CHARITABLE GIVING – Lifetime vs. At Death

Charitable Giving

 

Lifetime vs At Death

 

 

1.        Lifetime Giving

 

·                     You get to see the impact

·                     Control

·                     Income Tax Savings

·                     Estate Reduction

 

 

2.        Giving at Death

 

·                     Leaves a legacy

·                     Preserves principal while you are alive

·                     Estate tax benefits

 

 

3.        What is your Motivation?

 

·                     Give to society

·                     Benefit a cause/organization you feel strongly about

·                     Become involved

·                     Tax savings (income or estate)

 

 

 

1.      Lifetime Giving

 

Option #1 – Write a Check

 

·                     Easy

 

·                     Immediate

 

·                     Income Tax Deduction

 

·                     Removed from Estate

 

·                     You see the charity benefit while you are here

 

 

Option #2 – Donate Appreciated Asset

 

Example – You bought stock for $100.  It is now worth $10,000.  You donate to Do Good Charity.

 

·                     Simple

 

·                     Income tax deduction of $10,000

 

·                     Charity can sell without paying tax on the gain

 

·                     Asset is removed from your estate

 

·                     Possibilities – stock, real estate


 1.      Lifetime Giving

 

Option #3 – Transfer Life Insurance

 

·                     You have charitable deduction equal to “interpolated terminal reserve value.”

 

·                     Charity ultimately can receive face value.  (Consider lifetime transfer versus naming charity as beneficiary.)

 

·                     Additional payment of premiums by donor is additional charitable deduction for income tax purposes.

 

·                     Face value of life insurance is removed from your estate.  (Be aware of three year rule.)

 

 

          Other Options – can also be accomplished at death

 

Charitable Remainder Trusts

 

·                     Charitable Lead Trusts

 

·                     Private Foundations

 

·                     Charitable Gift Annuities

 

·                     Donor Advised Funds at Community Foundation

 

·                     Charitable Funds at Investment Firms

 

 

 

2.      Death Giving

 

Option #1 – Bequest

 

·                     Gift is made by Will

 

·                     Gift occurs after death

 

·                     Gift can be made to one or more charities

 

·                     Gift can specify an endowment fund

 

·                     Estate tax deduction

 

·                     You do need a will (or trust)

 

 

Option #2 – Name Charity as IRA Beneficiary

 

·                     IRAs are “double” taxed at death in the sense of being included in your estate and being subject to income tax as distributed.

 

·                     If an IRA is part of your estate and you desire to make a charitable gift at death, this is one of the most tax effective techniques.

 

·                     This approach is also SIMPLE.  All that is required is a beneficiary designation.

 

 

Additional Tax Effective Death Giving Options

 

·                     Interest on U.S. savings bonds

 

·                     Accounts receivable

 

·                     Deferred compensation

 

·                     Payments on installment obligations

 

·                     Death benefits from annuities

 

·                     Accrued royalties under a patent license

 

3.      Other Considerations

 

Income Tax

 

            Not all charities are the same –

 

·                     50% of AGI v. 30% of AGI

 

·                     Appreciated property – Full market value to 30% of AGI vs. Cost Basis up to 20%

 

·                     Unused contributions can be carried forward 5 years

 

 

Estate Tax

 

Federal Estate Tax applies at $1.5 million

 

·                     Nebraska State Estate Tax applies at $1 million

 

·                     Nebraska State Inheritance Tax – $10,000

 

 

Appraisals required for non-tax gifts over $5,000.

 

 

Delivery of gifts must be accomplished to obtain deduction.

 

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Advertisements