Philanthropy is often about impact. When woven into your estate plan, it can be a powerful tool for reducing taxes and shaping your legacy. Whether your goals are rooted in values, tax efficiency, or both, legacy giving allows you to transfer wealth purposefully.
This post explores how charitable giving strategies can benefit your chosen causes and estate plan. We’ll look at ways to incorporate giving into your legacy in a tax-efficient manner and how financial advisors can help guide the process.
What is legacy giving?
Legacy giving refers to planned charitable donations made as part of your estate. These gifts are typically outlined in wills, trusts, or beneficiary designations and take the form of money, stocks, real estate, or other assets.
The core motivation is a desire to support a cause beyond your lifetime. But the tax benefits are significant. Done strategically, legacy giving can reduce estate taxes and even help minimize capital gains and income tax during your lifetime.
Why estate taxes matter
Estate taxes can be substantial for high-net-worth individuals. For 2025, the federal estate tax exemption is $13.99 million per person. If your estate exceeds this amount, the excess is taxed up to 40 percent. Some states also impose their own estate or inheritance taxes with lower thresholds.
Charitable gifts made through your estate reduce the taxable value of your estate. A well-designed giving strategy can direct wealth where you want it to go rather than to taxes.
Ways to give through your estate
There are many options for building charitable giving into your estate plan. Each has unique tax implications and levels of flexibility. Here are some of the most common:
Bequests in a will or trust
A simple option is to leave a specific amount or percentage of your estate to a charity. This can be outlined in your will or a revocable living trust. These gifts reduce the taxable value of your estate and are easy to update over time.
Beneficiary designations
You can name a charity as the beneficiary of a retirement account, life insurance policy, or investment account. Doing so avoids probate, is simple to set up, and may reduce income tax burdens for other beneficiaries.
Charitable remainder trusts (CRTs)
A CRT lets you place appreciated assets into a trust that pays you or another beneficiary income for life or a set number of years. At the end of the term, the remaining assets go to charity. You receive an immediate partial charitable deduction and potentially avoid capital gains tax on the sale of appreciated assets.
Charitable lead trusts (CLTs)
CLTs work in reverse. The charity receives income from the trust for a period of time, and the remainder eventually goes to your heirs. CLTs can reduce estate and gift taxes, particularly if trust assets appreciate.
Donor-advised funds (DAFs)
Though DAFs are often used for lifetime giving, they can also be part of your estate plan. You can name a DAF as a beneficiary and instruct your heirs to recommend grants over time, allowing your values to influence future generations.
Private foundations
Establishing a private foundation offers control and permanence but comes with administrative complexity. For families with significant wealth and a long-term philanthropic vision, this structure allows for multigenerational involvement in giving.
Timing matters
Legacy giving can be built into lifetime strategies. Making charitable gifts during your life may allow you to see the impact of your generosity and reduce your taxable estate.
Charitable gifts can also be part of your required minimum distributions (RMDs). For 2025, if you are over 70½, you may donate up to $108,000 per year ($216,000 for a couple) directly from an IRA to a qualified charity through a qualified charitable distribution (QCD).
Doing a QCD can reduce your taxable income, even if you do not itemize deductions. In 2025, this amount will be indexed for inflation. You can also make a one-time election of up to $54,000 (adjusted annually) for a QCD to fund a charitable gift annuity or charitable remainder trust.
Align giving with your values
Beyond taxes and tactics, legacy giving is personal. It reflects what matters most. Whether you’re passionate about education, the arts, social justice, or medical research, a thoughtful giving plan can amplify your voice long after you’re gone.
It’s also an opportunity to involve your family. You might use the process to share your values with children or grandchildren, or to invite them to participate in grantmaking. This can be a powerful way to connect generations and foster purpose.
Work with an advisor
Legacy giving is rarely one-size-fits-all. Each strategy must be tailored to your goals, assets, and estate plan. This is where a financial advisor, estate attorney, and tax professional can be invaluable.
Together, they can help you evaluate:
- Which assets are best suited for charitable giving
- Whether to give now, later, or both
- How to structure gifts to maximize tax efficiency
- How to integrate charitable strategies with wealth transfer plans
Proper guidance can help you avoid unintended consequences, like disqualifying your estate from certain tax benefits or failing to meet IRS deduction requirements.
The dual reward of legacy giving
Philanthropy does more than reduce taxes. It creates meaning. It provides a way to express gratitude, reinforce family values, and support causes that shaped your life. When integrated thoughtfully into an estate plan, legacy giving becomes more than a financial decision. It becomes a final act of leadership.
