Charitable Planning in Texas

Serving Clients in Houston and the Surrounding Area

Americans have a long and generous tradition of charitable giving. Whether motivated by religious conviction, personal values, community pride, or a desire to leave a lasting legacy, charitable giving is deeply woven into the fabric of our society. At The Stegall Law Firm, we encourage and support this tradition by helping our clients incorporate charitable giving into their estate plans in a way that maximizes the impact of their generosity – for the charities they care about and for their own families.

Charitable planning is not just for the ultra-wealthy. With the right strategies, individuals and families at many different levels of wealth can make meaningful gifts to the causes they care about while also reducing their income, gift, and estate tax burdens. The key is to work with an attorney who understands both the tax code and the charitable planning tools available under Texas and federal law.

Making the Most of Your Charitable Giving in Texas

There are many ways to structure charitable gifts, and the best approach depends on your financial situation, your goals, and the nature of the assets you wish to give. Below are four of the most effective charitable planning tools available to Texas residents:

1. Charitable Remainder Trust (CRT). A charitable remainder trust allows you to transfer assets to an irrevocable trust that pays you (or other beneficiaries you designate) an income stream for a specified period of time or for life. When the trust term ends, the remaining assets pass to the charity or charities you have selected. A CRT provides an immediate income tax deduction for the present value of the charitable remainder, allows you to avoid capital gains tax on the sale of appreciated assets transferred to the trust, and provides a steady income stream during the trust term.

2. Charitable Lead Trust (CLT). A charitable lead trust is essentially the reverse of a charitable remainder trust. With a CLT, the charity receives the income stream during the trust term, and the remaining assets pass to your family members (or other non-charitable beneficiaries) when the trust term ends. A CLT can be an effective way to transfer assets to the next generation at a reduced gift or estate tax cost, particularly in a low-interest-rate environment.

3. Private Foundation. A private foundation is a separate legal entity created and funded by an individual or family for charitable purposes. Unlike a public charity, a private foundation is typically funded by a single source and is subject to more stringent regulatory requirements. However, a private foundation provides the donor with maximum control over how charitable funds are invested and distributed. Private foundations can be an excellent tool for families that want to create a lasting charitable legacy and involve future generations in the family’s philanthropic mission.

4. Donor Advised Fund (DAF). A donor advised fund is a charitable giving account administered by a public charity (such as a community foundation or a financial institution’s charitable arm). You make an irrevocable contribution to the fund, receive an immediate tax deduction, and then recommend grants from the fund to the charities of your choice over time. Donor advised funds are simpler and less expensive to establish and maintain than private foundations, making them an attractive option for individuals and families who want the flexibility of a foundation without the administrative burden.

Each of these tools has its own advantages, limitations, and tax implications. The right choice depends on your specific circumstances and charitable objectives. At The Stegall Law Firm, we work with our clients to understand their goals and design a charitable giving plan that achieves the maximum benefit for both the charities they support and their own families.