Those who are charitably inclined, but also early in retirement, often find it hard to balance between ensuring they have the retirement portfolio needed to accomplish their goals for the next few decades, while also ensuring they support causes they care about. One great option to help with this problem is a Charitable Gift Annuity.
Best Ways to Donate to Charity
There are a lot of great ways to donate to charity, and be sure to watch some of our other videos that go into detail on things like donor advised funds, and qualified charitable distributions. We also devoted a whole webinar to creating a charitable giving plan for those interested in the finer details.
CGA – Charitable Gift Annuity
But another particularly good way for those with a lot of assets early in retirement is a charitable annuity. These are often called charitable gift annuities or CRATs – charitable remainder trusts.
With these, you contribute money today to an irrevocable trust whose beneficiary is a charity or set of charities. You receive a large tax deduction in the year that you make this contribution.
What makes these unique is that you are allowed to receive a set amount of income each year from the assets in the trust while you are alive. So, you could contribute $500,000 to one of these, receive a large one time tax deduction, and still receive some amount of income from that lump sum to support you in retirement.
Benefit of CRATs and Charitable Annuities
These charitable giving techniques help a lot of people feel at ease, knowing their assets are still providing income for them while they are alive, but it also designates money for charity today.
If you have assets in excess of the estate tax limit, this is also a particularly good strategy in getting money out of your taxable estate, while also being able to receive income from your investments in your lifetime.
However, know that these will take help from a lawyer to get set up, and you will probably want to talk with a financial advisor or tax preparer first to ensure you are maximizing the tax benefit.
Matt Hylland is a financial planner and partner at Arnold & Mote Wealth Management, where he helps individuals and families make informed decisions around retirement planning, investment management, tax planning, and comprehensive financial strategy. As a flat-fee, fiduciary advisor, Matt focuses on providing objective guidance designed around each client’s goals and long-term financial needs.
Before transitioning into financial planning, Matt worked as a materials scientist for the Department of Defense, bringing a problem-solving mindset and analytical approach to his work with clients. He has been featured or quoted in nationally recognized financial publications, including The Wall Street Journal, CNBC, and Kiplinger, for his insights on personal finance and investing.
Years of experience: 10
Specializations: retirement decisions, tax-efficient strategies, investment choices, and the complex financial decisions that come with major life transitions.