Previous | Student Loan Scams Next | How do I handle high inflation?
August 25, 2022 / The Merrill Anderson Company
Planned giving in 2023

Planned giving in 2023

The idea of “planning” a gift to charity may not spring as readily to mind as investment or retirement planning. Yet there are many ways to give, and many kinds of gifts to consider, especially when philanthropy is one of your core values.People donating money to a charity collection box.

 

Of course, the very first step in your planning is to identify the object of your philanthropy. Then consider what you intend your gift to accomplish: How you would like your gift to make a difference both in general and specific terms? At this point, you probably will make contact with the director of development at your chosen charitable organization to discuss your gift.

 

With the procedural steps out of the way, creativity begins. How can you shape your gift? For instance, your gift need not be cash (except that non-cash gifts do have a lower deduction limit). You may own certain assets that you want to donate, and your charity will be more than glad to receive.

 

Qualified Charitable Distributions

Those who are 70½ or older may direct up to $100,000 from an IRA to a qualified charity (a Qualified Charitable Distribution, or QCD). The QCD will qualify as a Required Minimum Distribution (RMD), which is mandated for those over age 72. The QCD may be a good choice for the charitably minded, because the amounts so transferred are not included in income, and that can have other tax benefits.

Gifts of property

Generally, your federal income tax deduction for your gifts to charity is the fair market value of the transfer. There’s a tax bonus when you make a gift of a long-term capital asset that has appreciated in value during the time that you owned it.

 

Here’s how it works: You plan a substantial gift and are considering selling some securities that you have owned for years which have grown significantly as the means to fund the gift. You’ll pay a long-term capital gain tax on the sale and then can pay what’s left over to your charity. If you make a gift of the securities themselves, you will pay no capital gain tax. The charity can sell the securities without incurring any tax. You also will be entitled to an income tax deduction for the fair market value of the gift of securities (limited to 60% of AGI).

 

Another creative approach is to make a gift of personal property, such as a work of art or valuable collectibles. You can deduct the current market value of a gift of appreciated personal property, but there is an important caveat: If the contributed property is related to the exempt purpose of the organization—rare books to a library, for instance—the full deduction is available. However, if the property is unrelated to the charity’s purpose—the books to a hospital to sell and use the proceeds—your deduction is limited to the property’s cost basis.

Gifts of real estate

For some people, a gift of a parcel of land held for many years that has appreciated significantly in value may be an especially attractive candidate for a gift to charity.

 

As with other appreciated property, you will have the opportunity to take an income tax deduction for your charitable contribution equal to 100% of the property’s fair market value, which, if you have held the property for some time, may be substantial. In addition, you pay no capital gain tax on the past appreciation. As a bonus, you are reducing your taxable estate by the value of your gift.

 

If you would rather take a “wait-and-see” approach, you can make the real estate gift as a bequest in your will. Although you receive no current income tax deduction, your estate receives a full deduction for the real estate’s fair market value at your death.

Gifts in trust

Fashioning your gift in trust adds a great deal of flexibility to your gift giving.

 

There are many ways to establish your trust. For example, you may set up your trust during your lifetime or through provisions in your will. You can arrange for the trust to provide you with income from the trust for your life, or income for someone whom you name in the trust document. You can provide for the gift of income to yourself or the named beneficiary or beneficiaries for a period of time or for life, followed by a transfer to the charity (a charitable remainder annuity trust, or charitable remainder unitrust); or the reverse—a gift of income to the charity followed by a transfer of assets to the named beneficiary (a charitable lead trust).

 

You may fund your trust with cash or be more creative by using the appreciated securities, real estate, or perhaps a life insurance policy. When your donation is placed in the trust, you receive an income tax deduction for the charitable part of the gift.

 

You’ll need to cross all the T’s and dot all the I’s to reap all the possible tax benefits from a charitable gift in trust. Be sure to confer with your attorney, trust consultant, and the charity itself when considering any of these creative ways of giving.

 

© 2022 M.A. Co.  All rights reserved.

Recent Articles
How do I handle high inflation?
How do I handle high inflation?

How do I handle high inflation?

April 11, 2024 / Megan Brindle

How to spot IRS imposters
How to spot IRS imposters

How to spot IRS imposters

April 04, 2024 / Ray Wills

Stocks and bonds for beginners
Stocks and bonds for beginners

Stocks and bonds for beginners

March 21, 2024 / Warren Hurt

Planning how to pay for your bundle of joy
Planning how to pay for your bundle of joy

Planning how to pay for your bundle of joy

March 18, 2024 / Courtney Shauf

Important changes made to FAFSA
Important changes made to FAFSA

Important changes made to FAFSA

March 07, 2024 / Joel Huffer

Can I have my student loans forgiven?
Can I have my student loans forgiven?

Can I have my student loans forgiven?

March 04, 2024 / Joel Huffer

Tips for using peer-to-peer payment apps
Tips for using peer-to-peer payment apps

Tips for using peer-to-peer payment apps

February 21, 2024 / Matt Sheibley

Consider these things when filing your tax return
Consider these things when filing your tax return

Consider these things when filing your tax return

February 14, 2024 / Alyssa Proctor

Quishing attacks use QR codes to lure victims
Quishing attacks use QR codes to lure victims

Quishing attacks use QR codes to lure victims

February 08, 2024 / Ray Wills

Join our e-newsletter

Sign up for our e-newsletter to get new content each month.

NOTICE: YOU ARE LEAVING F&M TRUST!

You are now leaving the F&M Trust website. Links to third-party sites are provided for your convenience. Such sites are not within our control and may not follow the same privacy, security or accessibility standards as ours. F&M Trust neither endorses nor guarantees offerings of the third-party providers, nor is F&M Trust responsible for the security, content or availability of third-party sites, their partners or advertisers.