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The Business Of Giving: Estate Planning


Achieving financial and charitable goals.


Oh boy, when you're dead, you don't take nothing with you but your soul - think!
- John Lennon

With this column I expect to wrap up the "ABC's" of giving. In prior installments we've covered the importance of giving, how to choose a charity and the tax benefits inherent in giving. With this one we'll focus on the benefits of planning today to give tomorrow.

Even though the primary point of philanthropy is its benefit to a charity with a mission you admire, your gift could also have a considerable impact on your finances - if you plan.
Planned giving is a way of building charity into your current financial strategy and estate planning.

If John Lennon's words mean something to you, perhaps you're ready to think about the many ways you can give to charity now and keep giving after you've passed away - with great benefit to the charity and immense tax advantages for you and your beneficiaries. Indeed, many benefits of planned giving can be reaped right now:

  • Current income tax deduction
  • Avoidance of long-term capital gains tax
  • Increased income and effective rate of return on investments
  • Reduction of estate and gift taxes

Here are ten options for deferred -- or planned -- gifts. It's always best to select the option that matches your goals. Each of these options require a statement in your will (you have a will, don't you?). Of course, all options should be explored with an estate planning attorney.

Type of gift: Bequest
Your goal: Defer a gift until after your lifetime.
How to make the gift: Name a charity in your will (designate a specific amount, percentage or share of the residue).
Benefits: Donation exempt from federal estate tax and control of your assets over your lifetime.

Type of gift: Living trust
Your goal: Make a revocable gift during your lifetime.
How to make the gift: Name a charity as the beneficiary of assets in a living trust.
Benefits: Control of the trust over your lifetime.

Type of gift: Gift of life insurance
Your goal: Make a large gift with little cost to yourself.
How to make the gift: Change ownership on a life insurance policy you no longer
Benefits: Current income tax deduction and possible future deductions through gifts to pay policy premium.

Type of gift: Outright gift of securities
Your goal: Avoid tax on capital gains.
How to make the gift: Contribute long-term appreciated stock or other securities.
Benefits: Immediate charitable deduction and avoidance of capital gains tax.

Type of gift: Gift of retirement assets
Your goal: Avoid the twofold taxation on IRAs or other employee benefit plans.
How to make the gift: Name a charity as the beneficiary of the remainder of the assets after your lifetime.
Benefits: Gift from the most highly taxed assets, leaving better assets for family.

Type of gift: Gift of real estate
Your goal: Make a gift of property no longer needed and generate an income tax
How to make the gift: Donate the property to a charity.
Benefits: Immediate income tax deduction and reduction or elimination of capital gains tax.

Type of gift: Retained life estate
Your goal: Give your personal residence or farm now, but continue to live there.
How to make the gift: Designate ownership of your home to a charity, but retain
Benefits: Valuable charitable income tax deduction and lifetime use of residence.

Type of gift: Charitable remainder annuity trust
Your goal: Secure a fixed and often increased income.
How to make the gift: Create a charitable trust that pays you a set income
Benefits: Immediate income tax deduction and fixed income for life, often at higher rate of return.

Type of gift: Charitable remainder unitrust trust
Your goal: Create a hedge against inflation over the long term.
How to make the gift: Create a trust that pays a fixed percentage of trust's assets
as revalued annually.
Benefits: Receive a variable income for life and an immediate income tax charitable deduction.

Type of gift: Charitable gift annuity
Your goal: Supplement income with steady payments that are partially tax-free.
How to make the gift: Establish a charitable gift annuity contract with a charity that pays a set amount for life.
Benefits: Current and future savings on income taxes and fixed payments for life for one or two individuals.

Type of gift: Charitable lead trust
Your goal: Reduce gift and estate taxes on assets you pass to heirs.
How to make the gift: Create a charitable trust that pays fixed or variable income
for a specific term of years; principal is retained for heirs.
Benefits: Reduces your taxable estate and the property is kept by your family, often with reduced gift taxes.

All of these programs fall under estate planning, which will helps you achieve both financial and charitable goals. Whether you're 20, 40, 60 or 80, the Minyan credo of earn, save, spend and give applies. I encourage you, no matter your age, to think about planning your legacy of goodwill and providing valuable lessons to your family through planned giving.

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