Planned Giving for Dummies

by Alanna Berman September 29, 2010


As founding president of Charitable Trust Administrators Inc. for more than 20 years, Chuck McLucas simplifies the complex world of planned giving for his clients. He helps them allocate their assets to the charitable organization of their choice and works with organizations to find the right donors.

For many, the words “planned giving” mean little more than a complicated process that’s great in theory but difficult to execute. They turn to McLucas to make it happen.

“Planned giving is probably best defined as a process to arrange one’s financial affairs to maximize income for family members and to assist in supporting a favorite charity or charities,” he said.

In most situations, donors receive tax breaks for providing the gift, and an income stream from the nonprofit. The most common type of planned giving is the bequest of property through a person’s will.

Usually, he says, donors contribute property that has depreciated in the falling market, which allows them to get a partial tax break out of an otherwise substantial loss if they were to sell the property.

Later, the charity becomes the owner of the property, which provides the charity income they otherwise would not have had, so both parties benefit from the transaction.

“The family benefits by having significantly higher income, as the tax dollars are still in the family’s control to generate income, and the charity benefits by receiving a substantial gift upon the death of the donor,” McLucas said.

In simple terms, planned giving allows individuals or families to donate responsibly and concretely to organizations and causes that matter to them.

Besides minimizing estate taxes, bypassing capital gains taxes and receiving current tax deductions, donors can rest assured that the causes that matter to them will be well cared for after they are gone.

“Planning to give some of one’s wealth to a needy charity is one of the greatest things we can do to help our community,” McLucas said. “Many university foundations, as well as local hospitals, have been established over the years by the use of these planned gifts.”

Normally, McLucas said, donors already have a rapport with the charity and have been giving throughout their lifetime. “These are not small transactions, so it helps to have someone working on your side when establishing a planned giving trust,” McLucas said.

While there are quite a few types of planned giving, McLucas focuses on estate planning for high net-worth individuals, and establishing planned giving departments for nonprofits.

In San Diego and Orange County, McLucas said the most common type of giving he sees is clients selling their businesses or transferring wealth to family members.

“It’s a win-win situation for all parties involved,” McLucas said.

For more information on planned giving, contact Chuck McLucas at Charitable Trust Administrators Inc., (888) 738-0500 or visit

Planned Giving Through Charitable Gift Annuities

By Ari Wein, CFO, American Friends of Tel Aviv University

Some people still feel nervous about the stability of the current economy. Older people are afraid to take risks with their retirement assets. Younger people, still working and investing for the future, fear that their assets might go through another substantial reduction in value. But there’s a way to recession-proof your own financial picture — a planned gift in partnership with a charitable organization.

The charitable gift annuity option

Of the many planned giving options available, perhaps the most well known is the charitable gift annuity (CGA) — you make a contribution to the cause of your choice and receive a lifetime annuity.

For example, the American Friends of Tel Aviv University charitable gift annuity (contact Rosalie Lurie at (310) 553-5232 or for more information) offers a high fixed-rate income — for life — no matter what happens in the economic market.

A charitable gift annuity is especially attractive because tax laws encourage these partnerships between a taxpayer and a charity. A CGA provides an income tax charitable deduction you can use right away; then every year, part of the ongoing annuity income it produces is often tax-free. And if you create it with appreciated property, such as stocks or bonds, you can receive partial relief from capital gains taxes.

To maximize your annual payments, you can create a CGA now and defer your annuity to a future date — another bit of recession-proofing.

Best of all, you earn all these benefits while knowing you’ve made a meaningful contribution to an organization you believe in.

More planned giving options

Other charitable planned gifts fall into the category of the deferred gift. This is any gift you arrange in the present — by trust, will or other vehicle — from which you or someone else receives current benefits and that will be available to the charitable organization at a future date.

If you want to give to a charity during your lifetime, and then leave assets for your heirs, consider a charitable lead trust. The charity receives an annual fixed percentage or sum for a specified period of time after which the trust assets revert to you or your beneficiaries. It allows property to be transferred to those beneficiaries at a low transfer tax cost.

Other planned gifts fall into the category of philanthropic funds. A philanthropic fund bears your name or that of someone you choose and is maintained as a component fund of a charity. It can be established by a gift of cash or property. You and your designees can make recommendations for distributions from the fund within the scope of the charity’s purposes. Your initial and subsequent contributions are fully deductible as charitable contributions.

As these examples show, planned gifts can provide significant lifetime income protection with substantial income tax and estate tax savings as well.


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