients in creating charitable organizations and in negotiating agreements with existing charitable organizations to best effectuate those goals. At the request of our clients, we draft and negotiate restrictions or other terms with the charity before the gift is made. The attorneys who deal in this area also advise in the establishment of private foundations and provide ongoing counseling for annual reporting requirements.
Understanding The Options
Tax rules and other laws reflect a social policy which favors charitable giving. As a result, there has developed a wide range of charitable giving options. Deciding among the many options can frequently involve a wide range of choices. The available options can include one or more of the following:
- Volunteer service to a charity
- Outright gifts to a public charity by cash or check, securities, or other assets
- Donor Advised Fund: A donor gives to a separate fund established at a public charity and managed by the public charity in the name of the donor. The public charity then officially controls the annual charitable giving from the fund but first consults with the donor or the family
- Endowed chairs or professorships at colleges and universities
- Private Foundation. A donor establishes a charitable foundation controlled by one or more trustees (often family members or close associates of the donor), and the donor and others can make gifts to the foundation. The foundation itself is then the charitable organization, which makes other charitable gifts or carries on charitable activities, perhaps indefinitely. There are several varieties:
- Private, Non-Operating Foundation: Makes annual gifts to charities
- Private Operating Foundation: Makes gifts and conducts charitable activities
- Supporting Organization: A hybrid between a private foundation and a public charity, it makes gifts to – or performs the functions of – an existing, specified public charity. The original donors must share control of the supporting organization with the public charity it supports
- Charitable Gift Annuities and Pooled Income Funds: The donor gives assets to a public charity in return for the charity’s promise to pay fixed annuity amounts, typically, to the donor and the donor’s spouse over their joint lifetimes
- Charitable Remainder Trust: The donor creates a trust which pays an annuity to the donor and the donor’s spouse for a period of time, or for life, and the balance then remaining is distributed to one or more charities
- Charitable Lead Trust: The donor creates a trust which pays an annuity to one or more charities for a period of time, and the balance then remaining is distributed to the donor or family members, or held in further trust for their benefit
Planning And Coordinating Charitable Giving
Charitable giving does not take place in a vacuum. Many people motivated to engage in charitable giving are also in the process of giving to family members. When such giving is properly coordinated, the tax laws can enable both intentions to be carried out more cost effectively using a single mechanism for the giving. For example, with some of the mechanisms, interests can be divided between charity and family members, with one category of beneficiary receiving an interest for a period of time and the other category benefitting thereafter.
Also, some of the mechanisms permit the donors themselves to retain some interest, either before or after the charitable interest is paid. We have the experience to help clients coordinate these intentions through choices that fit their particular circumstances and goals. We consult with our clients and their families to develop their ideas into a cohesive plan, and we assist them in effectuating that plan with the participation of existing charitable organizations or by working with them to create new charitable organizations.
Advice On Continuing Administrative And Compliance Matters
Some of the charitable giving mechanisms involve the creation of trusts or foundations with continuing administration. Tax and other legal rules can involve requirements for certain levels of charitable spending, limitations on which charitable recipients can receive distributions, restrictions on the activities of the donors, trustees, or managers of the charitable trusts or foundations, and tax and other reporting requirements. We are able to provide advice on particular compliance issues as well as assistance with and preparation of the required informational returns and other reports.