Money IQ: Charitable Giving Opportunities

Money IQ

Charitable Giving Opportunities

When choosing the most advantageous charitable giving strategy, individuals must evaluate a number of factors, such as their need for current income, their desire to control and preserve assets during life and after death, their specific charitable intent, as well as important tax management issues.

Charitable estate planning techniques can help achieve many of these objectives. Donor-advised funds, family foundations, and charitable remainder trusts (CRT), charitable lead trusts (CLT) are available to individuals and their families.

A Donor-advised fund is a tax-advantaged charitable giving vehicle that offers maximum flexibility to take tax deductions and recommend grants to charitable organizations.

By definition, donor-advised funds are public charities under Section 501(c)(3) of the Internal Revenue Code, and contributions to such funds are tax deductible.

A family foundation derives its assets from the members of a single family, in which the donor and the donor’s relatives play a significant role in managing the foundation.

Family foundations can form a legacy of community involvement and responsible citizenship for generations to come. Family foundations offer potential tax and estate planning benefits.

While the tax benefits associated with charitable giving help reduce the cost of making charitable gifts, an individual’s income or wealth transfer needs determine the ability to give. To address both goals, vehicles such as CRTs or CLTs are available.

A CRT can guarantee a lifetime income stream for a donor and a spouse, while minimizing current income taxes.

Donors generally may deduct the fair market value of a charity’s remainder interest in the CRT during the year the CRT is funded. A CRT can be an integral part of a family business succession plan.

A CLT provides control over and enjoyment of a donor’s assets during the donor’s lifetime, an estate tax deduction at death equal to the present value of the charity’s future income interest, and a legacy to family heirs with potentially little or no estate tax consequences.

Including charitable giving strategies within your estate plan can be an effective way for you and your family to enjoy an income stream during their lives, earn tax savings, and to maintain a significant degree of control over your assets.

Be sure to consult an attorney or a financial advisor who can help you identify the strategies that are most appropriate for your situation.

Editor’s note: Eric Loucks has more than 30 years of experience in the financial services industry, and has been an Investment Officer with the LANB Investment Group for the past six years. Loucks grew up in Los Alamos, spent the majority of his career with Charles Schwab in San Francisco and Phoenix and returned to New Mexico six years ago.

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