Charitable Giving

Charitable giving shouldn't happen by accident. Each gift should fit the donor's needs and support the causes they care about.

Outright Gifts

The most common form of charitable contribution is the outright gift of cash or other assets made to a charitable organization during the donor's lifetime. Outright gifts to charity can be made in a variety of forms, depending upon the size of the gift and the objectives of the donor. Following is an overview of some of the options available:

Cash

Gifts of cash enable a donor to claim a current tax deduction of up to 50% of their adjusted gross income in any one year when they itemize deductions, with the excess, if any, carried forward for an additional five years.

Securities

Gifts of appreciated securities offer important tax advantages, since their full fair market value is deductible as a charitable contribution up to 30% of the donor's adjusted gross income each year when they itemize deductions. Like gifts of cash, deduction amounts that exceed the limit can be carried forward for up to five additional years. The donor does not have to pay federal or state capital gains taxes on the appreciated portion of the gift. After the Foundation liquidates the securities, the full value of the gift is available to support the donor's charitable goals.

Real Estate

The Community Foundation can accept a gift of a house or other personal residence, farm, commercial buildings, and income-producing or non-income-producing land. A gift of real estate that a donor has owned for more than a year entitles them to the same federal tax advantages as those for gifts of securities - a tax deduction for the fair market value of the property - while allowing the donor to avoid paying capital gains tax.

Life Insurance

Life insurance makes it possible for virtually everyone to make a meaningful gift. Policies that are no longer needed for their original purpose can make excellent gifts when given to the Community Foundation. Your client can either designate the Community Foundation as the beneficiary, or they can gift the policy during their life and likely receive an immediate income tax deduction.

Retirement Assets

Like life insurance, retirement assets can be easily gifted to the Community Foundation at death. This can be done by changing the beneficiary designation for the retirement asset. In addition, a donor can reduce income taxes payable by their family - in addition to saving estate taxes - by giving retirement assets to the Community Foundation. For example, if a donor were to give a $100,000 IRA to their children at death and another $100,000 of assets to the Community Foundation, the donor's children would have to pay income taxes on the IRA (in addition to any estate taxes that might be owed). By merely giving the IRA to the Community Foundation and the other assets to their children, all of the income taxes are avoided on the IRA. This income tax benefit can be important when planning the distribution of a pension plan, profit sharing, Section 401(k) and Section 403(b) plans and IRAs. Special rules apply to making charitable gifts of these assets during life.

 

Planned Gifts

Planned gifts can provide your clients with many benefits. These benefits can include an immediate charitable income tax deduction (even though the charity may not receive any property until some future date), avoidance or deferral of capital gains taxes on appreciated property used to fund the gift, retained and possibly increased income to your client or others they care about, and, last but not least, support for charity.

There are a number of different planned gift options, each of which is useful in certain circumstances. The goal is to find the planned gift that is most advantageous to your client, to all those who are significant to him/her, and to the causes he/she support. The Community Foundation's staff can provide assistance in creating a planned gift that's right for your client.

Planned gifts include:

Charitable Bequest by Will

One of the simplest ways for your client to provide to their community is to establish or add to a fund at the Community Foundation through a bequest in their will or by providing for a distribution from their trust. This is a simple option that allows them to enjoy all of their assets while they are alive, yet support their favorite causes at death.

Charitable Gift Annuity

Your client may also establish a charitable gift annuity with the Community Foundation. This is an agreement between your client and us wherein we agree to provide the annuitant (usually your client) a determined amount for life, in exchange for your client's gift. Unlike most other retained income arrangements, a gift annuity is not a trust. Rather, it is a contract between the Community Foundation and your client that is secured by our assets.

Charitable Remainder Trust

Giving through a charitable remainder trust allows your client (or someone they select) to receive income for life, knowing that whatever remains will benefit their community. Your client can do this by placing cash, property, or other assets into a trust that distributes to the "income beneficiary" an annual income for life or for the duration of the trust. Your client receives an immediate tax deduction for the present value of the gift in the year the gift is made. After death or the end of a specified trust term (up to 20 years), the remainder of the trust transfers to a fund your client has named at the Community Foundation. Grants from the fund will be made in accordance with their interests.

Charitable Lead Trust

A charitable lead trust enables your client to make significant charitable gifts now while transferring substantial assets to their beneficiaries later. It works like this: A trust is set up from which the Community Foundation receives annual payments for your client's life or for a specified number of years. These funds may be distributed to charities your client specifies or be added to a donor-advised fund. When the trust terminates, the trust principal is returned to your client or distributed to their children or others they may designate. The trust assets pass to the recipients at reduced tax cost, sometimes even tax-free.

Retained Life Estate

Your client can turn their property's value into community good - while receiving financial and tax benefits - by making a charitable gift of real estate through the Community Foundation. Your client can continue to live in and fully enjoy their home (or vacation property) as long as they like while still giving the future ownership of it to the Community Foundation. This is called a retained life estate. The gift of the "remainder interest" is a charitable contribution in the year the gift arrangement is made, which may result in a substantial income tax charitable deduction. When the life tenancy terminates, the Foundation becomes the owner of the property. The proceeds of the property's sale will go into a charitable fund your client establishes at the Foundation.

If you believe you have a client that would benefit from one of these giving options and would like further details, please contact the Community Foundation's staff at 812-427-9160.