Planned Giving: An Expert Weighs In

‘Tis the season…to celebrate and to give back. One lasting way you can give back to a favorite charity is by making a Planned Gift. Attorney Ken Kossoff of Panitz & Kossoff, LLP is an Estate Planning, Probate and Trust Law Specialist. He is also a long-time TWCVV Board member and has been kind enough to share his expertise on Planned Giving and whether it may be an option for you.

I very much encourage clients to consider planned giving. Not all people do so. However, for those who believe their children or other family members are getting enough or have received enough during their lives, or for those people who have no children, gifts to charities are a wonderful way to leave a legacy – even if you want to do so anonymously. And for taxable estates, charitable giving allows the donor to control where their money goes, rather than leaving that to the US government to decide.

There are a number of planned giving options. Before I discuss them, I want to remind everyone that a gift during one’s life, whether in cash, appreciated stock (so the donor does not have to pay capital gains taxes), real estate or other property, is a great way not only to support a charity, but to see how the charity manages and applies your gifts so you can get some sense of how the charity will manage a planned gift that is managed and spent after your passing.

Outright Gift: In terms of planned gifts, most charities would prefer an outright gift to the charity’s general fund. This can mean naming TWCVV as a beneficiary of your trust or will, as a beneficiary of a life insurance policy, or, as discussed below, as a beneficiary of a retirement account.

Gifts from Retirement Accounts: One recent form of gift that has been allowed by legislation, but will only be available for a short time unless extended by Congress, is to allow people to make a gift from their Individual Retirement Accounts directly, during life, so that the taxpayer does not first have to take a distribution from the IRA, pay taxes on the distribution, and then make the donation. There are a lot of people with substantial retirement accounts, and when the money is taken from those accounts, it will be subject to income tax – whether taken by the account participant (the person who put money into it) or by their heirs after the participant’s death.

With a substantial estate, retirement accounts also can be hit with the estate tax, which means that a retirement account can be decimated by the income and estate tax hit. Thus, charities make good beneficiaries of retirement accounts, because charities will not have to pay income tax on the amounts received, and for taxable estates, the participant’s estate will get an estate tax deduction for the value of the gift. It is important to make sure you consult with your attorney, CPA or financial advisor, because rules regarding retirement accounts are complicated.

Charitable Remainder and Lead Trusts: One popular gift structure is called a charitable remainder trust (CRT). During life, the owner donates an appreciated asset (stocks, real estate, etc.) to a trust they create, and gets a tax deduction for the donation. The CRT pays no capital gains taxes and invests all of the donated property for the donor; if the donor had sold the assets and invested them herself, the amount invested would be after capital gains taxes that the CRT does not have to pay. During the life of the donors, or for a term of years, the income generated by the trust is paid to the donor. A CRT leaves the “remainder” – what’s left after the death of the donors or the term of years – to a charity.

Finally, for people with more than $1,000,000 to donate, private foundations can be very useful. Putting aside the good that large amounts of money can do those in need, private foundations provide families with the opportunity to involve younger generations in identifying worthy charities, and overseeing how the charitable dollars are spent.

After hearing about the many charitable options – and these are not all of them – some people employ one of them, others employ more than one, and others employ none of them and just write a check to the charity. Any decision involving a substantial gift should be made in consultation with your professional advisors.

To learn more about leaving a legacy to support the mission of TWCVV, please click here or contact president Suzanne Drace at 805-371-0417.