USA Law and Practice Contributed by: Diana Zeydel, Marc Selden, Benjamin Babcock and Brian Smith, Greenberg Traurig, LLP
charitable deduction, removing the donated assets from the taxable estate and potentially reducing or eliminating federal estate tax liability. Common charitable planning vehicles include CLTs and CRTs, which allow donors to combine philan - thropic objectives with tax and wealth transfer plan - ning. DAFs and private foundations likewise provide structured mechanisms for long-term charitable giv - ing. They differ significantly with respect to donor control, administration and regulatory requirements. 10.2 Common Charitable Structures 501 (c)(3) Public Charities Section 501 (c)(3) public charities are charitable organ - isations that receive broad public support or qualify as inherently charitable organisations, like churches, educational institutions and hospitals. As they are not typically controlled by a single donor or family, contri - butions to public charities receive the most favourable income tax treatment, including a 60% AGI limitation for cash gifts and a 30% AGI limitation for gifts of appreciated capital gain property. Public charities generally face fewer regulatory restric - tions than private foundations and serve as the spon - soring organisations for donor-advised funds. Private Foundations Private foundations are typically funded and controlled by a single individual, family or small group of donors. They provide substantial control over investment and grant-making decisions and may be used to promote family philanthropy across generations. Private founda - tions are subject to extensive regulatory requirements, including annual distribution obligations, self-dealing rules, excise taxes, and restrictions on excess busi - ness holdings. Charitable deduction limitations are less favourable than those applicable to public charities. Supporting Organisations Supporting organisations are a specialised category of Section 501 (c)(3) public charity established to sup - port one or more public charities. They may provide a middle ground between the control associated with private foundations and the favourable tax treatment afforded to public charities.
Although supporting organisations are subject to com - plex organisational and operational requirements, they may offer planning advantages when holding certain illiquid assets, including closely held business inter - ests, real estate or partnership interests. Compared with private foundations, supporting organisations may be subject to less restrictive rules in certain cir - cumstances; specialised restrictions and anti-abuse provisions apply. DAFs DAFs are charitable giving accounts maintained by public charities. Donors make irrevocable contribu - tions, receive an immediate charitable income tax deduction, and may thereafter recommend grants to qualifying charitable organisations. DAFs are relatively inexpensive and easy to administer and offer a high degree of flexibility and privacy. Ultimate legal control over contributed assets resides with the sponsoring charity, and donor recommendations are not legally binding. For 2026 and later years, DAF planning should be fac - tored in considering the new non-itemiser charitable deduction. While cash gifts made directly to qualifying public charities may qualify for the deduction avail - able to non-itemisers, contributions to donor-advised funds generally do not. CLTs A CLT provides payments to one or more charitable beneficiaries for a specified term, after which the remaining trust assets pass to non-charitable benefi - ciaries, often family members. Properly structured, a CLT may reduce gift and estate taxes while benefiting charitable organisations during the trust term. CRTs In a CRT, the trust pays an income stream to the donor or other designated beneficiaries for a specified peri - od, with the remaining assets ultimately passing to charity. CRTs may provide an immediate charitable deduction and permit the sale of appreciated assets within the trust without immediate recognition of cap - ital gain. CRTs are irrevocable and require ongoing administration and compliance.
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