Making a Tax Plan for Planned Giving

Join The College’s Chartered Advisor in Philanthropy® (CAP®) Program Director and Assistant Professor of Philanthropy Jennifer Lehman PhD, JD, CFP®, CAP®, as she discusses how to account for tax consequences when assisting clients in making charitable contributions and other forms of planned giving in this new continuing education (CE) opportunity available on Knowledge Hub+!

Whether you’re a financial advisor or a professional representing any other area of the philanthropic advising ecosystem, you should be familiar with tax regulations in order to assist clients as they devise their strategies for planned giving. The College and charitable giving expert, Jennifer Lehman provide key details in Planned Giving: Fun with Taxes and Probate.

What is Probate?

Lehman begins this discussion by explaining the concept of probate to listeners. “Probate is a legal process … that transfers property after somebody’s passing.” Probate is meant to re-title assets that are not already re-titled through some other method (such as a valid beneficiary or automatic survivorship).

However, not all cases in which the transfer of property occurs involve the process of probate. Some smaller families without significant assets may simply agree on how to divide an individual member’s wealth after their passing.
Probate can also differ on a case-by-case basis. Lehman goes on to discuss how probate looks when an individual dies with a will in place and compares the differences in the process when an individual dies without one. She also describes what parts make up this process and what participants can expect.

Lehman goes on to share her major takeaway that provides a high-level understanding of people’s relationship with probate. According to Lehman, probate is an expensive and onerous process. “It is a process that people like to avoid. So, the way to avoid probate is to plan during life for what will happen to your things when you pass.”

Giving During Life vs. After Death

Lehman discusses several methods of planned giving that clients may want to consider, starting with giving to individuals, such as a family member, and the differences between giving during life and giving after death. She emphasizes several important factors to consider, including step-s up in basis, long-term holdings, and annual gift tax exclusions, among others.

However, one key factor cannot be optimized for the best tax situation. Lehman reminds  advisors, “The downside in waiting until death is you don’t get to see the benefit to the individuals or the charity as far as how they use the money and what they do with it.” This can be a major deciding factor for some clients, as they may like to see the benefits of their giving before passing away.

Gifts Your Clients May Want to Consider

Lehman highlights several forms a client’s gift may take, including gifts that can take effect during life such as cash, donor advised funds (DAFs), stocks and bonds, real estate, and qualified charitable distributions (QCDs). She continues by comparing these types of gifts to  gifts that can be planned in life, but do not take effect until death, such as retirement assets, life insurance, life estate, DAFs, and individual retirement accounts (IRAs).

For continued giving, clients may also want to consider gifts that generate income such as annuities, remainder trusts, and lead trusts. These allow clients to impact their recipient of choice for years to come rather than as a single transaction.

All of these gifts have various factors to consider, and the best choice may not be the same from one client to another. By mastering the principles Lehman shares in this discussion and following her guidance when offering clients recommendations, advisors can help their clients achieve all of their gift-giving goals and more. She elaborates on these in greater detail in Planned Giving: Fun with Taxes and Probate on Knowledge Hub+.

To access this learning opportunity and other valuable CE, visit Knowledge Hub+.

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