How does Philanthropy play a part in your financial planning.

By Jeremy Loftin, Chief Administrative Officer, Missouri Trust and Investment Company

Charitable Giving

How does philanthropy fit into your future?

Philanthropic planning plays an important role in the financial planning process.  These discussions often start with an evaluation of the legacy you want to leave.  Often, philanthropy can give you great personal satisfaction along with an added bonus of a current income tax deduction, capital gains avoidance and sometimes a reduction of taxes your estate may owe at death.

There are many ways to give to charity. Below, we will explore some of the ways you can benefit your favorite charitable organization whether you are considering a gift during your lifetime or at death.

Outright gifts

An outright gift is one that benefits the charity immediately and exclusively. With an outright gift you get an immediate income and gift tax deduction subject to certain limitations.


These gifts are made by including a provision in your estate planning documents (trust and/or will), or by using a beneficiary designation form on your IRAs and/or life insurance and annuities policies. The charity receives the gift at your death.

Charitable trusts

Another option is the use of a charitable trust. These types of trusts have a split interest that provides you the opportunity to name a charitable and a non-charitable beneficiary.  The most common types of trusts used to make partial gifts to charity are the charitable lead trust and the charitable remainder trust.

Charitable lead trust

A charitable lead trust as the name suggests pays income to a charity for a certain period of years, and then the trust principal passes back to you or other non-charitable beneficiaries that you designate. The trust is known as a charitable lead trust because the charity gets the first, or lead, interest.

A charitable lead trust can be an excellent estate planning vehicle if you own assets that you expect will substantially appreciate in value.

Charitable remainder trust

A charitable remainder trust is the inverse of the charitable lead trust. Trust income is payable to you, or your designated beneficiaries, for a period of years, then the principal goes to your favorite charity.

A charitable remainder trust can be beneficial because it provides you with a stream of current income during your lifetime.

Private family foundation

A private family foundation is a legal entity that can last for many generations after your death. You create the foundation, then transfer assets to the foundation, which in turn makes grants to public charities. You and your descendants have complete control over which charities receive grants.

Qualified Charitable Distribution (QCD)

A qualified charitable distribution allows IRA owners over the age of 70 ½ to transfer money from their traditional IRA directly to a charity of their choice.  The amount of the distribution up to $100,000 reduces your adjusted gross income.

To explore any of these strategies in further detail please contact your financial advisor.