What Are the Options for Charitable Giving in a High-Net-Worth Estate Plan?

When a family has spent decades building wealth through businesses, investments, and real estate, they may encounter unique concerns during the estate planning process. When making decisions about what will happen to family wealth, a family may want to support schools, hospitals, churches, community groups, or other organizations that have shaped their lives or promote causes they believe in. The way a family handles charitable giving matters just as much as what they give. The right approach can lower taxes, protect a family’s inheritance, and keep values alive for generations.

To ensure that charitable giving and philanthropy will be handled correctly, a family can work with an attorney who understands the tools to use in a comprehensive estate plan that addresses asset protection, wealth preservation, and legacy planning. Legal guidance in these areas can help a family avoid financial losses while making sure the wealth they have accumulated can be used to maximum effect.

Why Is Charitable Giving an Important Part of Legacy Planning?

Charitable giving can be built into an estate plan through trusts, funds, foundations, gifts in a will, and other methods. These tools can make sure a family can support causes they care about while reducing estate and income taxes and ensuring that family members will have a meaningful role in their legacy.

Legacy planning is about more than money. It is about passing down values. Including children and grandchildren in decisions about giving can teach them how to manage wealth responsibly and give them a shared purpose that can help keep a family connected long after a person is gone.

The Tax Benefits of Giving to Charity

For Naperville families, taxes are a big part of the picture of estate planning and legacy planning. As of November 2026, the federal estate tax exemption is $15 million per person, but the Illinois Estate and Generation-Skipping Transfer Tax Act taxes estates worth more than $4 million. The Illinois exemption is not adjusted for inflation, and it is not “portable,” meaning a surviving spouse cannot use the unused portion of the first spouse’s exemption.

Illinois also has what many call a “cliff” effect. Once an estate passes the $4 million threshold, estate taxes will generally apply to the entire estate, not just the amount over the limit. Gifts to qualified charities are generally deducted from a person’s taxable estate, so charitable giving can help bring an estate below that line or reduce the amount of taxes that will need to be paid after a person’s death.

What Are the Main Ways to Give to Charity Through an Estate Plan?

There is no single best method for charitable giving. The right choice will depend on a family’s goals, the types of assets they own, and how involved family members will be in charitable efforts. Common options for charitable giving include:

• Direct gifts in a will or living trust, which can leave a set amount of money, specific assets, or a percentage of assets to a charity
• Naming a charity as the beneficiary of a retirement account or life insurance policy
• Charitable remainder trusts
• Charitable lead trusts
• Donor-advised funds
• Private family foundations
• Qualified charitable distributions from an IRA

Charitable Remainder Trusts

A charitable remainder trust is a type of trust that pays a person or people they choose an income stream for a set number of years or for life. When that period ends, what is left over will go to charity. These trusts can work well for assets that have grown in value, such as stock or real estate. The trust can sell the assets without paying capital gains taxes right away, and a person may receive an income tax deduction when funding the trust.

Charitable Lead Trusts

A charitable lead trust works the opposite way as a charitable remainder trust. The charity will receive payments first, and whatever remains later will pass to children, grandchildren, or other beneficiaries. This can reduce gift taxes or estate taxes.

Donor-Advised Funds

A donor-advised fund is an account held by a sponsoring charity, such as a community foundation. A person will contribute money or assets, receive a tax deduction in that year, and then recommend grants to charities over time. These funds are simple to set up, and they have low costs, which makes them a popular choice for families who want flexibility without managing a separate organization.

Private Family Foundations

A private foundation is a separate nonprofit organization that a family creates and controls. Foundations offer the most control, and they can employ family members and operate for generations. They also come with specific rules. Federal law generally requires foundations to give away about 5 percent of their assets each year, file annual tax returns, and avoid deals that benefit insiders. In Illinois, foundations must register and file reports with the Illinois Attorney General under the Charitable Trust Act.

What Issues Should High-Net-Worth Families Consider When Making Plans for Charitable Giving?

Charitable planning works best when it fits into a larger estate plan. Families may need to consider several issues as they make plans for philanthropy, including:

Balancing Charity With a Family’s Needs

A family will want to make sure gifts to charity will not leave a surviving spouse or children without enough support. A plan should account for long-term care costs, a family business, and children with special needs before deciding how much to give away.

Recent Changes to Charitable Tax Deductions

When planning large gifts in 2026 or later, federal tax changes may affect the strategies that may be used. Under the One Big Beautiful Bill Act, people who itemize deductions can only deduct charitable gifts that exceed 0.5 percent of their adjusted gross income. Taxpayers in the top income bracket also face a cap on the value of their deductions. Some families may address these issues by “bunching” several years of gifts into one year through donor-advised funds or other methods.

Choosing the Right Assets to Give

Not all assets are equal. Giving appreciated stock instead of cash can help avoid capital gains taxes. Retirement accounts may be taxed when they are left to children, so leaving them to charity and passing other assets to family members may save money overall.

Maintaining Control and Planning for the Future

It is important for family members to think about who will make decisions after they are gone. Trusts and foundations need trustees or board members, and disagreements can arise between family members. Clear written instructions and succession plans can help prevent conflict. 

Contact Our Naperville Estate Planning Lawyer for Charitable Giving

Charitable giving can help protect wealth while supporting family members and making a lasting difference. At [[title]], our Naperville, IL estate planning and charitable giving attorney can help families understand their options and build plans that reflect their values and goals. Call <strong class=\"makeCall\">630-756-1160</strong> today to schedule a consultation.