How to Give? Ideas from the Rich, and Near Rich

There are a myriad of ways to give, if you are so inclined. Some give directly to institutions (such as qualified charities) while others create trusts for this purpose.

Giving through a trust can be complex, and might involve (for example) setting up a Charitable Remainder Trust (called a CRT in estate planning circles), where income is paid for a lifetime or a certain number of years to a non-charitable beneficiary, with the charity receiving what is left afterwards (which is called the "remainder interest"). Another popular category of trust is a Charitable Lead Trust, where the charity receives the initial interest and the remainder interest going to non-charitable beneficiaries. The Charitable Lead Trust is abbreviated a "CLT."

Depending upon the method of giving, you as a taxpayer might be entitled to an income, gift, or estate tax deduction. But how do those wealthy enough to file an estate tax return give?

A recent IRS report written by Brian G. Raub shows how those with estates in excess of $1.5 million gave in 2004. That report broke down the giving patterns of the wealthy and near-wealthy.

The report shows that those with gross estates between $1.5 million and $3.5 million gave the most to educational institutions (28.7%), with the smallest percentage going to "animal related activities" (1.6%). Religious and spiritual giving among this near-but-not-quite-rich category was in second place, with 18.5%.

On the other hand, those with large estates of $5 million or more gave significantly the most to "philanthropy and volunteerism" -- 70.2%. Of this wealthy category of taxpayer, educational institutions were in distant second place (10.5%) with religious and spiritual giving receiving a paltry 3.2%.

By the way: The wealthy gave only 1.1% to animal related activities.

But don't be fooled by these low percentages. The amount of money involved is still significant. For instance, even the minuscule 3.2% given to religious and spiritual organizations by the wealthy (those with estates exceeding $5 million) totalled $443,482,000. The total of all charitable giving by all 2004 estate tax return filers (i.e., those with gross estates exceeding $1.5 million) totalled $17.8 billion dollars. Remember that this only relates to what was reported in estate tax returns. It does not include the giving recorded in income tax returns.

Of course, you don't need to be rich to give. Giving can be a part of any estate and/or financial plan -- along with beneficial tax deductions as a side benefit. Your financial and/or estate plan advisor can help you factor giving as part of your estate and financial plans.

(My thanks to Professor Caron of the TaxProf Blog for making me aware of this report)