Family Cents: Making a Difference One Donation at a Time
11/28/2016 11:04AM ● Published by Jennifer Gonzalez
This time of year, charitable giving increases as people reflect on their many blessings. With our community recently being impacted by back-to-back floods, many people want to know how they can make a difference.
Charitable giving allows one the opportunity to support philanthropic organizations, assist in revitalizing communities, potentially receive income and estate tax savings and bring others
along to further propel the efforts of charitable organizations.
However, no matter how large or small the gift may be, there is one common denominator regarding charitable giving: all gifts to charity make a difference!
Methods of Giving
A “gift” is defined as voluntarily transferring property, and all property rights thereto, to another without compensation. Gifts are not limited to cash or check but may also consist of stock, real estate, art, motor vehicles, etc.
Additionally, just as there are numerous gift vehicles, there are many ways one can give to charities (often referredto as Section 501(c)(3) tax exempt organizations). Some examples of thosegifts are as follows:
• Outright Gifts
• Testamentary Bequests
• Beneficiary Designations
• Charitable Remainder Annuity Trusts
The simplest and easiest way to make a charitable donation is to make an outright gift to a tax exempt organization. An outright gift requires little time or effort, and an income tax deduction is often available to the donor for the year the gift is completed.
Testamentary bequests allow donors to make provisions in their wills and trusts to benefit certain charities. In general, a “bequest giver” meets the following criteria:
• Would rather make a gift after their lifetime;
• Does not currently need an income tax deduction;
• Does not have an available asset to donate at the current time;
• May need an Estate Tax deduction; or
• Enjoys the flexibility to change their mind at a later date.
Another effective way for a donor to make a charitable deduction is through beneficiary designations in life insurance policies, IRAs, 401(k)s, etc. Beneficiary designations allow a donor to name a charity as primary or contingent beneficiary pursuant to a plan.
This method is very convenient and the donor may specify a percentage of the account
or policy to designate to a charity.
Charitable Remainder Annuity Trust (CRAT)
For certain individuals who desire a steady income stream while benefiting from an income tax deduction, a CRAT provides a valuable gifting tool.
To establish a CRAT, an individual gives a gift of cash or property to an irrevocable trust and simultaneously designates an individual or individuals to receive streams of income for life while naming a charity as the remainder beneficiary of the trust. Upon the death of the
designated individual, the remaining property passes outright to the tax exempt organization. A
CRAT allows the donor to receive a current income tax deduction while making a philanthropic
Taxes – Do not be afraid; charities can help!
Aside from the warm and fuzzy feeling one receives from making a charitable donation, a donation to a tax exempt organization results in possible income tax and estate tax deductions.
For every $1 an individual gives to charity, that person’s adjusted gross income is decreased by 50%. In addition, most gifts of tangible personal property produce an income tax deduction as well.
There are also ways to decrease one’s estate tax liability by making provisions for tax exempt organizations.
Make a difference, one donation at a time
Charitable giving is an extremely important aspect of the world in which we live, and as stated previously, all gifts make a difference.
Just remember, no gift is too small, and if you feel exceptionally generous, remember
giving your TIME to a charity is also important.
About the Author:
Chris Foster is an attorney who practices in the areas of Wills, Trusts, Estate Administration in the Fayetteville location of Hutchens Law Firm.
Holding an AV Preeminent Rating from Martindale Hubbell, Chris earned his Juris Doctor from the University of South Carolina School of Law and his Masters of Laws in Taxation (LL.M.)
from the University of Florida, Levin College of Law. He can be reached at 910.864.6888.