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CR Insider: Legacy Giving with Christen Douglas

Christen Douglas, a member of the Children’s Rights National Advisory Council, is a partner at the law firm McDermott Will & Emery, where her practice is focused on trust and estates. She also advises clients on philanthropic planning and private charitable foundations. Christen has joined the CR Legacy Society by designating CR as a beneficiary of her retirement accounts, but no time soon, as she has lots more adventures planned.

 


Q: What is planned giving and what is your role in trust and estate planning?

Planned giving is a term used to describe more structured charitable giving during a donor’s life or at the donor’s death that takes into account the donor’s financial and estate planning goals. It often involves making charitable gifts of assets that are more complicated than cash. I work with individuals and families to advise them with respect to their tax and estate planning. To give this advice I need to understand my client’s charitable aspirations and integrate methods of achieving these aspirations in their overall estate plans.

Q: What was your path to a career in trust and estate planning? 

I started out as a litigator, which was a fantastic way to begin my legal career. But it just didn’t satisfy my desire for a more personal connection with my clients. This work gives me that. Helping clients consider and craft their legacies is incredibly fulfilling. I really enjoy connecting with my clients on a psychological and human level. My partners and I become trusted advisors to our clients. They come to us with anything and everything that touches not only their estate plans but their personal lives. This work is deeply engaging to me.

Q: What is one of your favorite parts of the job?

I love learning about the legacy a client wants to leave behind after he or she is gone. Their legacies often include charitable giving. I am often surprised and moved by the deep and emotional commitment people have to supporting the arts, education, and other bedrocks of our society through the charities they love.

Q: Why did you decide to include CR in your will?

There are many ways to provide for a charitable organization, in or outside of a will. I have designated CR as the beneficiary of my retirement accounts. Hopefully CR will not receive my accounts for many years (as I plan to stick around for a while)! But if anything were to happen to me, it gives me peace of mind to know that the assets I worked hard to accumulate will go to a cause that I find incredibly compelling. I want to contribute to society, in life and at death, in a way that will improve the lives of children who were arbitrarily born into challenging situations and may not be able to advocate effectively for themselves.

Q: What are the benefits of including charitable giving to one or more groups in my estate?

There are tax benefits to making charitable gifts during life and at death.  During life, the charitable income tax deduction is limited to 60% of an individual’s adjusted gross income (“AGI”), subject to the temporary unlimited charitable income tax deduction of up to 100% of an individual’s AGI under the CARES Act for cash gifts to public charities in 2020 and 2021.  If you give to charity during life, you get the benefit of the income tax deduction, and the assets given to charity are out of your estate for estate tax purposes.  At death, the charitable estate tax deduction is unlimited for estate tax purposes.  In addition, if you give an interest in your IRA or other tax deferred plan at death, you potentially save on the deferred income tax and the estate tax.

Q: What are some popular misconceptions about planned giving?

One misconception is a belief that a donor is not allowed to benefit from assets after giving them to charity.  The reality is that there are several forms of planned giving that allow a donor or members of the donor’s family to continue to benefit from the assets contributed.  Examples include split-interest trusts (i.e., charitable remainder trusts and charitable lead trusts) and charitable gift annuities.  These arrangements all allow for the donor or members of the donor’s family to retain an interest in the assets contributed.

Q: What are some of the charitable giving vehicles donors should be aware of?

A donor-advised fund is a very popular vehicle for charitable giving.  It provides the benefit of a charitable income tax deduction now while allowing the donor (or other “advisors” designated by the donor) to decide over time when and in what amounts the donor would like to request that the administrator of the donor-advised fund make distributions to charitable organizations.  In low interest rate environments, charitable lead annuity trusts can also be especially effective because the non-charitable remainder is valued using the currently unusually low 7520 interest rate.  Many clients also prefer to contribute appreciated stock rather than cash to obtain the additional benefit of avoiding capital gains tax on the appreciation while still deducting the fair market value of the stock if the donor has held the stock for at least one year before contributing it.

Q: Are there new tax regulations I should know about when it comes to charitable giving?

The temporary increase in the AGI limitation of the charitable income tax deduction.  In 2021, cash contributions to charitable organizations (excluding private foundations and donor-advised funds) are deductible up to 100% of the donor’s AGI.  However, the penalty for overstating your income tax deduction has also been increased from up to 20% to up to 50% of the underpayment.  This means that it is even more important to consult with your advisors in filing your income tax returns for 2020 and 2021.  An above-the-line deduction of up to $600 is also available to taxpayers in 2021, even if they file using the standard deduction (rather than itemizing their deductions).

Q: What about family? How can donors provide adequate support for their children/grandchildren and still also include a bequest to one of more charities?

Achieving both goals requires careful planning with your financial and legal advisors. It may also be helpful to provide that a certain percentage of your estate will pass to charity rather than a specific dollar amount so that the amount will self-adjust with fluctuations in the value of your estate. Similarly, many clients prefer to provide a fixed dollar amount for their family members, so that they know that a certain dollar amount will be available to care for their loved ones, and then provide for the residuary of the client’s estate to go to charity.

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