As you’re making out your holiday gift list, you may want to plan some charitable gifts as well. With the recent recession, many charitable organizations need help more than ever. One way you can make a significant gift to your favorite charity and maximize tax savings for you and your family is through a charitable trust or other planned giving vehicle. The following are some popular gift strategies you may want to consider.

Charitable Lead Trusts

If you are making regular gifts to a favorite charity — or would like to make regular gifts — consider using a charitable lead trust for those gifts. A charitable lead trust pays a specified amount to the charity of your choice for a specific period. At the end of that period, the trust assets pass to the person you’ve named as the trust’s remainder beneficiary — your child or grandchild, for example. Both the charity and your heirs benefit.

The current low-interest-rate environment may make a charitable lead trust particularly attractive. The value of certain types of gifts is determined using an applicable federal rate, or “AFR,” from tables issued by the IRS. The AFR can change monthly. Lower rates can reduce gift and estate taxes on the assets that eventually pass from the trust to your family or other heirs, allowing them to receive more of those assets. Depending on how you design your charitable lead trust, you may achieve income-tax benefits as well.

Charitable Remainder Trusts

These irrevocable trusts pay income at least annually to you, you and your spouse, or to another noncharitable beneficiary for life or a term of up to 20 years. At the end of the trust term, the charitable beneficiary you’ve named receives the assets remaining in the trust. Charitable remainder annuity trusts pay a fixed dollar amount annually. Charitable remainder unitrusts pay a variable amount annually, equal to a fixed percentage of the value of the trust’s assets, recalculated each year.

You can take a charitable income-tax deduction in the year of the contribution for the present value of the charity’s remainder interest (subject to limits). Note that a lower AFR will reduce the value of your charitable gift and mean a lower up-front income-tax deduction. However, making gifts of assets that you expect to appreciate may help you avoid future capital gains tax, and the value of the gifted assets is removed from your estate for gift- and estate-tax purposes.

Charitable Gift Annuities

With this arrangement, you and the charity essentially enter into a contract under which you give cash or other property in exchange for fixed annuity payments. The transaction is, in essence, part gift and part purchase. You are allowed a charitable income-tax deduction (within limits) for the difference between the value of the contribution and the value of the annuity.

While lower interest rates reduce the value of your charitable contribution and, consequently, your income-tax deduction for the gift, low interest rates can make a charitable gift annuity attractive for another reason. For older donors, a charitable gift annuity is likely to provide significantly higher payouts than they can gain from other fixed income investments such as certificates of deposit.

While more complex than outright gifts, planned gifts can offer substantial benefits. Let us know if you’d like to review your situation and explore the various planning options in more depth. 

NOVEMBER

2Employers: File Form 941, Employer’s Quarterly Federal Tax Return, for the third quarter of 2009.

10Employers: Deferred due date for Form 941, if timely deposits were made.

DECEMBER

15Corporations: Pay fourth installment of 2009 estimated tax.

JANUARY

15Individuals: Pay last installment of 2009 estimated tax with Form 1040-ES. Or file 2009 income-tax return and make full payment of any balance due by February 1, 2010.

FEBRUARY

1Employers: Distribute copies of Form W-2 for 2009 to employees.

1Businesses: Distribute Forms 1099 (or other information statements) to recipients of certain payments made in 2009. See us for more details.

1Employers: File Form 941, Employer’s Quarterly Federal Tax Return; quarterly deposit due.

1Employers: File Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, for 2009.