Planned Giving

September 2017

Every true believer desires to give to the work of the Lord. Giving is part of our worship to God. Believers give as an exercise of their faith. God has chosen giving to “prove the sincerity of your love” (II Cor. 8:8). Giving is a form of sacrifice. “For God so loved the world, that he gave his only begotten Son” (Jn. 3:16). Believers give because they love God; as He loved us and made the greatest sacrifice for us by sending His Son into the world to give Himself as a sacrifice. God does not tax us but, instead, he desires us to give with a cheerful heart. Simply because we understand the purpose of giving, it does not always mean that we know all the methods of giving that are available to us. True believers understand tithing, and many also give offerings above their tithes.

Fortunately, there are many gifting strategies available in the U.S. that can accomplish several beneficial goals in giving—all made permissible by our income tax legislative rules. As we look at philanthropy, we will see that donors who use these various strategies fund universities, hospitals, and many social and community programs, including churches. Because giving is very personal, we do not suggest that you give to gain income tax benefits; however, if you are led by the Lord to give, incorporating a planned giving approach may result in income tax and/or estate tax savings.

Despite its perceived simplicity, gifting remains one of the most misunderstood financial concepts. Confusion in this area has led to under utilization of gifting strategies and potentially higher taxes owed by taxpayers each year. From misconceptions about potential taxes owed by the donor or recipient, taxpayers continue to get tripped up on how best to leverage this opportunity. Gaining a clear understanding of the mechanics of gifting may help reduce both future estate taxes and current income taxes for the donor while also benefiting the recipient.

When choosing a planned giving strategy, you have to look at contribution limits, duration, complexity, and donor control over the funds. These are just a few of the characteristics that you should consider before making a planned gift. We recommend that you also speak to your attorney and income tax advisor for advice on your specific circumstances.

Direct Donations

Direct donations are cash or property donations given directly to a charity, church, or any 501(c)(3) non-profit corporation. Property can consist of stocks, bonds, mutual funds, and other property, subject to the organization’s board of directors’ approval. Generally, there is a charitable income tax deduction for lifetime cash donations but limited to 50 percent of adjusted gross income. Any unused deduction can be carried forward for up to five years. For lifetime property donations, it is currently limited to 30 percent of adjusted gross income. Any unused deduction can be carried forward for up to five years.

Charitable Bequest

A charitable bequest is cash or property donated at donor’s death. The donor makes this bequest through his or her will, trust, or beneficiary designation. Oftentimes, individuals and small business owners own securities, annuities, and life insurance and seek to use all or a portion of the value at their death as a bequest to their church or favorite charity. A charitable estate tax deduction for the full market value of the donation is available at death.

Charitable Gift Annuity

A charitable gift annuity is a gift made during the donor’s lifetime to a charity in exchange for the charity’s promise to make a fixed, lifetime payment to donor and/or other individual(s). At the end of the contract or death of the donor, the remainder of the gift value is retained by the charity. The gift can be cash, securities, or other assets, if the charity elects to accept it, i.e. real estate property. Typically, the minimum gift size is $10,000. The duration of the annuity arrangement can be for a set number of years or until the death of the donor. Charitable gift annuities offer income tax deductions, income streams that may have income tax savings benefits, and interest rates that may pay more than certificate of deposit rates.

The gifting strategies mentioned in this article are very common and very simple to implement and use. Next month, we will explain some of the other permissible gifting strategies. These strategies are more complex and will require the guidance of your income tax advisor and attorney. My goal is to make you aware of them so that you can then explore which strategy, or combination of strategies, is most advantageous to you.

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