Monthly Planning Tips Archive

IRA Gift Opportunity Expected to Be Renewed

Both houses of Congress have voted to extend through the end of 2010 the provision allowing IRA owners age 70½ and older to make gifts to qualified organizations of up to $100,000.   Renewal of this gift opportunity won’t be official until the House and Senate versions are reconciled by a committee and the final act signed by the president. Income tax deductions are not available for IRA “qualified charitable distributions,” but donors may save taxes anyway where gifts take the place of required minimum distributions, which are generally 100% taxable.   For 2009 there was a waiver of required distributions, but that moratorium has not been continued for 2010.

Here are some points to keep in mind about IRA gifts:

• Only the IRA trustee can transfer gift amounts to a qualified organization.  If IRA owners withdraw funds and then contribute them to charity separately, amounts withdrawn will be included in the donor’s gross income.

• IRA gifts cannot be made for charitable gift annuities, charitable remainder trusts or to donor advised funds. 

• Beneficiaries of inherited IRAs can make gifts if they have reached the age of 70½.

• Other plans, such as 403(b) or 401(k) plans, are not eligible, but you may be able to convert part or all of these arrangements to an IRA.

• If you are under age 70½, it still makes sense to use an IRA (or any other retirement account) to make charitable gifts from your estate.  These contributions escape all “death taxes” and income taxes, as well, that ordinarily are payable by your estate or heirs.

Please call our office if you are interested in making a qualified IRA gift.  We will need to provide you and your IRA custodian with important information and ensure that you receive appropriate tax receipts.

 

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Investors Welcome Back Bull Market . . . and Capital Gains Concerns

Investors recently marked the one-year anniversary of the bull market that began March 9, 2009.  That 12-month period saw a 61% increase for the Dow Jones Industrial Average (68% for the S&P 500 index) and created a “problem” not seen lately by many stock owners:  capital gains tax exposure.

Many philanthropic Americans know that appreciated securities, owned more than one year, can be ideal for charitable giving.  Donors can deduct the current fair market value of stocks, bonds or mutual funds they contribute, not just what they paid originally, and save again by avoiding any tax on their long-term capital gains.  Historically, many donors have also found it satisfying to cash in on investment success by using appreciated stocks to fund charitable gift annuities. 

Take the case of Charlotte, age 73, who is in a 28% federal tax bracket.  Charlotte bought some computer stock for $6,000 in January 2009.  Today that stock is worth $10,000, but if she sells there will be 15% capital gains tax on her $4,000 profit.  Charlotte decides the time is right for an important gift and asks for an illustration of the benefits of giving the stock for a charitable gift annuity. 

Based on her age, Charlotte would be entitled to an annual payout of 6%, which works out to $600 a year, plus a charitable deduction of $4,290.    Furthermore, $290 of her annual payments will be tax free during her life expectancy.  What about the $4,000 capital gain?  Only $2,284 will be reportable by Charlotte, but that amount can be spread out over her life expectancy – at just $165 a year.  Summing up, here are her gift annuity benefits:

• $600 annual lifetime payments – with only $145 taxed at her 28% tax rate; $165 at 15% (the current capital gains rate) and $290 tax free;

• $1,716 of taxable gains totally avoided;

• $4,290 charitable deduction, creating tax savings of $1,201 in a 28% tax bracket.

If you, like Charlotte, have had recent success in the stock market, we’d be happy to discuss how those investments can be harvested in a tax-wise, satisfying manner, through a charitable gift annuity.

 

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Planning a Will That Makes You Feel Good!

Can will-making be a pleasurable experience? You can make your will far more than just a dry, legal document. Wise planning and creativity will enable you to:

• Leave special items to special people...the cuckoo clock to Jack, who tried to catch the bird as a child...the handpainted china to Jennifer, who always treasured it.

• Help a friend. Emily is leaving us funds for the purpose of establishing a gift that will provide income to her best friend, Susan, who has been struggling financially, with eventual assistance for our programs.

• Establish a memorial in the names of your parents or other loved ones. Many gifts and bequests we receive are made as tributes to the wonderful people who influenced donors’ lives.

• Encourage a young person. Joanne is making bequests that will be earmarked for a college fund for her young grandchildren.

• Leave the world a better place. Your bequest can express your concern for humanity and make a lasting difference in the lives of future generations.

For assistance in planning your own legacy, please call our office. We can provide you and your attorney with our correct legal name and ideas for benefiting specific programs.

 

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Customize Your Estate Plan with a Trust

Rather than make a bequest in your will, you may find it extremely advantageous to create a lifetime trust under which you will be paid annual benefits for life; the trust assets will benefit our programs only after your death.  Consider the benefits:

• A 2010 income tax deduction is available if you create a qualified charitable remainder trust this year.  The amount of the deduction will depend on your age and the amount of income you want to receive each year.

• You can transfer stocks or real estate to the trust without losing anything to capital gains taxes on your paper profit.

• You can choose between fixed payments (an annuity trust) or a variable income plan (unitrust) and decide the amount of income you will receive each year.  In many cases, your income will be favorably taxed. 

• The cost of settling your estate will be minimized and there may be valuable estate tax advantages.

• The trust you establish for our benefit generally can be tailored to meet your individual financial needs and objectives, including supplemental retirement savings, assistance for friends or relatives and funding for a grandchild’s college education.  Please call our office for details.

 

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