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planning matters
• WITH PVW LAW
charitable giving strategies TO BENEFIT CHARITY AND GET A TAX DEDUCTION Benefit charity and get a tax deduction at the same time. The Direct Gift The direct gift is the easiest and simplest strategy. You just write a check. Alternately, you can transfer securities. Direct gifts during your life may result in a charitable income tax deduction for you. The exact amount of the deduction and various limitations depend on the amount of the donation, your income, they type of donation, and the type of organization to which the donation is made. The use of appreciated assets to make a gift to charity is a longtime preferred strategy to make tax effective gifts. If you own a share of stock with little basis and much value, you would recognize gain on selling the asset. Instead of selling the asset, recognizing gain and then making a gift, you can transfer the appreciated asset to the charity, avoid the capital gain, and obtain a current income tax deduction.
Using Life Insurance to Make Gifts A life insurance policy can be transferred to a charity during your life. You would receive an income tax deduction equal to the fair market value of the policy transferred. You could then make gifts to the charity mary e. vandenack to pay the premiums and would likely qualify for income tax deductions for doing so. Once the policy is transferred, the gift does become irrevocable and you lose the ability to change your mind. An alternate way to use life insurance in benefitting charity is to name a charity as beneficiary upon death. Naming a charity as a beneficiary upon death will not result in lifetime income tax deductions but will result in an estate tax deduction. Charitable Gift Annuity A charitable gift annuity is a way that you can make a gift to charity of the underlying asset but continue to receive a stream of income from the asset. Typically, you transfer an asset to charity in exchange for an annuity for life. Typically, your income tax deduction for the charitable gift annuity will be the fair market value of the asset transferred less the value of your annuity interest. Charitable Remainder Trust A charitable remainder trust is a vehicle that allows you to make a gift to charity and receive an annual pay-out. This vehicle is often used with a highly appreciated asset. Transfer of the appreciated asset to a charitable remainder trust will avoid capital gain. You may also receive a current income tax deduction. Private Foundation A private foundation is a type of charitable entity that is typically set up as a family foundation for purposes of making direct charitable gifts. A private foundation might be used where a family or a small group of individuals want to remain involved in ongoing charitable gifting and maintain control over the nature and timing of gifts. This structure is often used to help cultivate philanthropy in younger generations. Significant tax benefits remain available through use of the private foundation although they differ from gifts made to public charities.
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mquarterly • FeB/Mar/aPr 2015