The Oklahoma Bar Journal November 2024

that are happy to serve as a resource for you as you advise your clients about charitable giving. These services include preparing tax illustrations and giving instru ments such as charitable remainder trust agreements, donor-advised fund agreements and charitable gift annuity agreements. give to charity run the gamut, with most settling on either a specific dollar amount, particular assets or a percentage of the over all estate value. In some circum stances, it is a combination of all three! One of the great attributes of charitable gift planning is that it is very flexible and customizable. Attorneys, financial advisors and clients can reach creative planning arrangements that support giving goals and achieve tax and income objectives at the same time. While less than 10% of donors statistically report tax deductions as the primary motivator for char itable giving, 13 as an advisor, com municating the tax advantages of charitable planning reinforces the importance of tax-efficient plan ning. Tax-deferred assets, such as qualified retirement accounts and IRAs, are ideal assets to leave to charity because of the tax that would be paid by noncharitable beneficiaries. Knowledgeable drafting attorneys often include a provision explicitly stating that charitable gifts should be paid first from taxable assets. Attorneys should collabo rate with clients’ financial and tax advisors to ensure assets are not overlooked in the planning process and that the advisor team has con sidered planning ramifications from both a tax and legal perspective. WHAT TO GIVE? Client preferences on what they

interest as defined by the donor before death, such as distributions to the beautification of a geographic area, education, health research or a religious-related mission. Ethical considerations may arise for charitable beneficiaries. 11 Attorneys should stay vigilant and verify no undue influence has been exerted by the organization. It is important to remember that although the charity may have a critical role in soliciting the gift or sharing recommendations on gift language, it should not have a rep resentative present at the execution of the estate plan itself. If there has been active involvement of the charitable organization prior to exe cution, the attorney should ensure clients leave testamentary charitable gifts willingly and without duress. 12 Noncharitable Beneficiaries Charitable estate planning can include providing income interests that benefit noncharitable bene ficiaries prior to the distribution to the charitable beneficiary. The drafting attorney should assess which giving solutions are prefer able based on factors such as the amount of the charitable gift, the amount payable to noncharitable beneficiaries, tax goals, gift admin istration costs, the location of the charitable organization, the age of the noncharitable beneficiaries and the states in which the donor and noncharitable beneficiaries are domiciled. A testamentary charitable gift annuity, charitable remainder trust or other trust arrangement may satisfy the donor’s overall intent. Charitable planned giving arrangements that include both charitable and noncharitable interests can quickly become complex. There are numer ous local community foundations

WHEN TO GIVE?

Timing is yet another critical factor to weigh when drafting testamentary charitable gift lan guage. There is a broad spectrum of when clients may intend funds to be distributed. Some clients desire the full amount of the gift to be put to work immediately and ask that the gift be distributed in its entirety to the charitable organization as soon as possible. Others fall into a separate camp with the unequivocal intent that their gift be dispersed over time and in increments of 3% to 5% a year, typically via an endow ment. These gift instruments seem chiefly attractive to donors who crave assurance that the impact of their gift will extend into perpetu ity. Endowment investment strat egies under the Uniform Prudent Management of Institutional Funds Act 14 are conservative and focus on long-term horizons, with the goal that the value of the gift will continue to outpace inflation, providing equity among subse quent generations. Still others have a preferred distribution schedule including an immediate distribution and an amount held permanently in endowment. Many clients relay specific thoughts on where they want their funds used within the organization or, conversely, place meticulous constraints on activ ities they want to avoid funding. In contrast, unrestricted gifts can be spent however organizational leadership deems appropriate. If the client is amenable, it can prove helpful to discuss gift restrictions with the charitable organiza tion in advance of executing the documents to confirm the charity WHERE TO GIVE?

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

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THE OKLAHOMA BAR JOURNAL