Charitable Giving and Estate Tax: What NJ Business Owners Should Ask Their CPAJune 24, 2026

Charitable giving is one of the most effective ways to reduce your estate tax exposure while supporting causes that matter to you. But the tax benefits of charitable giving depend entirely on the structure. A straightforward donation and a charitable remainder trust produce very different outcomes, and the wrong approach can cost more in lost tax savings than the gift itself is worth.

Before making significant charitable gifts as part of your estate plan, there are questions you should be asking your CPA. Not your attorney, not your financial advisor – your CPA, because the answers are fundamentally about tax strategy.

Why Charitable Giving Belongs in Your Estate Plan

For New Jersey business owners with substantial estates, charitable giving is not just generosity. It is a planning tool that accomplishes multiple objectives simultaneously:

• Reduces your taxable estate – Assets given to qualified charities are removed from your estate, reducing both federal estate tax and, in some cases, NJ inheritance tax exposure
• Generates current income tax deductions – Depending on the structure, charitable gifts can provide significant income tax benefits during your lifetime
• Creates retirement income – Certain charitable trust structures pay you income for a set period before the remainder passes to the charity
• Transfers wealth to heirs more efficiently – When combined with other planning tools, charitable giving can actually increase what your family receives after taxes
• Fulfills philanthropic goals – You direct where your money goes rather than sending it to the IRS

The key is that these benefits only materialize when the giving is structured correctly and integrated with your broader estate and tax plan.

The Questions to Ask Your CPA

“Should I give now or at death?”

Lifetime gifts and bequests at death have different tax implications. Lifetime charitable gifts generate income tax deductions and remove assets from your estate immediately. Bequests at death reduce your taxable estate but provide no income tax benefit during your lifetime.

For business owners in high-income years – particularly around a business sale or liquidity event – lifetime giving can produce substantial income tax savings on top of estate tax reduction. Your CPA should model both scenarios based on your current income, projected estate value, and tax bracket.

“What should I give?”

The type of asset matters as much as the amount. Donating appreciated stock or business interests can eliminate capital gains tax entirely while providing a deduction for the full fair market value. Donating cash is simpler but provides fewer tax advantages.

For business owners with highly appreciated real estate, closely held stock, or other illiquid assets, your CPA should evaluate whether donating those assets directly is more tax-efficient than selling them and donating the proceeds.

“Is a charitable trust right for my situation?”

Charitable trusts are powerful but complex. Two common structures:

Charitable Remainder Trust (CRT): You transfer assets into the trust and receive income for a set period (or for life). When the period ends, the remainder goes to your designated charity. You receive an immediate income tax deduction, avoid capital gains on appreciated assets placed in the trust, and reduce your taxable estate.

CRTs are particularly effective for business owners who plan to sell appreciated assets. Placing the assets in a CRT before the sale eliminates the capital gains hit and converts the full value into an income stream.

Charitable Lead Trust (CLT): The charity receives income from the trust for a set period, and the remaining assets pass to your heirs at a reduced gift or estate tax value. CLTs are a way to transfer wealth to the next generation while supporting a charity during the interim period.

Your CPA should model the income, gift, and estate tax consequences of each structure before your attorney drafts the trust documents. The numbers need to work before the legal framework is built around them.

“How does this interact with my business succession plan?”

If you are planning to transfer your business to the next generation, charitable giving can play a strategic role. For example:

• A CRT funded with a portion of business interests before a sale can provide retirement income while reducing the estate
• Charitable giving can offset income from installment sale proceeds during a gradual business transfer
• A CLT can transfer appreciation to heirs while providing community goodwill that benefits the business

These strategies need to be coordinated with your succession plan and your business valuation. Timing, valuation, and entity structure all affect the tax outcome.

“What are the limits and restrictions?”

Charitable deductions are not unlimited. The IRS imposes annual limits based on your adjusted gross income and the type of asset donated:

• Cash gifts: generally deductible up to 60% of AGI
• Appreciated property: generally deductible up to 30% of AGI
• Excess deductions can be carried forward for up to five years

Your CPA should project your income over the next several years and time charitable gifts to maximize the deduction within these limits. Bunching gifts into high-income years or spreading them across multiple years can produce significantly different results.

“How do I make sure the deduction is defensible?”

The IRS scrutinizes charitable deductions, especially for non-cash gifts. Donations of closely held business interests, real estate, or other hard-to-value assets require a qualified appraisal and specific documentation. Failure to meet these requirements can result in complete denial of the deduction.

Your CPA ensures the valuation and documentation meet IRS standards. For business interests, this means a formal valuation from a qualified professional, not a back-of-the-envelope estimate.

What Happens Without a CPA in the Conversation

When charitable giving is planned without tax analysis, the most common problems are:

• Donating the wrong asset – giving cash when appreciated stock would have eliminated capital gains and provided the same deduction
• Ignoring AGI limits – making a large gift that exceeds the annual deduction limit without planning the carryforward
• Funding a trust with the wrong structure – creating a CRT when a CLT would have been more effective for the family’s wealth transfer goals
• Missing the timing – making a gift in a low-income year when the deduction would have been worth significantly more in a high-income year
• Inadequate documentation – having a deduction denied because the appraisal or acknowledgment letter did not meet IRS requirements

These are not theoretical risks. They are the issues your CPA should be catching before the gift is made.

Frequently Asked Questions

Can charitable giving actually increase what my family inherits?

Yes. By reducing estate taxes, generating income tax deductions, and avoiding capital gains on appreciated assets, strategic charitable giving can increase the net amount your family receives after taxes compared to a plan with no charitable component.

Do I lose control of assets I put in a charitable trust?

With a CRT, you receive income from the trust for a set period, so you maintain an economic benefit. However, the assets are irrevocably committed. With a CLT, the charity receives income for the set period, and your heirs receive the remainder. Your CPA and attorney should explain exactly what control you retain under each structure.

Is a donor-advised fund better than a charitable trust?

Donor-advised funds are simpler and less expensive to establish, but they do not provide the income stream that a CRT offers or the wealth transfer benefits of a CLT. For smaller charitable goals, a DAF may be sufficient. For estate planning purposes, trusts generally offer more flexibility and tax advantages.

Make Your Generosity Count

Charitable giving should accomplish two things: support the causes you believe in and strengthen your financial plan. When it only does the first, you are leaving tax savings on the table.

Contact The Curchin Group to discuss charitable giving strategies as part of your estate plan, or call (732) 747-0500.