Planned Giving: Vehicles, Tax Benefits, and How to Protect Your Interests

"Planned giving" is a term institutions use for gifts structured as part of a donor's estate or financial plan — as opposed to a current gift written from a checkbook today. If you've been approached by a university development office, a hospital foundation, or a religious organization about making a "planned gift," "legacy gift," or "deferred gift," this guide explains what you're actually being offered, the tax consequences of each vehicle, and why you need your own independent advisor before agreeing to anything.

The five core planned giving vehicles

Every planned gift falls into one of five structures. Understanding the mechanics of each lets you evaluate what you're being offered before signing anything.

1. Charitable bequest — the simplest planned gift

A bequest is a gift made through your will or revocable living trust that transfers assets to a charity at death. It is the most common form of planned giving by number of donors and dollar volume — and the only one that remains fully revocable while you are alive.

Tax treatment

A charitable bequest qualifies for the estate tax charitable deduction under IRC §2055, which is unlimited — there is no cap on the bequest amount you can deduct from your taxable estate. Under OBBBA (July 2025), the federal estate tax exemption is permanently $15M per person ($30M MFJ), so estate tax is only relevant for estates above that threshold. ¹

There is no income tax deduction for a charitable bequest during your lifetime. You cannot deduct a bequest pledge on Schedule A — only completed gifts count.

Asset selection for bequests

The right asset to leave a charity in your will is your most income-tax-burdened asset — typically a traditional IRA or 401(k). Heirs who inherit a traditional IRA pay ordinary income tax on every dollar withdrawn (this is called Income in Respect of a Decedent, or IRD). A charity inherits an IRA tax-free. Meanwhile, appreciated securities receive a stepped-up cost basis at death, eliminating embedded capital gains for heirs — so those assets are better left to family. Leaving the IRA to charity and the appreciated portfolio to heirs is frequently worth $50,000–$200,000 in combined tax savings for a large estate.

2. Beneficiary designation — the most overlooked planned gift

Naming a charity as beneficiary of a retirement account, life insurance policy, or investment account is technically a planned gift with no legal documentation beyond updating the beneficiary form. It costs nothing to execute, is revocable while you're alive, and — for retirement accounts — is one of the most tax-efficient gifts possible due to the IRD elimination described above.

Qualified Charitable Distributions (age 70½+)

If you are 70½ or older, you can make a Qualified Charitable Distribution directly from your IRA to a qualified charity — up to $111,000 per person per year in 2026. ² A QCD satisfies your Required Minimum Distribution without adding the distribution to your income, which can prevent IRMAA bracket jumps costing $2,400–$11,000/year in Medicare Part B/D surcharges. This is a current gift, not a planned gift — but it is the most common charitable strategy for retirees and is worth considering before committing to a bequest of the same IRA. See the QCD calculator and QCD strategy guide for full mechanics.

Note: QCDs to donor-advised funds are prohibited under IRC §408(d)(8)(B)(i). They must go directly to a public charity.

3. Charitable Gift Annuity — income plus deduction, no trust required

A Charitable Gift Annuity (CGA) is a contract between you and a charity: you transfer assets (cash or appreciated stock) to the charity today, and the charity pays you a fixed dollar amount for life. At death, whatever remains passes to the charity's general endowment.

Tax treatment and rates

The American Council on Gift Annuities (ACGA) sets recommended annuity rates. 2026 rates range from 5.2% (age 65) to 10.1% (age 90+). ³ Part of each payment is tax-free (return of basis), part is ordinary income. You receive a partial income tax deduction in the year of the gift — the present value of the charitable remainder, calculated using the May 2026 §7520 rate of 5.0%.

Appreciated stock funding

If you fund a CGA with appreciated stock instead of cash, you defer and spread the capital gains recognition over your life expectancy rather than paying it all at once. This is a meaningful benefit for donors with low-basis stock. Use the CGA calculator to model your specific numbers.

When a CGA fits

A CGA makes sense for donors who want guaranteed income for life, prefer simplicity over the legal complexity of a trust, and are comfortable with the charity holding the assets. Because the charity bears the longevity risk (they keep paying even if you outlive the actuarial assumptions), CGAs are a genuinely useful vehicle — not just a fundraising product. The risk: if the charity becomes financially distressed, payments can be at risk, unlike a CRT where the assets sit in an independent trust.

4. Charitable Remainder Trust — more control, more complexity

A Charitable Remainder Trust (CRT) is an irrevocable trust funded with assets that generates income for you (or named beneficiaries) for life or a term of years. At the end of the income period, the remaining trust assets pass to one or more charities. Unlike a CGA, the assets sit in an independent trust — the charity doesn't touch them until you're done.

CRTs are the most powerful vehicle for donors with large appreciated assets because they allow the asset to be liquidated inside the trust without triggering capital gains tax, reinvested, and paid out over time. A $2M low-basis stock position that would generate $400,000 in capital gains if sold outright can be transferred to a CRUT, sold inside the trust tax-free, reinvested for total return, and paid out over 20 years.

See the CRT design guide and CRT calculator for full CRUT vs. CRAT analysis, the 10% remainder test, and Flip CRUT mechanics for illiquid assets like real estate.

5. Retained Life Estate — giving your home to charity while living in it

A retained life estate is a gift of a remainder interest in your personal residence or farm to a charity — while you retain the right to live there for the rest of your life (or a specified term). You receive an immediate income tax deduction for the present value of the remainder interest. The charity receives the property at your death.

Tax treatment

The deduction is calculated actuarially using IRS Publication 1459 tables and the applicable §7520 rate. The younger you are, the smaller the deduction (because the charity's remainder is further away). A 75-year-old donating a $1M home might receive roughly $400,000–$500,000 as a deduction, depending on the §7520 rate, compared to a 60-year-old who might receive $250,000–$300,000 for the same property. ⁴

What retained life estate is NOT suitable for

This vehicle only applies to personal residence or farm. It does not work for investment real estate. It is irrevocable — once the deed is transferred with the life estate retained, you cannot unwind the gift. It also raises complications if you later need to sell the property (to fund long-term care, for example) — you can negotiate a buyout with the charity, but you have no unilateral right to sell. This makes it unsuitable for donors whose housing situation may need flexibility.

The institutional development office conflict

When a university, hospital, or religious organization approaches you about a planned gift, their development office staff — however well-meaning — are employed by the institution. Their professional success is measured by gifts secured, not by whether you got the best vehicle for your tax situation.

This creates structural misalignments:

• CGAs benefit the charity's cash flow. A charity prefers a CGA (where it holds your assets today) over a bequest (where it waits decades for anything). That preference is rarely stated explicitly.
• Irrevocable gifts cannot be undone. Development officers sometimes minimize the "irrevocable" aspect of CRTs and CGAs. Once completed, these gifts cannot be modified, even if your financial situation changes.
• Asset selection is rarely optimized. A development officer typically accepts whatever asset you offer. An advisor models which assets — IRA, Roth, appreciated stock, real estate — produce the optimal result across your estate, income tax, and retirement income simultaneously.
• They don't model your estate holistically. A CGA commitment that looks attractive in isolation may crowd out a better Roth conversion strategy or conflict with your estate equalization goals for heirs.

Planned giving vs. current giving: a decision framework

The choice between giving now vs. at death involves tradeoffs across five dimensions:

For HNW donors, the answer is often both — a current DAF for living-phase strategic giving and an IRA charitable beneficiary designation for the planned-giving component — rather than one or the other. See the IRA charitable beneficiary guide for the asset-selection framework.

Common planned giving mistakes

• Pledging verbally without documentation. A verbal pledge is not legally binding and provides no tax deduction. Until the gift is documented per IRS §170(f)(8) requirements, it doesn't count — neither for your taxes nor reliably for the institution.
• Signing a CGA without modeling the terms. Rates vary by issuing charity (some deviate from ACGA recommendations), and the partial deduction depends on your age and §7520 rate at the time of the gift. Model it before signing.
• Naming a charity as IRA beneficiary without coordinating with heirs. If the IRA is your largest asset, directing it to charity could leave heirs with less than intended. The full estate picture — what heirs receive from other assets — must be modeled first.
• Funding a CRT with S-corp stock. S-corp stock in a trust creates Unrelated Business Taxable Income (UBTI) under IRC §512(e), which can destroy the CRT's tax-exempt status. Get legal review before transferring closely-held business interests.
• Using a retained life estate when you need housing flexibility. As described above, a retained life estate is irrevocable. If you might need to sell, downsize, or access the property's equity for long-term care, this vehicle is not appropriate.
• Missing the OBBBA estate exemption context. With the estate exemption at $15M per person ($30M MFJ) made permanent by OBBBA, the estate tax motivation for charitable bequests is less pressing for many families. The income tax and IRD strategies are often more valuable than the estate deduction for estates under $15M.