Texas Estate Planning for Charitable Giving

Support meaningful causes as part of your legacy

When creating an estate plan, the strategies are as different as the individuals who need them. However, one strategy that appeals to many people is charitable giving, which offers the opportunity to give back and reduce your taxes.

At the law firm of Shann M. Chaudhry Esq., Attorney at Law PLLC, our Texas estate planning attorneys enjoy building lifelong relationships with our clients and their families. We appreciate the opportunity to help them support their favorite causes.

Charitable giving adds a unique element to any estate plan because you can share your values and support your community at the same time. It’s the chance to expand your legacy or the legacy of a loved one.

If you’re interested in incorporating charitable giving into your estate plan, contact us. Our experienced Texas estate planning attorneys can guide you through the process.

Why Should You Include Charitable Giving in Your Estate Plan?

Charitable giving adds a personal touch to your estate plan by supporting a meaningful cause of your choosing—and it also lowers estate taxes.

You can give to a charity either during your lifetime or through your Will. Each choice will reduce estate taxes at the time of giving.

Working with a trusted advisor in crafting your estate plan lets you make informed decisions about your legacy. Additionally, they will help you figure out how to balance your gift against your current needs and your beneficiaries’ future needs.

Our approach

At SMC ESQ PLLC, our Texas estate planning attorneys draw on extensive experience when guiding you through creating and implementing your estate plan, including charitable giving.

Our goal is to support you in making informed decisions. We aim to do this by sharing information in easy-to-understand, manageable steps without overwhelming you with too much at once. Our process is about serving our clients the whole way through.

We offer a commitment to proactive communication, and as with all our legal work, empathy is at the core of our process.

Our approach

At SMC ESQ PLLC, our Texas estate planning attorneys draw on extensive experience when guiding you through creating and implementing your estate plan, including charitable giving.

Our goal is to support you in making informed decisions. We aim to do this by sharing information in easy-to-understand, manageable steps without overwhelming you with too much at once. Our process is about serving our clients the whole way through.

We offer a commitment to proactive communication, and as with all our legal work, empathy is at the core of our process.

Types of Charitable Giving Tools

As with every form of estate planning, you can mix and match your approach to charitable giving.

Trusts and investments

Charitable remainder trusts

If you’re interested in receiving income from your assets during your lifetime but would like the assets to go to a charity later on, a charitable remainder trust (CRT) may be a good option.

Charitable remainder trusts allow you to claim a charitable deduction on your taxes now while benefiting from the income from those assets.

With a CRT, you can give cash, real estate, or other assets to an irrevocable trust. You receive income from the trust for either a set period or your lifetime. After the trust ends, the remaining assets go to the charity.

Charitable remainder trusts

If you’re interested in receiving income from your assets during your lifetime but would like the assets to go to a charity later on, a charitable remainder trust (CRT) may be a good option.

Charitable remainder trusts allow you to claim a charitable deduction on your taxes now while benefiting from the income from those assets.

With a CRT, you can give cash, real estate, or other assets to an irrevocable trust. You receive income from the trust for either a set period or your lifetime. After the trust ends, the remaining assets go to the charity.

Charitable lead trusts

With a charitable lead trust, your assets are ultimately passed on to your family members or other beneficiaries, but your estate taxes are reduced—and you get to support a favorite charity.

Charitable lead trusts generally function as the opposite of charitable remainder trusts. An irrevocable trust is created to fund a charity with income from assets for a set time. At the end of that time, the payment (and ownership) of the assets changes to named beneficiaries.

Charitable gift annuity

A charitable gift annuity is another form of planned giving that allows you to have your cake and eat it too.

With charitable gift annuities, assets are donated to a charity, resulting in a tax deduction—but the donor continues to receive income from the assets at a reduced tax rate. After the donor passes on, the charity continues to own the assets.

Charitable gift annuity

A charitable gift annuity is another form of planned giving that allows you to have your cake and eat it too.

With charitable gift annuities, assets are donated to a charity, resulting in a tax deduction—but the donor continues to receive income from the assets at a reduced tax rate. After the donor passes on, the charity continues to own the assets.

Funds and assets

Donor-advised fund

A donor-advised fund (DAF) allows for a hands-on approach to guiding, which projects your donations fund.

With a DAF, you receive an immediate tax deduction for your charitable contribution, and then you can advise grants to support meaningful charities and causes. You can also appoint friends and family to help you make these decisions—and you can contribute to the fund as often as makes sense for you.

Specific assets

You can receive tax savings by giving specific assets to a charity. In certain situations, giving the asset directly to the charity—versus selling it and then donating the cash—can be a more effective strategy.

In particular, donating assets that have appreciated significantly can be an effective way to reduce taxes from capital gains. Your charitable tax deduction will typically be based on the fair market value, not what you paid for the asset.

Specific assets

You can receive tax savings by giving specific assets to a charity. In certain situations, giving the asset directly to the charity—versus selling it and then donating the cash—can be a more effective strategy.

In particular, donating assets that have appreciated significantly can be an effective way to reduce taxes from capital gains. Your charitable tax deduction will typically be based on the fair market value, not what you paid for the asset.

Non-profits, charities, and foundations

Nonprofit corporations

All charities are nonprofits, but not all nonprofits are charities.

Only nonprofits organized as 501(c)(3)s offer tax-deductible giving opportunities. If your favorite nonprofit meets these criteria, you can use any form of charitable giving trusts, donor-advised funds, and more to support the organization.

Most nonprofit corporations—which are organized similarly to for-profit corporations—are 501(c)(3)s, but it’s always a good idea to check before making a contribution when you’re aiming to receive tax deductions.

Unincorporated nonprofit associations

An unincorporated nonprofit association is an organization that has yet to go through the paperwork and oversight process to receive its 501(c)(3) status. While these associations can fund admirable charitable work, donating to them doesn’t result in a charitable tax deduction.

Unincorporated nonprofit associations

An unincorporated nonprofit association is an organization that has yet to go through the paperwork and oversight process to receive its 501(c)(3) status. While these associations can fund admirable charitable work, donating to them doesn’t result in a charitable tax deduction.

Private foundations

Private foundations can effectively support charitable causes by giving to already established organizations, institutions, and philanthropists.

When planning charitable giving as part of your estate plan, you can choose between:

  • Making contributions to an active private foundation
  • Starting your own private foundation

Your approach depends on the resources you’re looking to invest and the benefits you’re looking to see. Contributing to a private foundation has the advantage of being tax-deductible, but many foundations only accept donations from private individuals, families, or corporations.

If you’re looking to start your own foundation, this can require time and energy.

The impact they have, though, can be substantial. Private foundations can invest their funding, then distribute it among selected causes and organizations. They also may choose to make financial grants available or operate programs.

Community foundations

Community foundations offer excellent opportunities for supporting local charities and addressing community needs. They’re often funded through donations that can help a variety of estate planning approaches, including:

  • Donor-advised funds
  • Scholarships
  • Endowments
  • Giving circles
  • Field-of-interest funds
  • More

These public charities serve a specific geographic location and support opportunities for an engaged and active form of donation.

Community foundations

Community foundations offer excellent opportunities for supporting local charities and addressing community needs. They’re often funded through donations that can help a variety of estate planning approaches, including:

  • Donor-advised funds
  • Scholarships
  • Endowments
  • Giving circles
  • Field-of-interest funds
  • More

These public charities serve a specific geographic location and support opportunities for an engaged and active form of donation.

Public charities

Public charities aren’t always the first organization a person thinks of when they hear the word “charity.” Public charities can include:

  • Colleges and universities
  • Hospitals
  • Schools
  • Hospital-affiliated medical research organizations
  • Religious institutions

Public charities offer valuable giving opportunities because they can significantly impact your wider community.

How to Include Charitable Giving in Your Estate Plan

Including charitable giving in your estate plan allows you to contribute to meaningful causes or honor a loved one—and optimize your charitable tax deductions.

You can:

  • Give through a straightforward trust, such as a charitable remainder trust
  • Gift assets, including those that have appreciated significantly
  • Name a charity as the beneficiary of your retirement account
  • Make a charitable bequest in your Will or revocable trust
  • Set up a donor-advised fund
  • Give through charitable annuities
  • Set up a private charity

These aren’t your only options, though. Working with an experienced estate planning opportunity lets you explore the full scope of choices available to you.

Work with Our Estate and Trust Attorneys in Texas

At the law firm of Shann M. Chaudhry Esq., Attorney at Law PLLC, our Texas estate planning attorneys have extensive experience in guiding individuals and families through charitable giving and tax planning that meets their specific values and needs.

We enjoy building lifelong relationships with our clients, and we commit to clear, prompt communication in all our legal work.

If you’re interested in learning more about charitable giving and estate planning, contact us. Our experienced and compassionate Texas estate planning attorneys can guide you through the process.

TX Charitable Giving and Estate Planning FAQs

What is charitable estate planning in Texas?

Charitable planning allows you to support your favorite cause or charity while reducing estate taxes for yourself or your beneficiaries.

Many assets qualify for charitable planning, from cash to appreciated stocks or real estate. Likewise, there are numerous approaches to charitable estate planning, including trusts, annuities, and donor-advised funds.

Do charitable gifts reduce estate tax?

Charitable gifts to qualifying 501(c)(3) nonprofits can reduce estate tax on your assets now or after you pass on.

Charitable estate planning is a great way to support a worthy cause or leave a legacy in the name of someone you love. We recommend working with a Texas estate planning attorney to ensure that the approach you take for giving meets your goals and needs.

Why should I hire an estate and trust attorney for my estate plan?

Estate plans are immensely varied because everyone’s goals, values, and needs are different. Working with an estate and trust attorney can help ensure that your estate plan is designed according to your interests.

Without legal support, it’s possible to end up with an estate plan that falls short of your intentions. This also holds true for anyone seeking to incorporate charitable giving into their estate plan.

At SMC ESQ PLLC, our Texas estate planning attorneys can help you build an estate plan that reflects your values and meets your needs.