Will the Bubble Burst?

The stock market has been on a tear this year, reaching 17000 (July 3, 2014) less than eight months after closing above 16000 (November 21, 2013).  Before liquidating all your gains to avoid that sinking feeling in the event the market tanks, consider locking in the appreciation with a charitable gift.  There are several satisfying options that might allow you to sleep better:

  • Make your year-end gifts early using stock or mutual fund shares that you have held more than one year.  You’ll be entitled to a deduction for the full fair market value on the date of the gift and avoid the capital gains tax, and possibly the 3.8% net-investment income tax, that you’d owe if you sold the shares.

  • Use shares to fund a charitable remainder trust and retain income for life from the full value of your gift.  You can choose to receive a fixed income equal to a minimum of 5% of the value of your gift (annuity trust) or a fluctuating income equal to at least 5% of the annual value of the assets in the trust (unitrust).  You’ll also be entitled to an income tax deduction for a large portion of what you contribute.

  • Establish a charitable gift annuity that will provide fixed payments for life for one or two beneficiaries.  The exact amount of the annuity payment depends on the age or ages of the recipient(s).  A portion of the annuity received each year will be favorably taxed capital gains.



Building a Better Society through Your Living Trust

Many people have incorporated living trusts into their estate plans, but did you know that it’s possible to include creative charitable gifts in your trust?  Consider:

Lifetime gifts – You can direct the trustee to pay a specified amount or percentage of the income from the trust to charity each year.  You would be entitled to an income tax charitable deduction for any amount we receive.  Or simply tell the trustee to make a payment for our benefit and receive a deduction for whatever amount we receive.

Distributions at death – Your trust can provide that certain assets or a portion of your estate will pass to us at death, similar to a bequest in a will.  Your estate will be entitled to a charitable deduction.

Lifetime income for family – You can direct that at death, a charitable remainder trust be created with some or all of the assets in your living trust.  Your spouse, children or anyone else you name can receive income for life, with assets eventually passing to us.


Where to Begin

Before consulting your attorney about drafting or updating your will, ask yourself the following questions:

  • What does my estate include (cash, real estate, insurance, investments, deferred income)?
  • Will my estate be subject to estate tax?  How can I avoid or reduce the tax?
  • Do I have any assets that require special treatment, such as a closely held business?
  • Do I want to leave everything to my spouse?  Should I leave my estate outright or in trust?
  • What happens if my spouse and I die together?
  • Do I need to name a guardian for my children?
  • Besides my spouse and children, is anyone else dependent upon me for care (aged parents, friends)?
  • Is there some way to continue supporting, after my death, the charitable organizations I assisted during my lifetime?

Your attorney will want answers to these and other questions in order to draft the right documents for you and your situation.


Rating Your Risk Tolerance

The degree of risk you’re willing to take is one of the most important factors in deciding how to build and protect your estate.  Investment choices range from low-risk savings bonds, money market accounts and CDs, to average risk mutual funds, high grade corporate bonds or preferred stocks, to those with high risk (options, commodity futures, oil and gas ventures).

Investment advisers consider an investor’s age, risk tolerance and assets in developing a portfolio.  Weigh your need for building an estate with the need for keeping your assets secure.  The key is finding the mix that won’t sacrifice future buying power for security or jeopardize your security for quick growth.

Charitable gift annuities provide a way for donors to lock in gains from appreciated securities, secure steady payments for one or two lives and satisfy philanthropic goals.


Copyright © R&R Newkirk. All rights reserved.



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.