Charitable and Legacy Planning

For many families, giving is one of the most consistent things they do with their money and one of the few things their estate plan never mentions. Charitable and legacy planning closes that gap. It turns years of quiet generosity into a structure that carries on, coordinated with the rest of your plan and your family’s future.

Good charitable planning starts with a clear purpose and then chooses the tools that fit it: which assets to give, when, and through which vehicle. The order matters. Deciding what your giving is for, and who you want it to keep helping, comes before any fund is opened or trust is drafted, and it is what keeps the plan coordinated with the rest of your estate.

What is charitable and legacy planning?

Charitable and legacy planning is the practice of building your charitable intentions into your estate plan and your lifetime giving. It coordinates gifts of cash, appreciated assets, and retirement accounts with vehicles such as charitable trusts and donor-advised funds, so that support for the organizations you care about continues in a deliberate, tax-aware way.

Most conventional estate plans divide assets among family and stop there, because that is what the intake form asked about. A legacy plan adds a second question that is rarely raised: what do you want to continue after you are no longer here to write the check. Answering it is the whole of this work.

Do I need a large or taxable estate for this to make sense?

No. Charitable and legacy planning is defined by complexity and intention, not by net worth. For families below the federal estate tax exclusion there is no estate tax problem to solve, so the benefit is not on the estate side at all. It is on the income side, and it is available at ordinary asset levels.

That distinction matters, because a good deal of charitable marketing is aimed at avoiding estate tax that most families will never owe. Ohio has no state estate tax, and the federal exclusion is high enough that the great majority of givers sit well below it. Your reasons for giving are therefore genuinely about values, and the planning meets you there.

The tax advantages that remain are real and they are practical: gifting appreciated assets, qualified charitable distributions from retirement accounts, concentrating several years of gifts into one tax year, and the income-tax deduction created inside a charitable remainder trust. None of these depend on having a taxable estate.

What is a charitable remainder trust?

A charitable remainder trust is an irrevocable trust that pays income to you or another beneficiary for life or for a set term, after which the remaining assets pass to charity. It lets you give a significant asset, receive an income stream and a partial income-tax deduction, and defer capital gains on assets the trust sells.

Charitable remainder trusts come in two forms. A charitable remainder unitrust pays a percentage of the trust’s value, recalculated each year, so payments can rise or fall with the assets. A charitable remainder annuity trust pays a fixed dollar amount set at the start. Both are governed federally under Internal Revenue Code Section 664.

These trusts are often assumed to be instruments for the very wealthy. They are not. A charitable remainder trust can be a fitting choice for a family holding a concentrated stock position, appreciated real estate, or an interest in a closely held business approaching a sale, an asset they would like to convert to lifetime income without an immediate capital gains bill, while directing the eventual remainder to a cause that matters to them. Timing is essential with a business interest: the gift has to be in place before a sale is negotiated to a binding commitment, or the income-tax benefit can be lost.

What is a charitable lead trust?

A charitable lead trust is the mirror image of a remainder trust. It pays income to one or more charities for a set term, and when that term ends the remaining assets pass to your family, often to children or grandchildren. It is a way to support charity now while transferring assets to the next generation in a structured way.

A charitable lead trust tends to fit families who do not need the asset’s income during the trust term and who want to move wealth to heirs while supporting charitable work in the meantime. Because the structure is more specialized, it is worth discussing whether a lead trust, a remainder trust, or a simpler arrangement matches your goals before committing to any one form.

What is a donor-advised fund?

A donor-advised fund is a charitable account held at a sponsoring organization, often a community foundation. You contribute assets, receive a charitable deduction in the year of the gift, and then recommend grants to the charities you choose over time. It separates the timing of the tax benefit from the timing of the giving.

Donor-advised funds are the most accessible of the legacy vehicles and often the most sensible starting point. They allow bunching, which means concentrating several years of intended gifts into a single tax year to exceed the standard deduction, then granting the funds out gradually. They also accept gifts of appreciated stock, which lets you avoid capital gains while claiming a deduction at fair market value under Internal Revenue Code Section 170.

For most families weighing whether to create a private foundation, a donor-advised fund does the same work with far less administration. Saying so plainly is part of honest counsel.

Should I set up a private family foundation?

A private family foundation is a separate charitable entity your family controls, with its own board, its own grantmaking, and its own filing obligations. It offers the most control and the most visible family involvement, and it carries the most cost and administration, including an annual federal return and a required minimum distribution each year.

For most givers below the level where a foundation’s administration is justified, a donor-advised fund achieves the same charitable purpose without the overhead. A private foundation earns its keep when a family wants direct control of grantmaking, a lasting named institution, and a vehicle to involve children and grandchildren across generations. Honest counsel names which side of that line a family’s situation falls on rather than defaulting to the more elaborate tool.

How does charitable giving fit into the rest of my estate plan?

Charitable planning works well when it is coordinated with everything else, rather than added on at the end. The most efficient asset to leave to charity is often a pre-tax retirement account, because heirs pay income tax on those dollars while a charity does not. Redirecting that account to charity and leaving other assets to family can improve outcomes for both.

Coordination is the point. A qualified charitable distribution lets someone of qualifying age transfer funds directly from an individual retirement account to charity, counting toward the required minimum distribution and staying out of taxable income, under Internal Revenue Code Section 408(d)(8). Beneficiary designations, appreciated-asset gifts, trust language, and charitable bequests all need to point the same direction, and the plan works best when the attorney, the CPA, and the financial adviser are working from the same picture. You can read more about how that coordination works on the process page.

Charitable planning under Ohio law

Ohio is unusually strong ground for this work. Charitable trusts created in Ohio generally must register with the Ohio Attorney General under the Ohio Charitable Trust Act, Ohio Revised Code Chapter 109 (Sections 109.23 through 109.33), with periodic reporting, though certain religious organizations are exempt. That registration is not a one-time formality; the reporting continues for as long as the trust operates.

There is a fitting local history here. The community foundation, the model behind most donor-advised funds today, was created in Cleveland in 1914 by Frederick Goff, a local lawyer, to solve what he called the dead hand: charitable money trapped by outdated wills that no longer fit the world. Modern community philanthropy was, in other words, invented in Northeast Ohio to fix a defect in estate planning. It is a good reminder that giving and planning belong together.