Planned Charitable Giving

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Although writing a check at year-end is one of the most common ways to give to charity, planned giving may be even more effective.

What is planned giving?
Planned giving is the process of thinking strategically about charitable giving to maximize the personal, financial and tax benefits of your gifts.

Gifting strategies 

Outright gift
An outright gift is an immediate gift for the charity’s benefit only. It can be made during your life or at your death via a will or other estate-planning document.

Charitable trust
A charitable trust lets you split a gift between a charitable and a noncharitable beneficiary. The two main types of charitable trusts are a charitable remainder trust and a charitable lead trust. A typical charitable remainder trust provides an annuity or unitrust interest for one or two persons for life. An annuity interest provides fixed payments, while a unitrust interest provides for payments of a fixed percentage of trust assets (valued annually). At the end of the trust term, assets remaining in the trust pass to the charity. With a charitable lead trust, the charity gets the first (lead) unitrust or annuity interest, and the noncharitable beneficiary receives the remainder interest at the end of the trust term.

Charitable gift annuity
A charitable gift annuity provides a fixed annuity for one or two persons for life. It’s easier to establish than a charitable remainder trust because it doesn’t require a format trust document.

Private foundation
This is a separate legal entity you create that makes grants to public charities. You and your family members, with the help of professional advisors, run the foundation — you determine how assets are invested and how grants are made. But in doing so, you’re obliged to follow the many rules and regulations governing private foundations.

Donor-advised fund
Similar but less burdensome than a private foundation, a donor-advised fund is an account held by a charity to which you can transfer assets. You can then advise, but not direct how your assets will be invested and how grants will be made.

Tax benefits
Your gift can result in a substantial income tax deduction in the year you make the donation, and it may also reduce capital gains and estate taxes. With a charitable remainder trust, you generally receive an up-front income tax deduction equal to the estimated present value of the interest that will eventually go to the charity.

Charitable contribution deductions are generally limited to 50% of your adjusted gross income (AGI), or 30% or 20% of AGI depending on the type of charity and the property donated. Disallowed amounts can generally be carried over and deducted in the following five years, subject to the percentage limits in those years. Your overall itemized deductions may also be limited based on your AGI.

The charity must be a qualified public charity in order for you to enjoy these tax benefits. Not all tax-exempt charities are qualified charities for tax purposes. To verify a charity’s status, check IRS Publication 78, or visit www.irs.gov.

 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016. 

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