People are charitably inclined for many reasons, such as a desire to help others, support various causes, and possibly enjoy tax and estate planning benefits. This article provides a brief survey of some of the methods available to individuals inclined to make gifts (“donors”), along with the potential motivations and benefits of doing so.

Donors can make gifts during lifetime (sometimes referred to as inter vivos gifts), at death, or both. Charitable gifts can be simple, direct contributions of cash; they can potentially be made to an organization for a particular fund or purpose; or they can be structured using various tools — including trusts — to provide tax benefits to a charity as well as the donor (or others).

Gifts made to qualified charitable organizations may be eligible for deductions from income, gift, or estate taxes, depending on the donor’s circumstances and other factors. This most commonly entails gifts to organizations that have been approved as tax-exempt by the IRS (such as I.R.C. § 501(c)(3) organizations).

Common Methods of Gifting

The methods available for making charitable contributions (and their potential advantages and disadvantages) include the following:

Outright direct gifts during lifetime. Think of this as writing a check or giving cash directly to a desired charitable organization during the donor’s lifetime. Advantages of this method include that the donor can see and appreciate the benefit of the gift and may be able to take advantage of an income tax deduction. A potential drawback, especially if the contemplated gift is substantial relative to the donor’s assets, is that once the gift is made, the assets are no longer available to the donor.

Gifts to a donor-advised fund. Transfers to a donor-advised fund may occur during a donor’s life or at death, but typically occur during a donor’s life. Donor-advised funds have become increasingly popular in recent years because they allow donors to receive immediate tax deductions for their irrevocable gifts while retaining the ability to advise the fund’s sponsor (to whom the donor made the contribution) on how the fund should grant the contributed amounts.

Two potential downsides of gifting via donor-advised funds include account minimums and advisory fees that fund sponsors might require.

Gifts at death using documents such as a will, a revocable trust, or written designations. These are methods most people already know: a bequest in a will, for instance, or a gift through a trust. But this could also include designating a charity as a beneficiary (or partial beneficiary) of assets such as investment and retirement accounts (IRA, 401(k), 403(b), etc.), life insurance policies, annuities, bank accounts, and similar assets, using payable-on-death (POD) or transfer-on-death (TOD) designations. And if a donor is inclined to give real estate to a charitable organization at death, the donor can execute a Designation of TOD Beneficiary (such as State Bar of Wisconsin Form 9-2009), which would make the designated charity the owner after the donor’s death. The donor remains the owner during lifetime and could even change their estate plan by selling the property or revoking the Designation of TOD Beneficiary.

A potentially significant advantage of such bequests or designations is that they do not take effect until death, so the asset remains available to the donor throughout their lifetime (and the plan or designation can be revised or revoked). This method also allows a donor to tailor the charitable donation in terms of amount (assets can be given in proportions, not necessarily as a whole), restrictions, or specific instructions or even to leave the donation in a trust created under the donor’s will or trust. Clever estate planning enables donors to make formula gifts to their supported charitable organizations that set a floor or ceiling on how much they receive (for example, the “greater of $100,000 or 10% of the balance of this trust”).

Another potentially substantial benefit of gifting at death includes designating a charitable entity as the beneficiary of “traditional” (that is, pre-tax or non-Roth) retirement accounts. Because qualifying charities are tax-exempt, otherwise taxable retirement accounts can pass entirely tax-free to charities — resulting in more tax-efficient gifting.

Drawbacks include that the donor won’t know how the donated funds or assets are used (and the charity won’t benefit until after the donor’s death), and the donor gets no income tax deduction during their lifetime.

Gifts made to qualified charitable organizations might be eligible for deductions from income, gift, or estate taxes, depending on the donor’s circumstances and other factors.

Irrevocable charitable “lead” or “remainder” trusts. A full discussion of charitable lead trusts or charitable remainder trusts is beyond the scope of this article. That said, creating one can benefit the desired charity and the donor or other individuals the donor may want to benefit. These are irrevocable trusts generally created during the donor’s lifetime (although it is also possible to create them after death under the donor’s will or trust). Drafting requires close adherence to IRS rules to achieve the desired benefit, so it should be done by qualified estate planning counsel.

A charitable lead trust involves gifting assets to an irrevocable trust. The trust would provide that the charity receives either annuity (fixed amount) or unitrust (percentage of trust principal) payments annually for a period of years or for the donor’s lifetime. At the end of the term, the remaining assets pass to beneficiaries — such as the donor’s family or other individuals — whom the donor designates in the trust when it is created.

At the time of the gift, the donor receives an income tax deduction equal to the present value of payments to the charity over the term of the trust (subject to the limitations described above), calculated based on IRS tables.

A charitable remainder trust flips the structure around, meaning the charity receives the trust’s remaining assets after another beneficiary receives payments over a set period (based on lifetime or up to 20 years). It is not uncommon to set up such a trust with the donor receiving the stream of annuity or unitrust payments. By doing so, the donor retains an income stream from the gifted assets while locking in a future charitable contribution. The income tax deduction at the time of the gift is the actuarial value of the charitable remainder, calculated based on IRS tables. Finally, even though a charitable remainder trust is irrevocable, a properly drafted trust may be amended to name another charity (or a donor-advised fund) if circumstances change.

Qualified charitable distributions from an IRA. A relatively new way to make a charitable contribution during lifetime is to make a qualified charitable distribution (often referred to as a QCD) from an IRA. Normally, distributions out of an IRA are taxable income to the owner (except for Roth IRAs). If the donor qualifies, a QCD results in no taxable income to the donor and can satisfy (or partially satisfy) the donor’s required minimum distribution (RMD) for the year.

A donor can transfer as much as $111,000 per year directly from an IRA to an eligible charity without paying income taxes on the withdrawal, and the donated amount will count toward the donor’s RMD for that year. The $111,000 limit applies per individual, not per account (meaning that if a donor has more than one IRA, there is not a separate $111,000 limit that applies to each IRA). But not everyone can make qualified charitable distributions. First, they can only be made from an IRA (not from a 401(k), 403(b), or 457(b) plan).^[1] Second, they are available only to individuals age 70½ or older.

A relatively new way to make a charitable contribution during lifetime is to make a qualified charitable distribution from an IRA.

The Tax Benefits of Gifting

For donors making lifetime gifts who itemize deductions on their returns, under current law, the general rules governing charitable deductions for income tax purposes are as follows:^[2]

• 0.5% AGI floor: A donor can only deduct charitable gifts to the extent they exceed 0.5% of the donor’s adjusted gross income (AGI).

• 30% and 60% AGI limits: The deduction limit for appreciated property (such as stocks or real estate) is capped at 30% of the donor’s AGI, while the deduction limit for cash donations is capped at 60%.

• Top bracket cap: Donors in the highest (37%) marginal tax bracket have their itemized deduction value capped at a maximum benefit of 35%.

For gift taxes, the deduction is unlimited and not subject to any income tax limitation. That said, as of 2025, if a gift to a person or an entity that is not a charity requires filing a gift tax return, all charitable gifts during a given year must also be reported on a gift tax return (even if no tax is due for the transfers to charity).

Similarly, for estate taxes, the deduction is unlimited — provided certain rules are followed. For example, for an estate to claim a charitable deduction from estate tax, the donor must spell out the gift in a governing instrument.

Conclusion

Charitable giving provides a variety of benefits — personal, psychological, spiritual, societal, and financial. The strategies discussed in this article provide an overview of the various ways to support charitable entities, along with considerations donors should keep in mind when deciding how to make gifts.

Endnotes

[1] At the time of publishing, Congress is considering the Charity Parity Act, which would permit QCDs directly from employee-sponsored plans such as 401(k), 403(b), and 457(b) plans. S. 4511, 119th Cong. (2026). ^

[2] The information in this article is intended for illustration and information purposes only and should not be construed as tax or legal advice. ^