Charitable Bequest Planning: Leaving Money to Charity in Your Will

Not tax or legal advice — charitable bequests involve estate law, trust structures, and tax rules specific to your state and situation. Use this as a framework for conversations with your estate planning attorney and charitable planning advisor.

What a charitable bequest is

A charitable bequest is a gift made to a qualifying charity through your will or revocable trust, effective at your death. It is the oldest and most common form of planned giving — estimated to generate tens of billions of dollars in charitable contributions each year, often dwarfing donors' lifetime giving.

Bequests differ from lifetime gifts in two fundamental ways:

No income tax deduction. You're not alive to use an income tax deduction when the gift is made. A bequest generates no deduction on your Form 1040.
Unlimited estate tax deduction (IRC §2055). The estate tax charitable deduction has no percentage cap. Your estate deducts the full value of any bequest to a qualifying charity from the taxable estate — dollar for dollar, regardless of amount.¹

For most donors below the federal estate tax exemption, charitable bequests are about values and legacy — not current-year tax reduction. For donors above the threshold ($15M per person in 2026, per OBBBA²), and for all donors in states with lower estate tax exemptions, the §2055 deduction can save meaningful estate tax dollars.

Lifetime gift vs. bequest: comparison table

Factor	Lifetime gift	Charitable bequest (at death)
Income tax deduction	Yes — up to 20–60% of AGI depending on asset type and organization	No — no Form 1040 benefit
Estate tax deduction	No (asset leaves estate during life)	Yes — unlimited (IRC §2055)
Capital gains tax avoided	Yes — appreciated assets gifted during life avoid gain	No income tax at death; heirs get stepped-up basis, but charity pays no tax either
Control retained until death	No — gift is irrevocable	Yes — can change will or beneficiary designation any time
Reduces current estate	Yes — removes assets from future taxable estate	Yes — at death, bequest reduces taxable estate via §2055
Best vehicle when	You have high-income years, appreciated assets, AGI to absorb deduction	Your estate exceeds the exemption, or you want flexibility during life

Types of charitable bequests

1. Specific bequest

You leave a specific dollar amount or named asset to the charity. Example: "I give $250,000 to the Community Foundation of Greater Cincinnati." The simplest structure — but if your estate shrinks significantly before death, a specific bequest can crowd out family bequests.

2. Percentage bequest

You leave a percentage of your estate (or a specific account or trust) to charity. Example: "I give 10% of my residuary estate to XYZ charity." This structure scales with your estate rather than locking in a dollar amount — a better fit for most HNW donors whose net worth can vary substantially before death.

3. Residuary bequest

After all specific bequests, expenses, and taxes are paid, the "residue" — whatever's left — passes to charity. This can be all of the residue or a fraction. Residuary bequests are often the largest gifts charities receive, because the residue includes everything that wasn't specifically directed elsewhere.

4. Contingent bequest

Charity receives a gift only if a prior beneficiary doesn't survive you or predeceases you. Example: "I give my estate to my spouse; if my spouse predeceases me, I give my estate to the Nature Conservancy." Useful for donors who want to prioritize family but have a charitable backstop.

Critical drafting point: Use the charity's exact legal name, employer identification number (EIN), and mailing address in your will. Many charities operate under names different from their legal entity. "The American Red Cross" in a will is usually interpreted correctly, but "the cancer foundation" could be ambiguous among dozens of organizations. Call the charity's planned giving office — they'll provide the correct legal language for your attorney.

The estate tax charitable deduction: IRC §2055

Under IRC §2055, a transfer to a qualifying charity at death is deductible from the gross estate with no percentage cap.¹ This makes charitable bequests fundamentally different from lifetime gifts, which are subject to AGI percentage limits (typically 20–60% of AGI, with 5-year carryforward).

The §2055 deduction applies to:

Outright bequests to public charities (501(c)(3) organizations)
Bequests to private foundations
Transfers to donor-advised fund sponsors (if properly structured)
Transfers to government entities for public purposes

The deduction is equal to the fair market value of the property at the date of death (or the alternate valuation date if elected), not your original cost basis. This is one of the few estate planning areas where appreciated assets in a taxable account generate full FMV deduction treatment — because there is no "income in respect of a decedent" issue for appreciated securities left to charity.

How the federal estate tax math works

The federal estate tax applies a flat 40% rate on taxable estates above the exemption amount — $15,000,000 per person in 2026, under OBBBA.² Married couples can combine their exemptions (portability), effectively sheltering up to $30,000,000.

A $1,000,000 charitable bequest in an estate above the exemption saves $400,000 in federal estate tax — meaning the "real cost" of the bequest to the estate is only $600,000, with the other $400,000 coming from tax savings that would otherwise go to the IRS.

Estate size	Without bequest	With $1M charitable bequest	Tax savings from bequest
$18M taxable estate	$3M above exemption → $1.2M tax	$2M above exemption → $800K tax	$400K saved
$20M taxable estate	$5M above exemption → $2M tax	$4M above exemption → $1.6M tax	$400K saved
$13M taxable estate	Under exemption — no federal tax	No federal tax	$0 (see state estate tax)

State estate tax: why it matters for donors under the federal threshold

Most donors with $2M–$15M estates won't owe federal estate tax in 2026 — but 12 states and Washington D.C. impose their own estate taxes, several with exemptions far below the federal level.³

State	Exemption (approx. 2025)	Top rate
Oregon	$1,000,000	16%
Massachusetts	$2,000,000	16%
Rhode Island	~$1,800,000	16%
Minnesota	$3,000,000	16%
Washington	$3,000,000	Up to 35%
Illinois	$4,000,000	16%
Maryland	$5,000,000	16%
Hawaii	$5,490,000	20%
Vermont	$5,000,000	16%
New York	~$7,200,000	16%
Maine	$7,000,000	12%
D.C.	~$4,900,000	16%
Connecticut	~$14,000,000	12%

State exemptions are approximate 2025 values — some states index for inflation annually. Verify current-year thresholds with a local estate attorney. Note that Maryland and several other states also impose a separate inheritance tax based on the recipient's relationship to the decedent.

A Massachusetts resident with a $5M estate faces no federal estate tax but could owe significant Massachusetts estate tax on the $3M above the state exemption. A $500,000 charitable bequest reduces the Massachusetts taxable estate by $500,000, saving $80,000 in state estate tax (at 16%) — a meaningful real-dollar benefit even without any federal estate tax exposure.

Bequest vehicles: four structural options

1. Direct outright bequest

The simplest structure: your will or revocable trust directs a specific amount, percentage, or the residue of your estate to the charity. The charity receives the money or assets directly, with full discretion over their use. Appropriate when you have an established relationship with the charity and trust their current and future leadership to direct the funds appropriately.

2. Bequest to a donor-advised fund (the "legacy DAF" strategy)

Rather than naming a specific charity in your will, you leave assets to a DAF sponsor (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or a community foundation). Your heirs — or a successor advisor you name — then recommend grants to specific charities over time. This structure provides:

Flexibility — charities your family cares about can change after your death without requiring a will amendment
Governance structure — successor advisors can involve children or grandchildren in grant decisions, extending your giving legacy across generations
Immediate distribution or slow grants — assets can be distributed quickly or invested and granted over decades
Same §2055 deduction — a bequest to a DAF sponsor qualifies for the unlimited estate tax charitable deduction

For HNW donors who already use a DAF during their lifetime, the legacy DAF approach makes the most sense — it's a natural extension of an existing structure. See the Donor Advised Fund Strategy Guide for lifetime DAF mechanics.

3. Testamentary charitable remainder trust (CRT)

A testamentary CRT is established in your will and funded at death. Instead of giving the asset directly to charity, the trust pays an income stream to your heirs for a term of years (or their lifetimes), with the remainder passing to charity when the trust ends.

A testamentary CRT can make sense when:

You want to provide income to a surviving spouse, adult child, or other heir who doesn't need the capital immediately
Your estate includes a large asset that would generate a taxable gain if sold (though at death, the CRT still benefits from tax-exempt treatment on assets inside the trust)
You want a charitable deduction for the "charitable remainder" portion — though at death, this is an estate deduction, not an income tax deduction

Testamentary CRTs are complex trust instruments that require careful drafting. The 10% remainder test (the charitable remainder must be at least 10% of the initial fair market value) still applies. See Charitable Remainder Trust Design Guide for full mechanics.

4. Beneficiary designation (outside of will)

Assets with beneficiary designations — IRAs, 401(k)s, life insurance, annuities, TOD brokerage accounts — pass outside your will and are not subject to probate. You can name a charity as a beneficiary on these accounts directly, without any will language. This is a distinct mechanism from a bequest — and for retirement accounts, it's often the preferred vehicle:

IRA/401(k): Pre-tax retirement accounts carry embedded income tax liability ("income in respect of a decedent"). If a non-charitable heir inherits an IRA, they owe income tax on every distribution. A charity pays no income tax — making pre-tax retirement accounts the ideal asset to direct to charity at death, while leaving appreciated taxable accounts (which receive a stepped-up basis) to heirs.
Life insurance: Naming a charity as beneficiary of a life insurance policy generates an estate tax deduction but no income tax deduction. See Donating Life Insurance to Charity for full details.

See Naming Charity as Your IRA Beneficiary for a complete guide to the retirement account charitable beneficiary strategy.

Asset location strategy: what to give vs. what to leave to heirs

Not all assets are equally tax-efficient for charitable bequests. A smart charitable estate plan directs assets to charity in the order that maximizes after-tax value to both the charity and your heirs:

Asset type	Best for charity or heirs?	Why
Pre-tax IRA / 401(k)	Charity	Embedded income tax on every distribution; charity pays zero. Heirs owe marginal income tax on every dollar withdrawn over a 10-year window (SECURE 2.0).
Taxable appreciated securities	Heirs	Heirs receive a stepped-up basis at death — the embedded capital gain disappears. Heirs keep the full value with no income tax on the appreciation.
Cash / money market	Either	No tax advantage either way. Charity and heirs both receive the same after-tax value.
Roth IRA	Heirs	Already tax-free; heirs inherit with no income tax on distributions. Giving a Roth to charity wastes the tax-free compounding.
Real estate (appreciated)	Heirs (generally)	Stepped-up basis eliminates embedded gain for heirs. Exception: if carried at high appreciation inside an estate above the exemption, a charitable bequest or testamentary CRT may be worth modeling.

The optimal bequest portfolio, in order: (1) Name charity as beneficiary of pre-tax IRAs and 401(k)s. (2) Leave Roth IRAs, stepped-up taxable accounts, and real estate to heirs. (3) If you still want more going to charity, use a percentage bequest of the residuary estate or a testamentary CRT. This order maximizes the total estate value distributed — to both family and charity — for a given level of charitable intent.

Will vs. beneficiary designation: which mechanism is right?

Donors often have both a will and several accounts with beneficiary designations. Coordinating these is critical, because they operate independently:

Will / revocable trust: Governs assets titled in your name at death without a beneficiary designation. Goes through probate (for assets in a will) or passes to the trust (for assets in a revocable trust). Probate creates a public record; trusts generally do not.
Beneficiary designation: Overrides your will entirely for that account. An IRA beneficiary form completed in 1995 that names an ex-spouse supersedes a current will that says everything goes to your children. Update beneficiary designations every few years and after major life events.

For charitable bequests, beneficiary designations are the cleaner mechanism for retirement accounts (no probate, immediate transfer). Will bequests or revocable trust provisions are better for pooling residuary assets under a unified document that your attorney can update cleanly over time.

Informing the charity — and why it matters

You are not legally required to tell a charity you've named them in your will. But there are strong practical reasons to do so:

The charity can confirm it's a qualifying 501(c)(3), provide the correct legal name and EIN, and flag any restrictions on gift use
The charity may be better prepared to receive and deploy a large gift if they know it's coming
You may develop a deeper relationship — planned giving officers often provide exclusive access to special programs or advisory relationships for legacy-level donors
If circumstances change (the charity merges, dissolves, or changes mission), you'll know early enough to update your documents

How to integrate bequests with your lifetime giving strategy

Charitable bequests and lifetime giving serve different purposes and shouldn't be planned in isolation:

High-income years → lifetime gifts. If you have a large income event (business sale, RSU vest, Roth conversion), an immediate lifetime gift to a DAF or charitable vehicle captures the income tax deduction when you need it most. A bequest does nothing for a 2026 income tax liability.
Estate above exemption → bequest or testamentary CRT. If your estate is above $15M (federal) or your state threshold, a charitable bequest or testamentary CRT provides estate tax reduction. The §2055 deduction applies at death, not during your lifetime.
Legacy intent → DAF-in-will or private foundation. If your giving is more about family values and long-term philanthropic legacy than tax optimization, a bequest to a DAF or a private foundation established in your will creates a governance structure for future generations.
Both: Most HNW charitable planners do both — fund a DAF or make direct gifts during high-income years to get income tax deductions, then structure the residuary estate to flow charitable assets efficiently at death. The two strategies compound each other when planned together.

Common mistakes in charitable bequest planning

Using an informal charity name. "The heart foundation" or "the cancer charity" could match dozens of organizations. Use the exact legal name and EIN, obtained directly from the charity. Call their planned giving office.
Not updating documents after major life events. A will written when your estate was $4M may not account for how your estate has grown. If your estate has crossed a state or federal estate tax threshold since the will was drafted, revisit your charitable provisions.
Directing pre-tax IRAs to heirs and cash to charity. This is a common mistake — the optimal order is reversed. See the asset location table above.
Forgetting beneficiary designations overrule the will. A charitable bequest in your will doesn't redirect assets that have a conflicting beneficiary designation. Audit all account beneficiary forms annually.
Putting absolute dollar bequests in a will that may shrink. A $500,000 specific bequest from a $600,000 estate after expenses may leave almost nothing to family. Use percentage bequests unless you're highly confident in your estate size at death.
Not accounting for the residue. Specific bequests to family members get paid first; charity gets the residue. If the estate is depleted by specific bequests, the charitable residue bequest may receive nothing.
Failing to coordinate with state estate tax rules. If you live in Massachusetts, Oregon, or Washington, your estate plan needs to account for state estate tax thresholds — not just the federal $15M. Bequests can reduce state estate tax even when federal tax doesn't apply.
Not involving an estate attorney. Will drafting is regulated by state law. Template wills purchased online often fail to follow state execution requirements or miss state-specific rules. Charitable bequests above a threshold typically warrant a properly drafted will by a licensed estate attorney in your state.

When to involve a specialist

A fee-only financial advisor specializing in charitable planning can help you:

Model the estate tax impact of different bequest structures — outright, DAF, testamentary CRT, IRA beneficiary
Optimize the asset-location order to maximize total value to family and charity
Coordinate the charitable provisions of your will with your lifetime giving strategy (DAF contributions, QCDs, appreciated stock gifting)
Evaluate whether a testamentary CRT makes more sense than a direct bequest for large assets
Analyze state estate tax exposure if you live in one of the 12 states or D.C. with estate taxes
Work alongside your estate attorney to ensure the financial plan and legal documents are consistent

Get matched with a charitable planning specialist

Charitable bequests touch estate law, income tax, state tax, and multi-generational planning simultaneously. A fee-only advisor who focuses on this area will model the after-tax outcomes of different structures, optimize your asset-location order, and coordinate with your estate attorney — so the documents and the financial plan are aligned.

Fee-only · No commissions · Free match · No obligation

Related guides

Naming Charity as Your IRA Beneficiary

Pre-tax retirement accounts are the ideal asset to direct to charity at death — eliminating the income tax liability that non-charitable heirs would owe on every distribution under SECURE 2.0's 10-year rule.

Donor Advised Fund Strategy Guide

For lifetime giving, a DAF captures the income tax deduction in high-income years while giving you flexibility on which charities receive grants. A bequest-to-DAF strategy extends this into your estate plan.

Charitable Remainder Trust Design Guide

A testamentary CRT can be established in your will to provide income to heirs for a term of years — with the remaining assets passing to charity. Combines family income with a charitable legacy.

Family Charitable Legacy Planning

If you want your charitable giving to extend beyond your lifetime, a DAF with named successor advisors or a private foundation provides governance structures that involve children and grandchildren in ongoing grant decisions.

Donating Life Insurance to Charity

Naming a charity as life insurance beneficiary generates an estate tax deduction at death. Understand the difference between a beneficiary-only designation and a full ownership transfer — and how each interacts with your estate plan.

Charitable Advisor Match is a matching service. We connect you with vetted fee-only financial advisors in our network — we don't manage money or provide advice ourselves.

Sources

26 U.S. Code § 2055 — Transfers for Public, Charitable, and Religious Uses (Cornell LII). IRC §2055 provides an unlimited estate tax charitable deduction for transfers to qualifying organizations, with no percentage limitation. The deduction equals the FMV of the transferred property at the date of death. Structural requirements apply for split-interest transfers (split between charitable and non-charitable interests), including CRT and CLT arrangements.
IRS — What's New: Estate and Gift Tax. The One Big Beautiful Bill Act (OBBBA, Public Law 119-21, signed July 4, 2025) permanently increased the basic exclusion amount for federal estate and gift tax to $15,000,000 per individual for 2026. Married couples may combine exemptions via the portability election ($30M combined). The 40% flat estate tax rate applies to taxable amounts above the exemption.
Tax Foundation — Estate and Inheritance Taxes by State (2025). Twelve states and the District of Columbia impose estate taxes as of 2025, with exemption thresholds ranging from $1,000,000 (Oregon) to approximately $14,000,000 (Connecticut). Washington has the highest state estate tax rate at 35%. Several states also impose a separate inheritance tax based on the recipient's relationship to the decedent. Verify current-year state thresholds with local counsel.
IRS Publication 526 — Charitable Contributions (2025). Overview of income tax charitable deduction rules, including AGI percentage limits and carryforward provisions. Note: these income-tax rules apply to lifetime gifts only. Testamentary charitable bequests qualify for the estate tax deduction under §2055, not an income tax deduction.
26 U.S. Code § 691 — Recipients of Income in Respect of a Decedent (Cornell LII). IRC §691 defines income in respect of a decedent (IRD). Pre-tax IRA and 401(k) balances are IRD — they carry embedded income tax liability that is eliminated when a charity (a tax-exempt entity) inherits the account rather than a taxable individual beneficiary. This is the foundation of the "direct IRAs to charity" asset-location strategy.

Tax values and rules verified against 2026 federal law as of May 2026. State estate tax exemptions are approximate 2025 values; verify current-year state thresholds with a licensed estate attorney in your state. Federal estate tax rate of 40% and the $15,000,000 federal exemption reflect the One Big Beautiful Bill Act (OBBBA), effective 2026. Consult a qualified estate attorney, tax advisor, and charitable planning specialist before making any changes to your estate documents or beneficiary designations.