Planned Giving Techniques

Planned Giving Techniques Supporting your house of worship or favorite charity (exempt entity) through gifts is a great way to reduce income and death taxes. Gifts may include cash and cash equivalents, securities, insurance policies, retirement plan assets, personal property and real property. Subject to rather liberal restrictions, you may deduct annual donations of money and short-term capital gain property to charity, up to 50% of adjusted gross income (AGI). Long-term capital-gain property is limited to 30% of AGI. In subsequent years, you may deduct the value of gifts in excess of these limitations. There is no limit on the deductibility of charitable gifts for gift and estate tax purposes; this means that remembering an exempt entity in your Will may reduce the amount of death tax your estate will pay. You may immediately deduct the value of outright gifts, and the exempt entity may immediately use the funds, yet techniques are available to further increase the benefit to you and your family, as well as the exempt entity. Philanthropic tools may involve establishing a trust, designating the exempt organization as beneficiary of your retirement plan or assigning a life-insurance policy. By assigning a life-insurance policy to the exempt entity, you may leverage your annual, deductible gifts while giving the exempt entity the use of cash value and the right to the proceeds upon your death. Every year you donate to the exempt entity the amount of the annual premium, for which you receive a deduction. The exempt entity is responsible for forwarding the premium to the insurance company. Gifts of retirement plan assets, e.g. 401(k) or Traditional IRA, offer you and your family significant tax benefits. The Charitable Remainder Trust (CRT) entitles you, or the beneficiaries you name, to receive a stream of income for a term of years or life. When the trust terminates the exempt entity receives the remaining principal. Private Foundations and Supporting Organizations offer you opportunities to support tax-exempt entities, reduce taxes, nurture civic responsibility in your family and build a legacy. You may even start a business and donate all or a portion of the shares of stock to the exempt entity. Giving techniques come in all shapes and sizes; the vehicle that is right for you depends upon your goals and situation.