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How Can My Charity and I Both Benefit from My Gift?
One popular estate planning technique is planned giving. Making a donation to a qualified organization provides some very attractive benefits.
You could receive an immediate income tax deduction. With a properly structured gift, you could realign your investment portfolio without paying capital gains tax on appreciated property. Another strategy may allow you to pass your estate on to your children while avoiding both probate and estate taxes.
To Whom Can You Give?
You’re free to give your property to whomever you choose. To retain the tax advantages associated with planned giving, however, your gift must be made to a qualified organization.
The vast majority of donations are made to charitable organizations. To qualify, a charitable organization must have been organized in the United States, be operated on a strictly non-profit basis, and not be politically active.
In addition to common charitable organizations, you may give to veterans’ posts, certain fraternal orders, volunteer fire departments, and civil defense organizations.
What Can You Give?
You can contribute almost anything to a qualified organization. The deduction limits are more restrictive for gifts other than cash, but you are free to give almost any property of value.
What Are the Gifting Strategies?
In addition to making an outright donation, there are a number of different gifting techniques you can use.
You can give life insurance. This enables you to give a large future gift at a relatively modest cost.
A charitable remainder trust allows you to retain an income interest in a future gift. With a charitable lead trust, you can give the income to the charitable organization and retain the principal for your heirs.
What Are the Benefits?
Making a planned gift can provide some significant benefits.
A charitable contribution may qualify you to receive a significant current income tax deduction.
Your deduction for an outright gift will equal the value of your gift up to certain generous limits. You can carry forward any gift amount that exceeds these limits for up to five years.
With a charitable lead trust, you can pass an appreciated asset onto your heirs with little or no estate taxes.
By using a charitable remainder trust, the Trustee can sell highly appreciated gifted investments and reinvest the proceeds to generate income without paying capital gains tax. Thus, a properly planned gift could enable you to realign your investment portfolio without incurring any current income taxes. That could allow you to diversify your holdings and even increase your cash flow.
The only thing you can’t do is take back your gift. You can’t start selling assets and then pocket the money. But you can change the charity that will eventually receive your gift.
Whatever gifting strategy you choose, planned giving can be very rewarding. It’s wonderful to see your gift at work and to receive tax benefits as well.
The information provided here is to assist you in planning for your future. Any analysis is a result of the information you have provided. Proper tax and legal advice should always be obtained.
© 2006 Emerald Publications
Joe Swanson, Minnesota Financial Advisor.
401k, ESOP, 403B, Investments, Insurance
• Principal Financial Group,
• 11100 Wayzata Blvd, Suite 161
• Minnetonka, MN
• 55305
• Phone: (952) 277-4259Toll Free: 800 277-7095
• Fax: (952) 277-4301
• www.joeswanson.com
• swanson.joe@principal.com
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Joe Swanson is licensed in Minnesota Wisconsin Oregon and Ohio (additional states can be made available) to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), securities and if applicable - investment advice. This site is not a solicitation of interest in any of these products in any other state. IMPORTANT CONSUMER INFORMATION: Joe Swanson may only transact business in a particular state after licensure or satisfying qualifications requirements of that state, or only if (s)he is excluded or exempted from the state's registration requirements. Follow-up, individualized responses to consumers in a particular state by Joe Swanson that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, shall not be made without first complying with the state's requirements, or pursuant to an applicable state exemption or exclusion. For information concerning the licensure status or disciplinary history of a broker-dealer, investment advisor, BD agent or IA representative or any financial institution (s)he represents, contact your state securities law administrator. Principal Life Insurance Company, Des Moines, IA 50392. Principal Life maintains certificates of authority to transact insurance in all 50 states. Its NAIC identification number is 61271
