Charitable Giving and Estate Planning

Charitable giving sits at the intersection of two goals that usually compete: supporting causes you care about and reducing what your estate owes in tax. Structured well, a gift accomplishes both, and often provides income along the way. The vehicles differ substantially in cost, permanence, and control, so the choice matters more than the decision to give.

Giving During Life Versus Giving at Death

A lifetime gift produces an income tax deduction now and removes the asset and its future growth from your taxable estate. A gift at death produces an estate tax charitable deduction instead, with no income tax benefit, but it leaves you in control of the asset for as long as you live.

The estate tax side is straightforward. Charitable bequests reduce the taxable estate without limit, which matters more in the District than in most places because the local exclusion sits well below the federal threshold, as covered under estate taxes. A charitable bequest in a will or trust can bring an estate under the District ceiling entirely.

What Changed for 2026

The One Big Beautiful Bill Act altered the income tax side of charitable giving beginning with the 2026 tax year, and the changes cut in both directions.

Itemizers now face a floor. Charitable contributions are deductible only to the extent they exceed one half of one percent of adjusted gross income, so a donor with $500,000 of AGI gets no deduction for the first $2,500 given. Taxpayers in the top bracket also see the value of itemized deductions capped at roughly 35 cents on the dollar rather than 37.

Non-itemizers gained something. A permanent above-the-line deduction of up to $1,000, or $2,000 for married couples filing jointly, is now available for cash gifts to operating charities, though not for gifts to donor advised funds or private foundations.

The planning response for many donors is bunching, concentrating several years of giving into one year so the floor is cleared once rather than annually. The underlying percentage limits are unchanged, and IRS Publication 526 remains the reference for what qualifies, how much is deductible, and what records to keep.

Donor Advised Funds

A donor advised fund is the simplest structured option. You contribute to an account at a sponsoring charity, take the deduction in the year of contribution, and recommend grants to charities over time.

The separation between deduction timing and grant timing is what makes the vehicle useful under the new floor. Fund the account in a high-income year, clear the floor with a single large contribution, then distribute to charities on whatever schedule you prefer. Administration is minimal and costs are low.

The trade-off is control. Grant recommendations are advisory rather than binding, and the sponsoring organization holds legal title. Donor advised funds also do not qualify for the new above-the-line deduction available to non-itemizers.

Charitable Remainder Trusts

These split-interest trusts pay you or your beneficiaries first and the charity last. According to the IRS, a charitable remainder trust is irrevocable, lets a donor contribute assets while drawing annual income for life or a term of years, may allow a partial charitable deduction based on the value of the charitable interest, and can defer income taxes on the sale of assets transferred into it.

Two forms exist. A charitable remainder annuity trust pays a fixed dollar amount each year, at least five percent and no more than fifty percent of the value of the trust property when established. A charitable remainder unitrust instead pays a fixed percentage of the trust’s value, recalculated annually, so payments rise and fall with performance.

The classic use case is a highly appreciated asset, such as stock or real property, that would generate a large capital gain on sale. The trust can sell without immediate tax, reinvest the full proceeds, and pay the donor an income stream from a larger base. The cost is permanence, since the transfer cannot be undone.

Charitable Lead Trusts

A lead trust reverses the order. The charity receives payments for a term of years, and the remainder passes to your family. These work well for transferring appreciating assets to children at a reduced transfer tax cost while supporting a charity in the interim, and they pair naturally with business succession planning where a closely held interest is expected to grow.

Qualified Charitable Distributions

For donors over 70 and a half, this is often the most efficient option available. A qualified charitable distribution moves funds directly from an IRA to a qualified public charity, up to an annual limit that adjusts for inflation.

The mechanics matter. Because the distribution is excluded from income rather than deducted, it bypasses the new floor and the percentage limits entirely, satisfies required minimum distributions, and keeps adjusted gross income down, which protects against Medicare surcharges and a higher taxable share of Social Security. Donor advised funds do not qualify as recipients.

Naming a charity as the beneficiary of a retirement account at death is the companion strategy, since a charity pays no income tax on the balance while children inheriting the same account face the ten-year distribution rule.

Private Foundations

A private foundation offers the most control and carries the most burden. You choose the board, set the grantmaking direction, and can involve family across generations. In exchange, you accept annual filings, minimum distribution requirements, excise taxes, self-dealing prohibitions, and lower deduction limits than public charities receive.

Foundations make sense at scale and when family governance is itself part of the goal. Below that, a donor advised fund accomplishes most of the same objectives at a fraction of the cost.

Choosing the Right Vehicle

Start with the asset. Cash favors direct gifts or a donor advised fund. Appreciated stock or real property favors a remainder trust or an outright gift of the asset itself rather than the sale proceeds. Retirement accounts favor qualified charitable distributions during life and charitable beneficiary designations at death.

Donors with foreign assets or foreign charities face additional rules, since gifts to non-United States charities generally do not qualify for the income tax deduction. International tax planning addresses the workarounds. A DC trust lawyer can draft the trust, and a Washington DC estate planning attorney can fit it into the broader plan. Contact our office to schedule a consultation.

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