Tax Breaks for Donors Who Don’t “Itemize”
According to IRS statistics, only one-third of taxpayers “itemize” deductions, with the rest taking the standard deduction. That means two-thirds of the people who give to worthwhile causes and institutions can’t take advantage of charitable deductions.
Tax savings aren’t why people give to worthwhile causes, of course, but they may play a role in how much supporters feel they can contribute. Here are some ideas that can help you make the most of your generosity, even if you don’t itemize:
We should add that a person’s lifetime gifts may also reduce state and federal estate taxes and future probate costs.
Charitable Bequest Planning for Donors Who Don’t Face Estate Taxes
Now that only a few thousand estates per year will owe federal estate taxes, what considerations should people keep in mind in planning a legacy to our future?
Friends who face high capital gains tax rates and the new 3.8% net investment income tax might find it helpful to accelerate charitable bequests into lifetime charitable remainder unitrusts that provide them with lifetime payments, charitable deductions and the ability to harvest capital gains inside a tax-exempt trust.
The beneficiary forms associated with life insurance, retirement accounts, certificates of deposit and other financial arrangements are often plain-vanilla, one-size-fits-all documents – especially forms made available online. But what if the forms don’t fit your planning needs?
You should contact your account manager or customer service representative if you wish to name a trust as beneficiary, or make a designation that goes beyond just the name of a person or organization. For example, it’s possible to name us to receive part or all of your IRA in exchange for a charitable gift annuity payable to a surviving spouse or others. But special instructions would need to be included on a separate page attached to the beneficiary form.
It’s important to ensure that the company understands and consents to any special beneficiary language, and to have your attorney look over these documents as well. Our staff will be glad to provide you with appropriate language for naming us as one of your beneficiaries.
What planning is needed when someone dies and leaves you cash, investments or other property?
If the person who died is your spouse, be sure to file an estate tax return – even if he or she did not have enough assets to owe federal estate taxes. By filing the return (Form 706) you can make an election to “inherit” any of your spouse’s unused estate tax exemption ($5.25 million for 2013).
The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.