Top 4 Charitable Giving Strategies

If your charitable giving is limited to cash donations to organizations and causes you love, you may want to take a more strategic approach. Who wouldn’t want to pay less in taxes while at the same time making your charitable giving go further and do more than you ever dreamed!

The TOP 4 Charitable Giving Strategies

#1 Beneficiary Designations

Donors can designate a charitable organization as a beneficiary of their will, retirement plan, individual retirement account (IRA), life insurance policy, annuity, or any other asset that passes by contract, such as a payable on death account. The charity can be the primary beneficiary or one of several beneficiaries. Accounts with named beneficiaries are generally not subject to probate; however, designating a charitable beneficiary under a will is subject to probate. Distributions of retirement assets that would be subject to income tax, such as from a traditional IRA, are also exempt from income tax when passing to a charitable organization.

#2 Charitable Remainder Trust

If you want to make a future gift while retaining the right to income from the assets during your lifetime, you could consider a Charitable Remainder Trust. This is an irrevocable trust funded with either cash or property. You retain the right to an income stream that is either a fixed amount or a fixed percentage, such as with a Charitable Remainder Annuity Trust (CRAT) or Charitable Remainder Unitrust (CRUT). Income is paid for a number of years or for the life of the income beneficiary. When the trust ends, the assets pass to the charitable entity. You may be entitled to a tax deduction when you transfer assets to the trust. Also, by donating highly appreciated property to the trust rather than selling it and donating cash, you avoid incurring capital gain tax on the sale of the property since the trust, not you, owns the property. Keep in mind that such a trust is irrevocable, so you cannot terminate it or change the terms (other than retaining a power to change charitable beneficiaries). Also, the assets in the trust will not be available for your heirs.

#3 Charitable Lead Trust

Like the CRAT or CRUT, the Charitable Lead Trust makes periodic payments for a term of years or for life, but the payments go to a charitable entity rather than to the donor or another individual. When the trust ends, the remaining assets return to you or pass to other noncharitable beneficiaries, such as your children. Depending on how the trust is structured, you may be entitled to an income tax charitable deduction when assets are transferred to the trust.

#4 Donor-Advised Fund

If you would like to make multiple gifts but are tired of the paperwork, consider creating a donor advised fund. This is a charitable fund managed by a community foundation or a charitable entity created by a bank or other organization.

Contributions to a Donor-Advised Fund are tax deductible; however, assets transferred to the fund do not need to be immediately distributed to a charity. You may retain the ability to make recommendations for distributions to charitable beneficiaries; helpful if you want to take a charitable deduction but are not yet sure which charities you want to support.

These charitable giving methods may allow you or your heirs to benefit from your assets while providing needed funds to charity during your lifetime. If any of these options interest you, contact us now info@stewardshipworks.org to see if which of these planned gift strategies can benefit your overall estate plan.

How the Wealthy Can Pay Less Tax in 2019

The Tax Cuts and Jobs Act was signed into law in late 2017, effectively lowering the tax bracket for America’s highest earners from 39.6% to 37%. Most us, however, are somewhere between 22% and 32% and we don’t pay taxes on everything we make. Nonetheless, the new law has made us all pause and rethink how we save and give. We’re looking at creative ways to to protect what you have and bring down taxes.

Here’s what the wealthiest among us are doing:

  1. Not waiting until the end of the year to plan; 
  2. Having regularly scheduled meetings with their financial advisor;
  3. Owning land that can be taxed as a “conservation easement” or green space;
  4. Owning stocks and working with their investment advisor to actively manage capital gains and losses for tax advantages;
  5. Structuring a limited liability company, LLC, to manage investments and deducting management fees as a business expense;
  6. Taking advantage of the temporary doubling of exemptions (until 2025) for estate and gift deductions to lower taxable income;
  7. If you’re a business owner, consider a defined-benefit plan (like a pension) to set aside more tax-deferred money than you can in a regular 401(k).

Of course, these ideas to protect and grow income by lowering tax liability may not work for your particular income and tax bracket, but it may pay to find out now. There’s still time to weigh options and make changes. Call our office for an appointment.

PS: You can still take a deduction for charitable giving, but you have to itemize your taxes and the TCJA nearly doubled the standard deduction to $12,000 for individuals and $24,000 for married couples, making it a higher bench over which to climb.

Time For Stewardship

With recent news almost totally focused on the 2018 hurricane season and catfights between Democrats and Republicans, we’d like to share a bit of good news about the state of charitable giving and remind our friends that we are barreling toward another tax season.

laboratoryRegardless of our political distractions, we’re still a generous, big-hearted country when it comes to individual giving. It seems that we as a country are on track for a slightly higher percentage increase in 2018 than last year—a banner year for charitable giving. As individuals, we give about 70% of all charitable donations in the U.S. with the balance coming from estates, foundations, and corporations.

The passage of tax reform legislation could change the landscape of charitable giving for some households, but the majority of our clients have benefited from a booming stock market and are enthusiastic about exploring meaningful charitable giving opportunities.

Donor-Advised Funds, where donors receive an immediate tax benefit and can make suggestions about where the money goes, is the #1 rising trend. Now is the time to get in touch with us about adding to, or participating in, donor-advised funds for this tax year.

As always, let the real meaning of “stewardship” remain the driving force for your charity and reason for giving.