Strategic Charitable Giving In Your Estate Plan: Creating a Legacy That Matters

For many Connecticut families, wealth represents more than financial security. It’s an opportunity to make a meaningful difference. Strategic charitable giving in your estate plan doesn’t just support causes you care about. It can also provide substantial tax advantages, reduce your taxable estate, and create a lasting legacy that inspires future generations. 

Why Include Charitable Giving in Your Estate Plan 

Charitable giving offers benefits that few other estate planning strategies can match. Charitable bequests receive an unlimited estate tax deduction, effectively removing those assets from your taxable estate. For Connecticut residents facing both federal and state estate taxes, this becomes particularly valuable. When you donate appreciated assets, you avoid capital gains taxes while receiving a charitable deduction for the full fair market value. 

Beyond the tax benefits, charitable giving creates a values-based legacy that extends beyond material wealth. It demonstrates to children and grandchildren the importance of giving back, and allows you to make transformational gifts that would be difficult during your lifetime. 

Your Charitable Giving Options 

Connecticut residents have several ways to incorporate charitable giving into estate plans. Here’s what you need to know about each option. 

Direct Charitable Bequests: Simple and Flexible 

The simplest approach is the direct bequest: designating specific assets or amounts to charitable organizations through your will or trust. You can structure these as: 

• Specific bequests (particular assets or fixed dollar amounts)  

• Percentage bequests (specified portions of your estate)  

• Residuary bequests (what remains after other distributions)  

• Contingent bequests (backup provisions if primary beneficiaries predecease you) 

The advantage? You retain complete control during your lifetime and can easily update charitable beneficiaries. The tradeoff? No current income tax deductions. 

Charitable Remainder Trusts: Income Now, Charity Later 

Want income during retirement while ultimately benefiting charity? Charitable Remainder Trusts (CRTs) provide exactly that. A CRT pays income to you (or other beneficiaries) for a specified term, then remaining assets pass to your designated charities. 

The benefits are substantial:  

• Immediate income tax deduction for the charitable remainder interest  

• No capital gains tax when the trust sells appreciated assets  

• Guaranteed income stream for you  

• Assets removed from your taxable estate 

CRTs work best for larger gifts (typically $500,000+) since they require ongoing administration. They’re irrevocable, so make sure you don’t need those assets for your heirs. 

Charitable Lead Trusts: Charity Now, Family Later 

Charitable Lead Trusts (CLTs) work in reverse. The charity receives income payments during the trust term, while family members receive remaining assets when it terminates. This makes CLTs particularly attractive for wealth transfer planning. 

When structured properly, CLTs can transfer assets to heirs at reduced gift or estate tax values. Any appreciation passes to your heirs free of additional tax. They work especially well for families who want to provide significant charitable support now while ultimately preserving wealth for the next generation. 

Donor-Advised Funds: Maximum Flexibility 

Donor-Advised Funds (DAFs) have become one of the fastest-growing charitable giving vehicles, and for good reason. They combine tax efficiency, administrative simplicity, and remarkable flexibility. 

Here’s how they work: You contribute to a DAF and receive an immediate income tax deduction, even though the funds may not be distributed to charities for years. You can contribute cash, appreciated securities, real estate, or other assets while avoiding capital gains tax. 

Best of all, you can name successor advisors (like your children) to continue your charitable legacy across generations. Most DAFs require minimum initial contributions of $5,000-$25,000 and charge administrative fees of 0.6%-1% annually. 

Retirement Accounts: Often the Smartest Choice 

Here’s something many people don’t realize: retirement accounts are one of the most tax-efficient assets to leave to charity. When your heirs inherit Individual Retirement Accounts (IRAs) or 401(k)s, they must pay income tax on distributions. Charitable beneficiaries receive these distributions income tax-free. 

If you’re 70 and a half years or older, Qualified Charitable Distributions (QCDs) offer an even better strategy. You can transfer up to $108,000 annually directly from your IRA to qualified charities, satisfying required minimum distributions while excluding transferred amounts from taxable income. This often provides better tax treatment than taking the distribution and donating cash. 

What Connecticut Residents Need to Know 

Connecticut’s tax landscape adds unique considerations to charitable planning. The state’s estate tax currently applies to estates exceeding $13.99 million per person in 2025, rising to $15 million in 2026. Connecticut imposes a flat 12% tax on amounts above the exemption. 

Here’s the key benefit: Charitable bequests receive unlimited deductions for both Connecticut and federal estate tax purposes. For a Connecticut resident with a $20 million estate, a $5 million charitable bequest would save approximately $600,000 in Connecticut estate tax plus federal estate tax savings—potentially totaling over $2.6 million. 

Connecticut is also the only state with a gift tax. However, lifetime charitable gifts are not subject to this tax, though they do reduce your available estate tax exemption at death. This makes working with attorneys who understand Connecticut’s unique tax landscape essential. 

Choosing the Right Strategy 

Not sure which approach is right for you? Consider these factors: 

Timing: Need income now? Consider CRTs. Want to support charity while preserving assets for heirs? Look at CLTs. Prefer maximum lifetime flexibility? Choose direct bequests or DAFs. 

Control: Direct bequests and DAFs offer maximum flexibility to change charitable beneficiaries. Trusts are irrevocable. 

Family Involvement: DAFs excel at engaging multiple generations in philanthropic decisions. Consider whether involving family members matters to you. 

Asset Types: Highly appreciated assets work well with CRTs, DAFs, and direct donations. Retirement accounts are particularly tax-efficient as charitable bequests. 

Size: Direct bequests work for any amount. DAFs typically require $5,000-$25,000 minimums. Charitable trusts are most cost-effective for larger gifts ($500,000+). 

Common Mistakes to Avoid 

Even well-intentioned charitable planning can go wrong. Watch out for these pitfalls: 

• Failing to verify that organizations qualify as IRS 501(c)(3) entities  

• Neglecting to update charitable beneficiaries as organizations merge or close  

• Overlooking retirement account opportunities that could reduce family tax burden  

• Underestimating administrative requirements of charitable trusts  

• Making inflexible commitments without building in flexibility  

• Ignoring family communication (surprise charitable bequests can create conflict)  

• Failing to coordinate charitable planning with your overall estate plan 

Your Next Steps 

Strategic charitable giving transforms wealth transfer from a purely financial transaction into an expression of your values. Whether you choose direct bequests, donor-advised funds, charitable trusts, or strategic use of retirement accounts, thoughtful philanthropic planning creates a legacy that extends far beyond your lifetime. 

For Connecticut families, understanding how state-specific estate and gift tax considerations intersect with charitable planning strategies ensures you maximize both impact and tax efficiency. 

Have you considered how charitable giving could enhance your estate plan while reducing your tax burden? Our experienced estate planning team provides comprehensive guidance on charitable giving strategies, trust structures, and tax-efficient philanthropy throughout eastern and central Connecticut. Contact The Prue Law Group today at (860) 423-9231 or visit pruelawgroup.com to schedule a consultation and discover how strategic charitable planning can transform your estate plan into a lasting legacy. 

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Sources: 

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Fidelity. “Giving to Charity – Estate Planning.” https://www.fidelity.com/life-events/estate-planning/beneficiary-strategies/charity 

Fidelity Charitable. “Charitable Planning Guide.” https://www.fidelitycharitable.org/content/dam/fc-public/docs/advisors/charitable-planning-guide.pdf 

Ameriprise Financial. “7 Charitable Giving Strategies to Make an Impact with Your Estate.” https://www.ameriprise.com/financial-goals-priorities/family-estate/charitable-giving-strategies 

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Brady Cobin Law Group. “How to Incorporate Charitable Giving into Estate Planning.” February 27, 2025. https://ncestateplanning.com/estate-planning-and-charitable-giving/ 

Heritage Foundation of Williamson County. “Charitable Remainder Trusts vs. Charitable Lead Trusts.” February 14, 2023. https://williamsonheritage.org/giving/charitable-remainder-trusts-vs-charitable-leads-trust/ 

Fidelity Charitable. “Charitable Lead Trusts.” https://www.fidelitycharitable.org/guidance/philanthropy/charitable-lead-trusts.html 

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Fidelity Charitable. “What is a Donor-Advised Fund?” https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html 

National Philanthropic Trust. “Do Your Clients Need to Update Their Estate Plans? How a DAF Can Help.” July 12, 2024. https://www.nptrust.org/philanthropic-resources/philanthropist/do-your-clients-need-to-update-their-estate-plans-heres-how-a-donor-advised-fund-can-help/ 

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The Prue Law Group has served eastern and central Connecticut since 1980, providing comprehensive business law, estate planning, probate, and elder law services. Our team’s deep local knowledge and specialized expertise help business owners protect what matters most. AI may have been used for the initial research and drafting of the article. This content is intended for general informational purposes only and should not be construed as legal advice. For guidance on your specific situation, please contact our office for a consultation.