Charitable Planning

When does charitable planning make good sense?

Year-End Tax Planning – If your client needs additional income tax deductions, charitable giving is always an option. But if year-end is fast approaching, there may not be time to thoughtfully consider contributions and recipients.

Example: A Donor Advised Fund at The Community Foundation offers immediate charitable income tax deductions, but a flexible time horizon for giving.

Estate Planning – When the value of the client's estate exceeds the amount that can be sheltered from taxation using the unified credit, charitable giving is one of the few planning techniques available for reducing the estate taxes that will be owed.

Example: By making a bequest or other planned gift to The Community Foundation, your client can leave a legacy of caring in the local community that will live forever, while also reducing the tax burden on the family.

Retirement Planning – If your client is charitably inclined but also is concerned about depleting their retirement nest egg or is looking for a way to maintain or increase their retirement income, a deferred gift may be the answer. Some deferred gifts will guarantee a fixed income during the donor's lifetime. You can help your client determine the most appropriate asset to use for the income-generating gift (for example, appreciated stock).

Example: A client who is looking for more disposable income may find a charitable gift annuity an attractive option. This giving vehicle allows your client to transfer cash or marketable securities to The Community Foundation, take an immediate tax deduction and receive a fixed income for life. The balance of the annuity becomes a permanent asset of the Foundation at your client's death, to be used for grantmaking purposes specified by the client. Your clients may receive an immediate tax deduction on part of the gift, partial bypass of capital gains, and part of the annuity payments will be tax free.

Planning for Clients Who Own Closely-Held Companies – Some clients who are interested in charitable giving may have few liquid assets because their wealth is tied up in a closely-held company.

Example: Company stock can be donated to The Community Foundation, valued for tax purposes, and re-purchased from the Foundation by the company at fair market value. The proceeds are placed in a fund in the client's name and used for grantmaking. The client gets the satisfaction of doing something good for the community while taking an immediate tax deduction for the fair market value of the stock.

Planning for Clients Who Have Private Foundations – Once the private foundation is established, operational or grantmaking issues may arise. In many instances, The Community Foundation may be able to provide help and solutions either through a fund at the Foundation or through our consulting and advisory services.

Example: If the private foundation has not made sufficient grants to meet the minimum distribution requirement, the foundation will be subject to additional taxes. One solution is to make a grant to an advised fund at The Community Foundation through which the client can address community needs.

Example: In today's mobile society where family members often scatter throughout the country, it may be hard to ensure that the needs of the client's local community continue to be served by the private foundation. Terminating the private foundation and transferring the assets to The Community Foundation may be a good way for the client to ensure that his or her charitable intent and interests are protected and preserved.

For more information, contact Bob Roberts.