Sometimes, it really is better to give than receive. This is especially true for those hoping to fulfill philanthropic ambitions by donating portions of their wealth to an IRS tax-exempt charitable organization. This type of charitable impact planning allows donors to benefit their favorite charity while limiting their U.S. income and estate tax exposure, and insulating them from liability associated with donated property. With the right planned giving strategy, donors can introduce a philanthropic component into their family legacy and simultaneously address emotional and financial considerations that come with traditional estate planning.

Below I’ve illustrated 6 charitable impact planning tips recommended to meet the long-term estate planning goals of my client Fred. Fred, a long-time supporter of charitable giving within his community, visited my office for his annual trust and estate plan review. During our meeting, Fred excitedly spoke of his desire to update his plan to reflect his new found passion for mentoring children at his local Big Brothers Big Sisters organization.

Perform Charitable Planning Due Diligence

Because leaving a charitable legacy was his primary goal, I advised Fred that he could take steps today to take to become an impactful contributor to Big Brothers Big Sisters. I explained to him that in order for me to better understand his passion for philanthropy and offer planning recommendations, I would need to perform a due diligence review by having him complete the Firm’s charitable planning questionnaire which asks the following questions:

• What are the origins of your passion for philanthropy and charitable giving?
• Is your preference to give gifts to charity during life or after death?
• What assets do you intend to contribute to charity (i.e. cash, property or services)?
• Will you or your family members use donated property or need income from donated property during life?
• Are you contributing appreciating property or property with liability concerns?
• Do you intend to involve your family in your charitable legacy planning?
• Will donated property generate taxable income in the future?

Structure a Lifetime Gift

In order to make an immediate charitable impact, I asked Fred to consider making an outright gift of cash, property or services to Big Brothers Big Sisters. The primary benefit of making a lifetime gift is gaining the ability to reduce income taxes in current and future years while also immediately reducing the potential for estate taxes after death. Before making a lifetime gift, I suggested that Fred consider (i) whether he will be donating liquid assets (e.g. cash or readily marketable securities) or illiquid assets (e.g. real property, collectible art, antiques, closely-held business stock, or annuity or life insurance proceeds), (ii) whether donated services are properly documented by written contract, (iii) whether donated property will generate taxable income or capital gains tax upon sale, and (iv) whether a valuation of donated property or services is required by the IRS to justify the property’s appraised value greater than $50,000.

Update Beneficiary Designations

I suggested that Fred name Big Brothers Big Sisters as a primary or contingent beneficiary of (i) his life insurance policy, (ii) his 401(k) or other retirement account (e.g. Roth IRA), or (iii) any bank, brokerage or other account requiring a beneficiary designation. By designating a charitable beneficiary, Fred will be able to give far more at his death than he ever could during life. If a charity is named as beneficiary his retirement ac-count, Fred avoids income taxation on the sale of account assets during his life and, give the charity the ability to withdraw the account balance tax-free after his death. If offering a specific dollar amount is preferred, Fred might consider naming his estate as the primary beneficiary of the ac-count and executing a Will with a specific devise of that account to Big Brothers Big Sisters.

Make Charitable Bequests by Will

I explained to Fred that it is easy for him to leave a gift in favor of Big Brothers Big Sisters in his Will. In order to do this, Fred could include a general or residuary devise provision in the Will that leaves a specified monetary gift (i.e. a fixed amount or percentage of his estate) to the charity. Unlike a specific devise (e.g. a devise of a specific item of tangible personal property such as 100 shares of Google stock), a general or residuary devise of property is a gift given at death that will not lapse and must be distributed from assets within Fred’s estate. Whereas a specific devise has a chance of not being completed if the asset is not in existence nor is available upon Fred’s death, an outright gift of property by general or residuary devise can assure at least a partial distribution of assets paid to charity after Fred’s estate debts are satisfied.

Make Charitable Bequests by Trust

If Fred wants to make assets available for use by both his family and Big Brothers Big Sisters, a charitable gift by Trust is an attractive option to accomplish Fred’s charitable objectives. If Fred transfers assets to a charitable remainder trust, Fred’s family members can use and receive payments of income from trust property during their lives before distributing remaining trust assets to charity after the last member of the family dies. If Fred would rather keep a remainder interest in trust property for his family’s benefit, a charitable lead trust is preferred since this trust vehicle allows Fred to give income from trust assets to charity for a specified period of time (e.g. 5 years) before passing ownership of those assets within trust to family members. Bear in mind that either trust option is a good planned giving option if Fred’s children or grandchildren do not need for in-come from Fred for the reminder of their lives.

Start a Public Charity or Private Foundation

I recommended that Fred establish his own public charity or private foundation to achieve significant tax benefits and give family and friends a way to share in his passion for philanthropy. Because he can deduct up to 50% of his adjusted gross income for cash gifts made in a single tax year (and carry the excess forward at least 5 years), a private foundation can reduce Fred’s income taxes for several years after the donation is made. Further-more, Fred can take an active role in deciding the direction of his charity’s philanthropy while maintaining control of his donated assets. He will also avoid capital gains on appreciated property that is donated to the foundation. Although charitable foundations are subject to extensive IRS regulation, a charitable foundation is a viable option if Fred demonstrates and executes on his passion, enthusiasm and charitable vision to benefit the public-at-large.