GIFTING FOR THE CHARITABLY INCLINED

A variety of personal benefits are available from charitable giving – advantages that go well beyond just “warm feeling” and a tax deduction. Many gifts are made for purely unselfish reasons. Individuals who donate their time and talents to their church, synagogue, community organizations, educational institutions or other charitable organizations are often receptive of the idea of making monetary gifts to such charities, especially when they are shown tax-saving methods to do so. Reorganization of assets may provide greater income flow to a donor, and transferring assets to a charity eliminates taxation of them by any governmental unit. There are three popular techniques utilized in charitable giving: remainder trusts, charitable lead trust and gift annuities.

Charitable Remainder Trust. A CRT is undoubtedly the most common charitable trust. In creating this arrangement, the donor places cash or assets into a trust, and receives an income stream from the property for a period of time (often the life of the donor). At the end of the period, the income stream stops and the trust property passes to the charity. The donor gets a current charitable deduction for the value of the remainder passing to the charity. A CRT is commonly used where the donor would like to benefit a charity, but does not wish to give up all the benefits from the property. CRT’s come in three basic types: The Unitrust that returns a fixed percentage of the value of the assets to the donor each year; The Annuity Trust that returns a fixed dollar amount every year regardless of the value of the trust and the Pooled Income Fund. With the Pooled Income Fund, the donor tosses his/her contribution into a common pot of assets managed by the charity, and is entitled to a proportionate share of the income generated by the fund each year.

Charitable Lead Trust. A CLT is the mirror image of a CRT, since the charity receives the income stream and the donor or his/her family eventually receives the remainder interest. In this case, the charitable deduction is based on the value of the income going to the charity. Although the donor loses the income from the property, for clients who want to reduce their death taxable estates, and “do good” too, this is a winning combination.

Gift Annuities. Gift Annuities are similar to charitable remainder annuity trusts, since the donor receives an income stream for a specified period. However, unlike the annuity trust, the contribution is not held in trust through the income period but belongs to the charity making a promise to pay the annuity amount from its general assets.

Two other techniques to be considered are charitable giving with Life Insurance and Private Foundations.

Implementing the concepts of charitable giving can help people obtain the optimum mix of monetary, social and moral value from their assets. Charitable giving provides important advantages that can not only help you, but also make the world a better place in which we live. Of course, this brief article is no substitute for a careful review of your unique circumstances. Before implementing any significant financial planning strategy contact your financial advisor as appropriate.

Please contact Susan Graham at 305-367-3416 if you or your tax advisor would like to speak to someone from our planned giving committee.