How to Give to Charity and Also Generate Retirement Income

Hollywood and a general disdain for billionaires have given many Americans the impression that there is some secret way to give to charity as a way to save multiples of that amount in taxes. Unfortunately, or fortunately, that is not the case.

. Lastly, if executed properly, these methods will save some tax bucks.

Charitable gift annuity

If you’re a Baby Boomer, it’s likely your alma mater has made you quite aware of its charitable gift annuity (CGA). Many college websites will even run an illustration to show you the tax benefits and income you’ll receive on an annual basis.

Here’s how it works:

• You make an irrevocable gift of cash or an appreciated asset to a charity. Universities are common beneficiaries, but it can be any qualified charity that has a charitable gift annuity
• You receive an immediate charitable deduction for a portion of the gift
• You receive a fixed income stream for a set period or for the rest of your life
• At the end of the period or your life, the remainder goes to or stays with the charity

Here’s where I would use this strategy:

• An appreciated asset is always a good starting point. If you bought Apple stock before you bought an iPhone or bought Nvidia stock before 2023, you may be a good candidate
• may make more sense
• You feel strongly about the charity. Remember, this is an irrevocable gift. You cannot get the money back, and you cannot change the remainder beneficiary

Charitable remainder trust

This is a strategy we employ for clients who are generous but want to reserve the right to change who they are generous toward. As with your living trust, you will have to employ a trust and estate attorney to draft the trust. You will also have to use the services of a tax professional to file a trust tax return each year. Sound complicated?

Here's how it works:

• You make an irrevocable gift into a charitable remainder trust (CRT)
• You receive an immediate charitable deduction for a portion of the gift
• ) for a set term or for the rest of your life
• At your death, the remainder goes to the beneficiaries listed in the trust

Because the mechanics sound, and are, very similar, it’s important to highlight some of the reasons I would opt for the CRT route over the CGA route:

• Desire for flexibility. The gift to the trust is irrevocable, but you can change the beneficiaries of the trust
• trust assets
• There can be multiple beneficiaries
• control of the investments
• A CRT allows you to avoid a potentially large capital gain

In every situation that we have recommended one of these strategies, there have been two stories. First, the story of the charity and the impact that charity had on the client or is having on the world. Second, the story of the appreciated investment that allowed the donor to make such a large gift.

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Related content

• Three Ways to Give to Your Kids Tax-Free While You’re Still Alive
• Four Ways to Give Money Tax-Free to Your Kids When You Die
• Developing a Charitable Giving Strategy: Where to Begin
• How to Assess the Impact of Your Charitable Giving
• What to Do if Your Passion for Charitable Giving Has Flagged