CHECKLIST: ASSETS TO CONSIDER GIVING TO CHARITY

Many charitably-minded people underestimate the range of assets they can use to support favorite public charities, including, in many cases, funds at the community foundation. 

Here’s a simple guide to help you get started with your planning. And give us a call! We are happy to explain your options and let you know how your fund at the community foundation fits into the mix.

Cash
For itemizers, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted in five future tax years.

Highly-appreciated stocks and other investments
Publicly-traded stocks and bonds are tax-effective gifts to charitable organizations, especially because capital gains tax can be avoided.

Qualified plans
Whether via a Qualified Charitable Distribution by a taxpayer who is over 70 1/2, or through a bequest, a qualified retirement plan can be an effective asset for charitable giving. 

Alternative assets
Real estate, closely-held business interests, collectibles, and other nontraditional assets can frequently come with strong tax benefits when given to a public charity such as a fund at a community foundation or a favorite nonprofit.

CHARITABLE GIFT ANNUITY BASICS

A charitable gift annuity can be very effective planned giving tool. Our team is here to help you evaluate whether this type of transaction is right for you.

Here’s how it works:

  • Through a charitable gift annuity, a donor makes a transfer of assets to a charitable organization and in return receives a lifetime income stream and a partial tax deduction.

  • When the donor dies, the remaining funds are retained by the charity. 

  • The charitable donation portion of the transaction is calculated based on Internal Revenue Service rules for determining the amount of the contribution that is in excess of the present value of the annuity.

  • A donor can fund a charitable gift annuity with a variety of assets, including marketable securities and cash. 

  • Actuarial calculations are used to establish the payout amounts, paid in equal installment payments that are considered a partial tax-free return of the donor’s original gift.

  • Generally a large residual flows to the charity after the donor’s death. 

  • The charity’s own assets, not just the donated assets themselves, back the annuity payouts. Because of this dynamic, charitable gift annuities are regulated by most states to ensure that the charity has enough reserves to meet obligations. 

Keeping up with the rules and regulations for charitable gifts of all types is one of the many ways our team is here to serve you and help you support the community you love. 

SO LONG, STRETCH IRA

Among the changes enacted by the SECURE Act, which became law on December 20, 2019, is a provision eliminating the so-called stretch IRA. This change, which came as a surprise to many wealth advisors, requires that non-spousal beneficiaries of a decedent's IRA draw down the funds over a 10-year period, rather than giving them the option to take the distributions over the rest of their lives. Although exceptions apply for certain beneficiaries (such as a minor child, a disabled or chronically ill beneficiary, and beneficiaries who are younger than the decedent by fewer than 10 years), the new law is problematic for estate plans that contemplated allowing a high income-earning beneficiary to take advantage of lower income years later in life. The SECURE Act contains several other provisions designed to help Americans boost retirement savings, including new provisions for multi-employer plans, increasing the required age for starting distributions, automatic enrollment, and increases to IRA and 401(k) contribution limits.

Importantly, but for a few timing nuances, the SECURE Act left intact provisions for the popular "charitable rollover," which permit qualified charitable distributions from a retirement account to a charity. Even though donor-advised funds are not permitted as rollover recipients, the technique is still quite valuable to generate tax savings for the donor and a boost for the charity's finances.