Charitable Giving

For the last several months enormous amounts of money has flown into charitable causes the world over and it is said that the appetite for ‘ giving ‘ is huge. This should help alleviate some of the problems of the world, especially in developing countries, and
support numerous noble causes at home.
Advisors need to present ‘Charitable Giving ‘ to their employer/groups clients, as the time is very favorable for such a discussion and the tax implications and benefits to the society at large enormous.
Below are some facts, I mention to my group clients on charitable giving, and for setting up a private foundation. Sometimes I make a few peanuts out of the giving program, but
most of the time the job is completely voluntary, and provides me with satisfaction of enhancing the cause of charity.
Charitable giving maximizes the support to the causes one cares about. Giving is one of life’s greatest satisfactions. It allows you to share your financial success with loved ones and establish a legacy to benefit future generations.
Before making a gift or donation, one needs to know some facts about charitable giving to maximize the benefits of the gift to the recipient and save undue costs.
Gifts are irrevocable. The donor must release all control and title over the asset for the gifting process to be complete. Gifts can trigger taxes. Gift taxes are levied on donor, not the recipient.
Most gifts are tax-exempt. Five gifts that do not trigger gift taxes are :
Any gift to a spouse, in any amount, because there is an unlimited marital deduction provision. Spouses should be US residents/citizens.
Gifts up to $12,000 (for tax year 2006) a year, per donor/recipient to any number of individuals. This is called annual exclusion. The gift should be available to the recipient for immediate use/possessions/enjoyment.
A spouse’s gift that follows the above rule to the same individual(s). The total annual exclusion to a married couple is, thus, $24,000. The IRS considers them to be split gifts -- $12,000 from each spouse.
Gifts to charities and/or political organizations. These may have ramifications, however, the wise donor uses caution with such gifts.
Paying medical and/or educational/tuition expenses for other person, especially when it is directly to the institution(s).
To qualify as a gift, transfer during one’s lifetime, of cash, securities, property or any other kind of asset should be permanent and irrevocable. Some gifts may require the donor to pay a gift tax. These could be :
Amounts over the annual exclusion of $12,000 or $24,000 to any individual in a single year.
Any gift of any size not available to the recipient for immediate
Use/enjoyment/possession.
C. Medical and/or educational/tuition expenses not paid directly to
Institution concerned.
If one makes a gift that is taxable, the IRS requires you to file a gift tax return, IRC form 709, and keep copies indefinitely. Filing the gift tax return does not mean one has to pay gift tax, which is at about 55% rate currently. Presently we all have a lifetime exemption equivalent to about $1 million. Hence large gifts will reduce our lifetime exemption and increase our liability to estate taxes at the time of our death, by the amount gifted. A future increase in exemption limits, a repeal of estate taxes, imposition of higher/newer state estate taxes and other provisions in the tax rules after the year 2010 are still undecided, and being discussed by the congress.
With proper planning today, one can realize immediate tax benefits, enhance the quality of life for loved ones, and increase the scope of some organizations, by gifting. Even with modest amounts, one can create a foundation or join many of the foundations already established for charitable giving programs. Creative gift giving can lower the overall taxes for the donor, and benefit loved ones and favorite causes. Gifts or transfers of assets to minors (UGMA/UTMA), children, grandchildren have been popular for a long time. New education and college savings plans have extended the scope of giving
even further. In addition to children/grandchildren, gifts can be designed to take care of
the long-term needs of parents/grandparents on a tax-deductible, tax-favorable basis.
To secure current and future income for yourself and loved ones and enable one to leave a philanthropic legacy, one can set up a tax-deductible annuity program. Many such legitimate and excellent programs are available. A qualified tax attorney, a financial planner, or a competent accountant can provide further insight into charitable giving.
The paperwork on these programs usually are simple and easy to execute. For complicated estates, charitable remainder lead trusts and other instruments may be designed to manage funds in tax-efficient ways to provide the maximum benefit to all concerned.