What is Planned Giving

 Assets (such as real estate, business interests, property, etc.) that have grown in value are often subject to Capital Gains, State Taxes and can be assessed Net Income Tax or Depreciation Recapture. Contributing even a part of these assets can help with the tax burden and create a significant gift. It can be complex and there may be Planned Giving Tools that help. Beware of Unrelated Business Taxable Income (UBTI) that is taxable to charities. .

 A CRT allows the tax-free sale (all or partial) of an asset, business, or property while providing the donor with lifetime income, an income tax deduction today for a future gift, asset protection and potential estate tax savings. The economic benefit of saving taxes provides the donor with more lifetime income and the opportunity to leave a meaningful gift to charity. Donor’s advisors arrange Trust. 

Retirement and qualified account distributions are taxed as ordinary income and they have a death tax (Income in Respect to Decedent (IRD)) that is not included in estate tax exemptions. 

Beneficial Designations: Heirs must pay death taxes on retirement assets, so it should be the first asset a donor gives to a charity if they want to leave tax free assets to heirs. 

Qualified Charitable Distribution (QCD): A QCD allows a donor to gift up to $100,000 per year to a qualified charity after the age of 70 1/2. Better than an income tax deduction, the donor never takes receipt of the money and these gifts can potentially lower the donor’s tax bracket and save Social Security and Medicare Taxes and avoid IRD Tax to heirs. 

 Donors can leave a legacy of their own design with a percentage of their estate, all or part of an asset or a specific bequest. 

 Gifting highly appreciated stock has tax benefits over cash gifts. Donors get a deduction for the full market value and the charity can sell the stock tax-free. 

 The donor can create a charitable savings account, get an income tax deduction, invest the money, and grant the funds at their discretion to charities. 

Donors can plan for retirement by donating a lump sum and securing an income stream for life. The claims paying (income) is the responsibility of the charity’s general account and it is a liability to the organization.  Care needs to be taken when exploring a GA and other income tools could be considered.    

The donor can create their own “endowment or pledge” and give the charity contributions from an asset they allocate to a G-CLT. The donor can get an income tax deduction today for the future annual contributions to nonprofits. The donor can be the Trustee, determine the length of the trust, contribution amounts and get the asset back at the end of the term. 

Donors can transfer ownership of an existing policy or add a charitable beneficiary. Buying life insurance for a gift or pledge is not generally a good idea. If it is considered, the donor should be older than 65, willing to pay all premiums within 5 years and give ownership to the charity. All life insurance gifts should be carefully reviewed by an expert. 

Estate taxes can be mitigated or reduced using a Non-Grantor CLT that provides annual payments to a nonprofit and leaves the corpus of the trust to heirs. 

Growth in an annuity will be taxable as ordinary income to the donor and/or their heirs (no estate tax exemption (IRD)). The donor can gift an annuity or make the beneficiary a charity to avoid taxable income and taxation at death. 

A donor can commit to gifting their home / real estate after they pass away, use it during life, and get an income tax deduction today for the future gift. The Donor must maintain the property and it can get very complicated.