Charitable giving in an estate plan is a way of directing part of what someone leaves behind toward a cause that mattered to them while they were living. Charitable giving can be built into a plan in several different ways, and the structure chosen affects how much flexibility a family keeps, when the gift actually reaches the organization, and how the estate is treated for tax purposes. The five approaches below are among the more common ways a legacy gift gets structured, and each one fits a different set of circumstances.
1. A Charitable Bequest Written Into the Will
The most straightforward form of charitable giving is a bequest, a provision in a will directing a specific dollar amount or a specific item to a named organization. Because it lives inside the will, it takes effect through the probate process alongside everything else the will covers, and it can be changed at any time during a person’s lifetime simply by updating the document.
The main thing worth getting right is naming the organization precisely, since charities sometimes share similar names or operate through affiliated entities, and a gift described loosely can create genuine confusion for the people carrying out the plan later.
2. A Beneficiary Designation on an Account
An organization can be named directly as a beneficiary on a retirement account, a bank account, or a life insurance policy, which moves the gift outside probate entirely. This approach to charitable giving is often the simplest to set up, since it usually involves a form rather than a redrafted document, though it carries the same maintenance burden as any other transfer on death designation and needs reviewing when circumstances change.
Retirement accounts deserve particular attention here, because assets in them generally carry income tax consequences for individual heirs that a qualifying charitable organization does not face in the same way.
3. A Percentage Share Rather Than a Fixed Amount
Naming a percentage of an estate rather than a fixed dollar figure keeps a charitable gift proportional to whatever the estate actually turns out to be worth. A fixed amount written years earlier can end up consuming a far larger share of a modest estate than anyone intended, or a far smaller one than a person would have wanted if their circumstances improved considerably over time.
A percentage approach also tends to age better without revisions, which matters for anyone who would rather not revisit their plan every time the value of their assets shifts.
4. A Charitable Trust Arrangement
Some families structure charitable giving through a trust that splits benefits between an organization and individual loved ones, either paying income to family members for a period with the remainder going to charity, or the reverse. These arrangements can serve real purposes, providing for a family member during their lifetime while still honoring a charitable intention, but they are considerably more complex to establish and administer than a simple bequest.
Because these structures involve ongoing trustee duties and specific tax treatment, they generally warrant a longer conversation about whether the added complexity is genuinely earning its place in a particular plan.
5. A Donor Advised Fund
A donor advised fund holds contributed assets and distributes them to organizations over time based on recommendations, and it can be named as a beneficiary in an estate plan. The appeal for charitable giving is flexibility, since the specific organizations receiving support can change over the years without the underlying estate documents needing to be rewritten each time.
This can be particularly useful where a family wants to continue giving together after a parent’s death, keeping a shared tradition going rather than distributing everything at once.
Summary
Charitable giving can be structured through a bequest in a will, a beneficiary designation, a percentage share, a trust arrangement, or a donor advised fund, and the right choice depends far more on a family’s circumstances than on the size of the gift. Estate tax treatment matters as well, since a qualifying charitable gift generally reduces the value of an estate subject to tax, a point the IRS addresses in its estate tax guidance. Whichever structure fits, coordinating it with the rest of a plan, including any beneficiary deed or similar document, is what keeps every piece pointing in the same direction.
Anyone with specific questions about building charitable giving into an existing estate plan is welcome to reach out and discuss their situation with an attorney.
The choice of a lawyer is an important decision and should not be based solely upon advertisements. Prior results do not guarantee a similar outcome. This post is for informational purposes only and does not constitute legal advice.
