Michigan Estate Planning Blog

Should I have a Charitable Trust in My Estate Plan?

 

Charitable trusts can be created to provide a reliable income stream to you and your beneficiaries for a set period of time, says Bankrate’s recent article entitled “What is a charitable trust?”
Establishing a charitable trust can be a critical component of your estate plan and a rewarding way to make an impact for a cause you care deeply about. There are a few kinds of charitable trusts to consider based on your situation and what you may be looking to accomplish.
Charitable lead trust. This is an irrevocable trust that is created to distribute an income stream to a designated charity or nonprofit organization for a set number of years. It can be established with a gift of cash or securities made to the trust. Depending on the structure, the donor can benefit from a stream of income during the life of the trust, deductions for gift and estate taxes, as well as current year income tax deductions when the assets are donated to the trust.
If the charitable lead trust is funded with a donation of cash, the donor can claim a deduction of up to 60% of their adjusted gross income (AGI), and any unused deductions can generally be carried over into subsequent tax years. The deduction limit for appreciated securities or other assets is limited to no more than 30% of AGI in the year of the donation.
At the expiration of the charitable lead trust, the assets that remain in the trust revert back to the donor, their heirs, or designated beneficiaries—not the charity.
Charitable remainder trust. This trust is different from a charitable lead trust. It’s an irrevocable trust that’s funded with cash or securities. A CRT gives the donor or other beneficiaries an income stream with the remaining assets in the trust reverting to the charity upon death or the expiration of the trust period. There are two types of CRTs:
A charitable remainder annuity trust or CRAT distributes a fixed amount as an annuity each year, and there are no additional contributions can be made to a CRAT.
A charitable remainder unitrust or CRUT distributes a fixed percentage of the value of the trust, which is recalculated every year. Additional contributions can be made to a CRUT.
Here are the steps when using a CRT:
Make a partially tax-deductible donation of cash, stocks, ETFs, mutual funds or non-publicly traded assets, such as real estate, to the trust. The amount of the tax deduction is a function of the type of CRT, the term of the trust, the projected annual payments (usually stated as a percentage) and the IRS interest rates that determine the projected growth in the asset that’s in effect at the time.
Receive an income stream for you or your beneficiaries based on how the trust is created. The minimum percentage is 5% based on current IRS rules. Payments can be made monthly, quarterly or annually.
After a designated time or after the death of the last remaining income beneficiary, the remaining assets in the CRT revert to the designated charity or charities.
There are a number of benefits of a charitable trust that make them attractive for estate planning and other purposes. It’s a tax-efficient way to donate to the charities or nonprofit organizations of your choosing. The charitable trust provides benefits to the charity and the donor. The trust also provides upfront income tax benefits to the donor, when the contribution to the trust is made.
Donating highly appreciated assets, such as stocks, ETFs, and mutual funds, to the charitable trust can help avoid paying capital gains taxes that would be due if these assets were sold outright. Donations to a charitable trust can also help to reduce the value of your estate and reduce estate taxes on larger estates.
However, charitable trusts do have some disadvantages. First, they’re irrevocable, so you can’t undo the trust if your situation changes, and you were to need the money or assets donated to the trust. When you establish and fund the trust, the money’s no longer under your control and the trust can’t be revoked.
A charitable trust may be a good option if you have a desire to create a legacy with some of your assets. Talk with an experienced estate planning attorney about your specific situation.
Reference: Bankrate (Dec. 14, 2021) “What is a charitable trust?”

Handing Over The Reins: Tricks To Converting Foundations Into Donor-Advised Funds

To run the charitable foundation is to have absolute control and discretion over the charity, its goals, its practices, and all the decisions regarding where the money is to go. While this can be richly rewarding, it can be exhausting. Now there is a popular alternative to a full foundation and a move to collapse back into what is known as a donor-advised fund. That noted, there are some tricks to the transfer and limitations to the fund worth understanding. If you or your family run a charitable foundation and are considering this alternative, The Wall Street Journal had a few points to consider in a recent article titled “Risks to Consider With Donor-Advised Funds.” First, what is a donor-advised fund? Unlike a foundation that is run much like a business, a fund is much more like an investment vehicle run by an expert. As the name suggests, donors give to the fund and then advise it how to ultimately donate the money it takes in. There are some ways to more carefully form the fund so as to grant greater or lesser control. Ultimately, however, it is simply a different kind of animal than a foundation. It also means that there are far fewer administrative burdens (especially on you as the donor), far fewer fiduciary requirements, fewer taxes, and greater privacy. The original article has a helpful chart you might peruse to understand the differences. So what are the problems? First, to transfer from a foundation to a fund means coming to terms with the new benefits and shortcomings of the fund, and that may be a family activity. Second, the transfer will mean winding up the foundation and this ought to be done with care. State regulations can affect how to wind up the foundation, or how and when to give notice that you are doing so, so there is a bit of red tape. Then there are the foundation assets themselves. What if some of the assets are illiquid or otherwise difficult to move? Indeed, you need to at least leave enough assets in the foundation to let it get through the expenses involved in the windup. There are a few more issues addressed in the original article, and even more besides that may affect your particular foundation and/or assets. These are certainly issues to think about, but for many the message is also that there are options out there if the foundation has gotten out of hand. Either way, how does the foundation or the donor-advised fund fit into the overall plan?

Reference: The Wall Street Journal (April 13, 2014) “Risks to Consider With Donor-Advised Funds”

For more information, see www.jerryreiflawyer.com

Charity on “Spend-Down” Mode

Sometimes good things are built to last, and sometimes you decide it has run its course. This seems to be the growing attitude amongst philanthropists tending to the family foundation. In fact, today's charitable foundations seem to be shifting from maintenance for longevity to spending down and winding up. This may give you pause to consider your own charitable giving, whether you are a donor to various foundations or, should you run one, to the future of the foundation itself. This trend was identified in a recent article in The Wall Street Journal titled “The Rise of Spend-Down Philanthropy.” The hard numbers in the article come from an analysis by the Bridgespan Group which found a marked jump in spend-downs. As reported there, “About 50 years ago, only 5% of the total assets of America's largest 50 foundations were held by spend-downs. In 2010, that number had risen to 24%, according to Bridgespan Group in Boston.” Why spend down? Well it varies from foundation to foundation, but then it also relates to the purpose and nature of the foundation in the first place. The foundation typically has a philanthropic goal set up at its creation, but that goal may not carry forward past the original creator. This is especially true in a family foundation and, eventually, mission drift becomes a sustainability issue. The family may even not grow around the goal in the way originally hoped – they have lives, after all, and may not have the ability to keep up the foundation – and so the longevity may be in question due to logistics rather than the goal. A spend-down mode should be meaningful to the donor, too. It means funds are going out the door and into the world, potentially having real effects today. Then again, and without a careful hand guiding the course, that doesn’t mean the cause is getting the biggest bang for its buck. These charities may tend to be less inquisitive and less thoughtful out of necessity of quick decision-making, and may not adopt long-term goals. It is, if nothing else, an interesting trend to see the rise of the spend-down foundation, and maybe a meaningful one to think about when you think about your own goals in philanthropy.

Reference: The Wall Street Journal (April 13, 2014) “The Rise of Spend-Down Philanthropy”

For more information, see www.jerryreiflawyer.com

The Family Foundation In The Shadow Of Giants

In the face of big-time charities – the Gates Foundations, the Case Foundations, former presidents and the Rockefellers of today – small family charities and foundations have a little trouble making it into the spotlight. It’s an unfortunate problem of recognition that the Wall Street Journal points out over in “Small-Fry Family Foundations,” and many new charities face. Many new retirees are ready for a new challenge and a second career of giving back. After all, once they are playing the “back nine” of life, several new retirees are looking to make a difference with the fruits of their life’s work. Many choose to create a family foundation to make the most meaningful use of their time and money, not to mention to achieve their charitable objectives. How unfortunate it is, then, to see such lofty objectives fall by the wayside or simply go unnoticed because it is eclipsed. It’s crime enough to see mom-n’-pops go under when it comes to business and this isn’t just business; it is charity. So what ingredients make a family foundation successful? How do you steal a bit of the limelight to help your cause? These are things to think about even in the formation of the foundation, and even as you consider this as a family mission and second career. The original article contains advice and a case study or two to ponder if you already have or are considering creating a family foundation.

Reference: The Wall Street Journal (March 28, 2014) “Small-Fry Family Foundations”

For more information, see www.jerryreiflawyer.com

Life Insurance Donations: Two Birds With One Stone

Life insurance can be an incredible boon to your family, and a buffer against a dozen high-cost issues or a source of much-needed liquidity in the face of an estate tax. Then again, you might just end up not needing it all. What do you do with the policy? The good news is that you can kill two birds with one stone. Have you thought about donating your life insurance to a worthy cause? WealthManagement.com explained the motive and the usefulness of the approach a short time ago in a recent article titled “Donating Life Insurance.” What if it turns out that you won’t need that life insurance policy for which you scrimped to pay premiums over the years? Your children are grown and on their own, plus you have built up enough wealth to carry you and your spouse through retirement. Perhaps you have forgotten about that old policy sold to you by a college buddy when he was just getting into the business. In short, the policy is “found money” you really do not need now. Consider this: your favorite charity could make good use of your policy and its eventual proceeds. Charities in the know are far more amenable to such unique gifts than you might realize. Now, instead of the eventual proceed being a potential tax burden to your estate, you can claim a current charitable deduction. Two birds with one stone. Be sure to read the original article for more of the particulars. Then, before taking action, schedule a consultation with your estate planning attorney to make sure you connect all of the dots and get the best benefit while doing the most good.

Reference: WealthManagement.com (March 18, 2014) “Donating Life Insurance”

For more information, see www.jerryreiflawyer.com

 

Life Insurance Donations: Two Birds With One Stone

Life insurance can be an incredible boon to your family, and a buffer against a dozen high-cost issues or a source of much-needed liquidity in the face of an estate tax. Then again, you might just end up not needing it all. What do you do with the policy? The good news is that you can kill two birds with one stone. Have you thought about donating your life insurance to a worthy cause? WealthManagement.com explained the motive and the usefulness of the approach a short time ago in a recent article titled “Donating Life Insurance.” What if it turns out that you won’t need that life insurance policy for which you scrimped to pay premiums over the years? Your children are grown and on their own, plus you have built up enough wealth to carry you and your spouse through retirement. Perhaps you have forgotten about that old policy sold to you by a college buddy when he was just getting into the business. In short, the policy is “found money” you really do not need now. Consider this: your favorite charity could make good use of your policy and its eventual proceeds. Charities in the know are far more amenable to such unique gifts than you might realize. Now, instead of the eventual proceed being a potential tax burden to your estate, you can claim a current charitable deduction. Two birds with one stone. Be sure to read the original article for more of the particulars. Then, before taking action, schedule a consultation with your estate planning attorney to make sure you connect all of the dots and get the best benefit while doing the most good.

Reference: WealthManagement.com (March 18, 2014) “Donating Life Insurance”

For more information, see www.jerryreiflawyer.com

Art – In the Eye of the Beholder?

Art is gauged by two entirely different and often mutually-exclusive vantage points. There is the subjective eye of the beholder that gauges beauty, and then there is the no less subjective eye of the market, the appraiser and/or the taxman. In planning for your estate, your heirs can adopt the eye of the beholder but it is necessary for you to see through the eyes of the taxman. Be sure to properly plan for your artworks and ensure that they are appropriately (if usefully) valued, as seen through the eyes of the taxman. The issue of valuation is always the issue at stake when it comes to taxes – be it with regard to real property, stocks, or something as mercurial as an easement – but with art there is both a special importance and a special irony. After all, art is only truly valuable when it is priceless, in one sense, but there is nothing that is priceless on the market. For perspective on the issues and even some practical advice there is much to be gleaned from a recent article in Mondaq titled “Valuing Artwork For Federal Taxation Purposes: Income, Estate & Gift Tax Issues.” As anyone with a sizeable art collection will quickly understand, the value placed on a piece of art is, in the first instance, entirely based on the market’s whim and, in the second instance, every valuation is both a blessing and a curse. A high valuation leads to high prices for sale and, just as important, a high deduction when donated to charity. A low valuation, on the other hand, can make a piece of art cut that much less against estate and/or gift taxes. It is really hard to say which value you will want and when. That is a dynamic the IRS is well attuned to, so when it comes to finally pegging a value it is vital to have a reasonable valuation of the “fair market value.” Admittedly, it is a tricky topic and after reading the original article you will agree that it is a good idea to review your own collection and plans. So, what about your art collection? Will it pass the taxman’s tests or will it be a flaw in the estate plan?

Reference: Mondaq (June 3, 2014) “Valuing Artwork For Federal Taxation Purposes: Income, Estate & Gift Tax Issues”

The Conundrum Of Effective Charitable Giving

Is your charitable giving having the impact you expect? Are your dollars doing the work you intended? Is it time to reassess your personal philanthropy? If you are wrestling with these and similar questions, you may be interested in a recent article in The New York Times titled “Donating, and Making Sure the Money Is Put to Work.” It is natural to want your charitable dollar to effect the greatest good and have the greatest impact. When that happens, it can be genuinely satisfying to both giver and receiver. In fact, when really done right, it may be harder to tell who truly is on the receiving end. On the other hand, it can be rather disheartening when there is needless waste. Case in point: the original article tells the story of a useful organization known as GiveWell and the troubled relationship with Against Malaria Foundation. Perhaps you have your own concerns and your own story. If you are only just starting to reevaluate your charitable giving, then consider reading this article for any relevant advice.

Reference: The New York Times (April 25, 2014) “Donating, and Making Sure the Money Is Put to Work”

An Estate With No Family To Pass It To: Motivations To Charity

Estate planning oftentimes means ensuring the future care and prosperity of one’s children, and through them, for future generations still. So what do you do when there are no kids, no grandkids, or not even so much as a stepchild to care for? What is estate planning without a family? The New York Times recently touched on the subject of estate planning without a family. It is an important topic for those without future generations to inherit their assets. If this issue affects you or someone you know, then be sure to read the article titled “In Estate Planning, Family Isn’t Always First.” In the beginning and in the end, estate planning is always about disposing of your assets. Both in popular imagination and in the laws on the books, this commonly means the how and why of giving it to family members. Nevertheless, even with no lineal heirs to inherit your assets, there remains important decisions to be made. Optimistically, this means the sky is the limit. Many elect to give to charity, and as the original article describes, this can be an ever more important life-choice and period of growth for you, and especially for a childless couple. You see, many see “family” as their only legacy. However, through philanthropy you can choose your legacy. To do so well and to really appreciate your choices can take some planning. In the end, however, the time and treasure required to get your estate planning done right is worth the satisfaction and peace of mind it affords. To build the right plan will take both competent counsel and a bit of soul searching, to be sure.

Reference: The New York Times (May 2, 2014) “In Estate Planning, Family Isn’t Always First”

The Conundrum Of Effective Charitable Giving

Is your charitable giving having the impact you expect? Are your dollars doing the work you intended? Is it time to reassess your personal philanthropy? If you are wrestling with these and similar questions, you may be interested in a recent article in The New York Times titled “Donating, and Making Sure the Money Is Put to Work.” It is natural to want your charitable dollar to effect the greatest good and have the greatest impact. When that happens, it can be genuinely satisfying to both giver and receiver. In fact, when really done right, it may be harder to tell who truly is on the receiving end. On the other hand, it can be rather disheartening when there is needless waste. Case in point: the original article tells the story of a useful organization known as GiveWell and the troubled relationship with Against Malaria Foundation. Perhaps you have your own concerns and your own story. If you are only just starting to reevaluate your charitable giving, then consider reading this article for any relevant advice.

Reference: The New York Times (April 25, 2014) “Donating, and Making Sure the Money Is Put to Work”

Will The Charitable Rollover Rollover?

We are well into 2014. Consequently, that also means we are well into the 2013 tax season and planning for the upcoming year. As many retirees and their advisors review changes in the tax laws and begin their planning, they have one important question in common: “Will Congress revive the IRA charity rollover?” Coincidentally, these taxpayers and advisors will be interested in a recent article in The Wall Street Journal titled “Will Congress Revive the IRA Charity Rollover?” Why all the buzz? The IRA charity rollover is a well-loved tool that creates a win-win for retired taxpayers and the charities they support. Unfortunately, it has never been a permanent part of the tax code and was just one those many provisions of the tax code that bit the dust at the end of last year. What is an IRA charity rollover? It allows a taxpayer who is already required to take “Required Minimum Distributions” to direct their required distribution directly into the hands of charity. As a result, the taxpayer pays no income taxes on the distribution and the charity enjoys 100% of the distribution tax-free. What is not to like about that? With the IRA charity rollover gone, retirees and their advisors now have to shift their priorities and tools to minimize the tax bite and still accomplish all of their financial goals. Alternatively, you take the author’s lead and try waiting to see if Congress reinstates this beloved option. Will Congress revive the IRA charity rollover? That is the question.

Reference: The Wall Street Journal (January 25, 2014) “Will Congress Revive the IRA Charity Rollover?”

 For more information, see www.jerryreiflawyer.com

Charitable Challenges – Making A Difference Saginaw, Michigan

We are now in the traditionally charitably-minded time of year. Charitable giving is an important way of giving back. In addition, it can be an important way to do a little good somewhere in the world (who knows, maybe a great deal of good). That said, and even if you are ready to give back or help out, just how do you decide what to do and through whom? For those going-to-be-givers making year-end charitable gifts, these issues are significant because they want to be wise with their gifts. An increasingly popular metric is “effectiveness” or the ability of a charity to make a difference. To some, this is a technical question and involves hard data, number-crunching, and non-biased analysis. Resolving the technical is an easier matter in the digital age. Nevertheless, measuring how a charity makes a difference is also a question of how you define “making a difference” itself. The New York Times considered this in an article titled “Making a Difference in This Season of Giving.” If you are still reading, and therefore likely “charitably inclined,” then it is worth your time to read the original article. How do you determine the values most important to you and how do you privilege certain decisions over others? The article jumps into the work of a philosopher, Peter Singer. The debate turns on whether one ought to give locally or to the very neediest wherever located. This is not merely an abstract matter to resolve, as there are some hard data points, principles, and even outright charitable suggestions to mull over. Regardless whether you agree with Singer or any other thinker for that matter, this can be a very meaningful approach to the question of what, how and why to give. Time is ticking for those year-end gifts, though. Perhaps a new perspective can help you make some decisions you have been debating all along. Now, practically-speaking, how and what to give is another important point to get nailed down. If you have your values aligned, this can be the beginning of a charitable life plan, too.

Reference: The New York Times (December 6, 2013) “Making a Difference in This Season of Giving”

For more information, see www.jerryreiflawyer.com

Charitable Giving By Purpose Mid-Michigan

The year is not quite over. In fact, there is still space to squeeze in that last charitable gift of 2013. It seems most of us time our charitable planning to coincide with the holidays Question: is your charitable giving aligned with your deepest beliefs and values? While you are in the “holiday spirit,” you might want to survey a recent Forbes article titled “What Kind Of Philanthropist Are You? A How-To For Aligning Your Giving With Your Personal Values.” While the original article speaks for itself, consider the following guiding questions when it comes to your own giving: Do you want to invest in direct services that provide access to goods and services to those that need it? Or invest in reinventing existing patterns of resource creation, access, and distribution? Or help initiatives that are enabling new ways of thinking about social issues? Is empathy a key driver of the initiative? In a world where there is an increasing rate of change, charities and businesses alike are being faced with the difficulty of following rules that will constantly become outdated. Does the initiative consider the needs, perspectives, and dignity of the community it’s engaging? Is the organization incorporating systems for evaluating impact and integrating community engagement and feedback? Is it adapting to the evolving needs of the community, as well as to failures and successes? Is the initiative you are considering aiming to scale operations or to scale impact? Technically, there is time left to give, at least until the ball drops in Times Square. Before you cut that check, hand over that cash or make that online transfer, take time to consider the “why” behind your generosity.

Reference: Forbes (December 3, 2013) “What Kind Of Philanthropist Are You? A How-To For Aligning Your Giving With Your Personal Values”

For more information, see www.jerryreiflawyer.com

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Charitable Challenges - Making A Difference Mid-Michigan

Charitable Challenges – Making A Difference Mid-Michigan

We are now in the traditionally charitably-minded time of year. Charitable giving is an important way of giving back. In addition, it can be an important way to do a little good somewhere in the world (who knows, maybe a great deal of good). That said, and even if you are ready to give back or help out, just how do you decide what to do and through whom? For those going-to-be-givers making year-end charitable gifts, these issues are significant because they want to be wise with their gifts. An increasingly popular metric is “effectiveness” or the ability of a charity to make a difference. To some, this is a technical question and involves hard data, number-crunching, and non-biased analysis. Resolving the technical is an easier matter in the digital age. Nevertheless, measuring how a charity makes a difference is also a question of how you define “making a difference” itself. The New York Times considered this in an article titled “Making a Difference in This Season of Giving.” If you are still reading, and therefore likely “charitably inclined,” then it is worth your time to read the original article. How do you determine the values most important to you and how do you privilege certain decisions over others? The article jumps into the work of a philosopher, Peter Singer. The debate turns on whether one ought to give locally or to the very neediest wherever located. This is not merely an abstract matter to resolve, as there are some hard data points, principles, and even outright charitable suggestions to mull over. Regardless whether you agree with Singer or any other thinker for that matter, this can be a very meaningful approach to the question of what, how and why to give. Time is ticking for those year-end gifts, though. Perhaps a new perspective can help you make some decisions you have been debating all along. Now, practically-speaking, how and what to give is another important point to get nailed down. If you have your values aligned, this can be the beginning of a charitable life plan, too.

Reference: The New York Times (December 6, 2013) “Making a Difference in This Season of Giving”

For more information, see www.jerryreiflawyer.com

Charitable Challenges – Making A Difference Saginaw, MI

We are now in the traditionally charitably-minded time of year. Charitable giving is an important way of giving back. In addition, it can be an important way to do a little good somewhere in the world (who knows, maybe a great deal of good). That said, and even if you are ready to give back or help out, just how do you decide what to do and through whom? For those going-to-be-givers making year-end charitable gifts, these issues are significant because they want to be wise with their gifts. An increasingly popular metric is “effectiveness” or the ability of a charity to make a difference. To some, this is a technical question and involves hard data, number-crunching, and non-biased analysis. Resolving the technical is an easier matter in the digital age. Nevertheless, measuring how a charity makes a difference is also a question of how you define “making a difference” itself. The New York Times considered this in an article titled “Making a Difference in This Season of Giving.” If you are still reading, and therefore likely “charitably inclined,” then it is worth your time to read the original article. How do you determine the values most important to you and how do you privilege certain decisions over others? The article jumps into the work of a philosopher, Peter Singer. The debate turns on whether one ought to give locally or to the very neediest wherever located. This is not merely an abstract matter to resolve, as there are some hard data points, principles, and even outright charitable suggestions to mull over. Regardless whether you agree with Singer or any other thinker for that matter, this can be a very meaningful approach to the question of what, how and why to give. Time is ticking for those year-end gifts, though. Perhaps a new perspective can help you make some decisions you have been debating all along. Now, practically-speaking, how and what to give is another important point to get nailed down. If you have your values aligned, this can be the beginning of a charitable life plan, too.

Reference: The New York Times (December 6, 2013) “Making a Difference in This Season of Giving”

Fore more information, see www.jerryreiflawyer.com

Giving And Deducting Saginaw, MI

There is giving, and then there is “smart” giving. As the holiday giving season begins with the tax year ending shortly thereafter, now is a good time to plan your giving. After all, you want the best outcome for both you and the charities you support. Fortunately, Forbes has provided some giving tips and reminders well in advance in a recent article titled “Making Your Gifts Count:10 Smart Tips For Charitable Giving.” While there is much to say and consider regarding each of these 10 points, here they are if you are looking for a checklist: 1. Itemize. 2. Choose carefully. 3. Get a receipt – even for cash. 4. Don’t overlook payroll deductions. 5. Pay attention to the value of any incentives. 6. Consider donating appreciated assets. 7. You can’t deduct the value of your time. 8. Document the value of your gift. 9. Limits may apply. 10. Pay attention to the calendar. It is worth noting, however, that this is really only the beginning of smart charitable giving. What are your ambitions and what are your goals? The higher you set your giving sights, then the greater your need to pre-plan and seek appropriate legal, financial and tax counsel.

Reference: Forbes (November 1, 2013) “Making Your Gifts Count:10 Smart Tips For Charitable Giving”

For more information, see www.jerryreiflawyer.com

Legacies, Like Gardens, Take Time And Planning Saginaw, MI

What is a “Legacy”? That can be hard to define with any certainty. We kind of know it when we see it. There are those monuments, those legends, and those gifts about which there is no question. Whether it is in the name of a particular family or a community, it is unquestionably a legacy. So it is with a garden created roughly a century ago by members of the Morris family in Pennsylvania. For those with high ambitions to leave a legacy, consider a recent meditation in the form of a Barron's Penta article titled “A Lesson in Family Legacy.” It is the story of that Morris family garden. The garden is no patch of soil, either at its start or in the present day. No, it is the Morris Arboretum of the University of Pennsylvania, a famous landmark still giving to the public and the University. However, it was not always that way, nor was it as pretty as the article describes. In fact, the Morris family of Pennsylvania, namely siblings John and Lydia Morris, raised the garden from the soil and left their name in place long after their own passing or the passing of their house through the form of an endowment. While not every garden can be a monument, or every gift a legacy, it does require a unique perspective when it comes to coordinating your assets, goals and values. What will be your legacy?

Reference: Barron's Penta (October 4, 2013) “A Lesson in Family Legacy”

For more information, see www.jerryreiflawyer.com

 

 

Charitable Options For “Unnecessary” Life Insurance Saginaw, MI

To be over-insured is not exactly the same problem as being under-insured. Ask any widow or widower. That noted, if you have sufficient assets to provide for your loved ones, then you may have life insurance you really do not need. In that case, consider donating it to charity. Many of us tend to think of charity as an act of signing over an immediate gift. Nevertheless, even products like life insurance policies are important charitable contributions. What seems like a relatively small contribution now can have a big payoff later. The Wall Street Journal considered the ins-and-outs of donating life insurance in a recent article titled “Donating a Life-Insurance Policy to a Charity.” Basically, you have two fundamental options when it comes to being charitable with your life insurance policy. First, you can designate the charity as your primary beneficiary and the proceeds will pass upon your death. This approach provides a tax benefit to your estate, but no lifetime tax benefit to you. Alternatively, you can give the life insurance policy itself to the charity right now and enjoy tax benefits right now just as with any other immediate charitable contribution. Once the policy is owned by the charity, the charity can designate itself as the primary beneficiary. This latter alternative, gifting the ownership now, also means you can get further tax benefits by continuing to make cash gifts to the charity so it can continue to pay the life insurance premiums. This is pretty savvy, if you currently support the same charity with cash donations. These are notions worth exploring, if you truly have life insurance that no longer serves the purpose for which it was acquired. However, do make sure your family security is assured before taking action.

Reference: The Wall Street Journal (September 18, 2013) “Donating a Life-Insurance Policy to a Charity”

For more information, see www.jerryreiflawyer.com

 

 

Charitable Giving According To The Oracle Of Omaha Saginaw, MI

Doing good can be hard work, especially since there is so much need. In addition, your time and resources are not unlimited either. Fortunately, the “Oracle of Omaha” has some words of wisdom when it comes to focusing and leveraging your charitable impact. Actually, Buffett’s counsel is really a framework of thought - the “RISE Framework for Social Change.” Forbes recently explored the RISE framework in an article titled “4 Charitable Giving Tips From Warren Buffett.” Originally developed by one of the lecturers with Buffett’s free online giving course “Giving With Purpose,” RISE is an acronym to help center your thoughts and guide you toward good decisions when seeing to do good, specifically: • Relevance – Clarify what motivates you. • Impact – What is your “portfolio” (the collection of all your donations) and “toolkit” (the various ways you can contribute including with your money)? • Sustainability – Is the charity likely to stay around with its “business model”? • Excellence (in management and operations) – Is the organization well-run from top to bottom? If you would like to learn more about the RISE framework, then read the original article and consider enrolling in Buffett’s online course in the future. After all, the course is free and he seems to have a pretty good track record when it comes to his financial abilities.

Reference: Forbes (September 6, 2013) “4 Charitable Giving Tips From Warren Buffett”

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Capital Gains Hikes Boost Charitable Trust Appeal Saginaw, MI

When it comes to charity, sometimes doing good means giving away. Sometimes, however, it is good to “give and receive.” Depending on your assets, you might want to consider creating a charitable shelter trust. These trust are known by some rather silly acronyms, like CRUTs, CRATs, NICRUTs, NIMCRUTs, or Flip CRUTs. Nevertheless, the power behind this alphabet soup of sorts can cut your capital gains taxes or fund a retirement while benefiting your favorite charity at the expense of the IRS. The world of the CRUT and all its brethren is familiar to some, but alien to many. If you are among those in need of some background education on this timely subject, then a couple of recent articles from Forbes are worth reading. The first is titled “Charitable Shelter: How CRUTs Cut Capital Gains Tax.” As this article notes, you can use a CRUT, or Charitable Remainder Unitrust, to cut your capital gains taxes by using the trust to sell highly appreciated assets without triggering any taxation, to provide you with an annual income stream, and then to leave the remainder to charity. With all increases in the capital gains tax considered, and other specific taxes besides, a CRUT can mean preserving more than 20-30% of the value of the asset of the top to benefit you and charity. For some additional perspective on the use of charitable trusts consider reading a companion article of real stories from Forbes titled “Three Donors Tell Why They Set Up CRUTs.” As you might imagine, choosing the right charitable remainder trust depends a great deal on your assets, your needs, and the likely timespan before the charitable part comes into play. As with all estate planning, this is not a do-it-yourself project.

Reference: Forbes (August 14, 2013) “Charitable Shelter: How CRUTs Cut Capital Gains Tax”

      Forbes (August 14, 2013) “Three Donors Tell Why They Set Up CRUTs

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Structured Charity Flexibility Saginaw, MI

Timing can be everything when it comes to your charitable donations, both for you and for your charity of choice. Accordingly, you might want to build a little “flexibility” into your planning. Have you considered expanding your generosity through a unique kind of charitable gift that is structured to actually “give back”? Examples include a charitable gift annuity, a charitable remainder trust, a charitable annuity trust, a pooled income fund or a life estate. As important as it is to understand these kinds of charitable gifts, there is good reason to know how and why they can be undone – and all for the sake of timing. The subject of undoing structured gifts was illustrated by the Fred Hutchinson Cancer Research Center, itself no small target for charitable gifts of all kinds, in an article titled “Current Planned Gifts I - Gift Annuities and Unitrusts.” The original article is a fairly handy guide, especially if you are already familiar with these powerful planning tools. However, the guide also gets a bit technical, too. The main takeaway is that a structured gift is not necessarily a structure set in stone. In fact, there are ways to speed up a gift of the “remainder” interest in a structured gift. In a certain tongue-in-cheek way the article explains from the point of view of the charity: … presidents and CEOs of charities generally prefer current gifts as opposed to planned gifts. All presidents and CEOs have many goals and projects that require current funding. Therefore, the gift planner will be very favorably received if he or she understands the different methods for converting a planned gift into a current gift. Then again, there are just as many reasons to speed up a structured gift when you are the giver. For instance, if you are receiving a current income stream that you no longer need later in life, then you can accelerate the gift of the remainder interest generating that income and accelerate the charitable deduction to the current year. This deduction may be helpful if you are taking Required Minimum Distributions from your IRA. Timing is everything, and knowing what can be undone gives you that much more flexibility.

Reference: Fred Hutchinson Cancer Research Center (August 6, 2013) “Current Planned Gifts I - Gift Annuities and Unitrusts”

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Easing Into The Subject Of Conservation Easements Saginaw, MI

Conservation easements are something of a hot topic these days, and have been for some time now. Think you know the basics? If you do not, then you might want to take a good look before you leap.

Better yet, you really ought to read a recent article in Private Wealth magazine titled “Legacies By The Acre.”

If the concept of an easement is new to you, think of it as an act of charity by giving away the economic utility of the land for the greater good of preserving it. While you could sell the land to a developer who will build a mall, you might choose to forever close off that possibility and preserve it as a pristine forest for wildlife or recreation.

All easements, even urban “façade” easements, follow this general pattern. However, rural or wilderness conservation easements can get a bit more complicated and even allow for certain “economic utility” to the owners. A prime example described in the original article is the concept of a “working forest conservation easement” (WFCE). This approach allows a family to give up the full economic utility of the land and continue to embrace a sustainable pattern of use. In other words, you do not build malls, but you do continue to responsibly run a family timber company from trees harvested on the land.

Conservation easements can be as varied as the lands put up for easement. In addition, easements can be built to allow greater or lesser utility, rather than simply all or none. By doing good, the landowner can enjoy tax benefits to further sweeten the deal.

In the end, whether to go the conservation easement route will hinge on many factors, to include your family’s current land, its potential use, and specific market forces in play now and down the road. Understanding the true value of a conservation easement will take some experienced planning.

Reference: Private Wealth (July 11, 2013) “Legacies By The Acre”

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Charitable Intent Key To Easement Success

Sometimes you can have your cake and eat it too. When it comes to conservation and façade easements, however, this is no easy task. It is only the lucky few who can make such an easement work - cake, frosting, and healthy charitable deduction all in one. Easements are often touted as the “two-birds with one stone approach,” and not without good reason. Unfortunately, that is not always the case as a few planners have discovered when trying to “force” an easement when it really is not appropriate. In fact, this has landed more than a few planners in a tight spot. Consider the case of Lawrence and Lorna Graev and their agreement with the National Architectural Trust, as covered in a recent Forbes article titled “Side Agreement Voids Easement Charitable Deduction” (guess what they did wrong). You see, easements are a gift to a charity in the form of forsaken economic potential. Basically, you give a property to charity for some charitable purpose – love of earth, love of architecture, love of history. Since you may have thereby sacrificed potential (and potentially considerable) economic gain were you to have sold it on the market, you may be entitled to considerable charitable benefits in return. For example, what if you had sold prime real estate to McDonalds instead of giving it to charity? To simplify a complex equation, the value of the potential of the property to make money less the already existing value of the property equates to the gift to charity. Accordingly, this means there are always at least two very large but ambiguous values over which a taxpayer and the IRS have to quibble. The quibbling does not always go well for taxpayers, especially those who thought they had their cake and were about to eat it, too. Such was the case of the Graevs and the National Architectural Trust. The original article is instructive for anyone contemplating a charitable easement. Suffice it to say this is a complex area of tax law. In summary, there truly are those easements that offer the best of both worlds (your cake and the ability to eat it too) because a wonderful gift to charity begets a wonderful charitable tax deduction. That said, it is not always the case and being “tricky” does not always go unnoticed.

Reference: Forbes (July 15, 2013) “Side Agreement Voids Easement Charitable Deduction”

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Economy Down, But Generosity Up Saginaw, MI

Charity is at once the easiest, most joyous of human acts. Charity can be amongst the trickiest acts to pull off financially, however, especially when economic times are tight. Remarkably, despite tough economic times in 2012, Americans actually increased their charitable giving. As recently noted by CNN Money, “Americans were much more charitable last year.” Charitable giving was up in 2012 to the tune of a 4% increase in individual donations and a 12.2% increase in corporate giving. While there are many reasons for this, it is a positive fact. So what of 2013? What are your plans, for example? If you have high hopes and good intentions for a large gift, then consider obtaining competent counsel to make the most of the opportunity for yourself and your charity.

Reference: CNN Money (Junes 21, 2013) “Americans were much more charitable last year”

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Trust But Verify The Status Of Your Charities Saginaw, MI

The end of the year tends to be the most charitable of times, both for the sake of the holidays and for the sake of end-of-year tax moves. However, now that we have officially crossed the halfway point in the year (and then some) it is not too early to start your 2013 charitable planning. To help prime the pump regarding your charitable giving goals, consider two recent articles courtesy of Forbes. The first article is titled “Give Your Property To Charity…” and it deals with some real life (and largely football-based) examples to make the case for charitable giving largely to the exclusion of leaving an inheritance to your heirs. While that might be something of an extreme position for many, it is not without merit for others. Regardless, whether you give a little each year to charity or are intending to give it all to charity upon your passing, there is good reason to do your due diligence. Following on the heels of the first article, the second is appropriately titled “…But Make Sure It's A Charity.” Fact: not all charities are alike in form, even if they are all good at heart. In reality, some charities can be less “charity” than advertised, either in terms of their correct legal formation or in their bona fide charitable substance. If you give to larger national charities, then this likely is less of an issue. On the other hand, many smaller charities operate solely on the good will and donated time of their volunteers. Consequently, these “mom and pop” charities may not have been formed correctly or may operate in such a way as to threaten any possibility of tax-favorable treatment. Then again, bigger charities cost money and many rely on professionals instead of volunteers. As a result, these professionals soak up a higher and higher percentage of overhead, and sometimes without demonstrable effect. In short, there are many factors to weigh when it comes to charitable giving. As these bookend Forbes articles illustrate, it is important to examine both your own charitable goals and the charities themselves before making gifts large or small.

Reference: Forbes (June 23, 2013) “Give Your Property To Charity…”

                  Forbes (July 5, 2013) “…But Make Sure It's A Charity”

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Why Are Charitable Donors Charitable? Saginaw, MI

You might say the “head” versus the “heart” is an age-old dynamic and dilemma. This is true whether in literature, art, or – yes – charity. The head vs. the heart, as it occurs in charitable planning, was the topic of a recent article in The New York Times titled “Two Paths for Charitable Giving: From the Head or From the Heart.” The key question posed by the author: “Is it better to give in response to an emotional need or feeling, or are dollars better spent when tied to a metric that measures how effective they are?” So, do you give charitably simply because it feels good and perhaps has a positive impact to which you can personally relate based on your own life and experience? Alternatively, do you give with a focus on doing the most measurable good with the assets gifted? For many donors, giving is a matter of “and” – it is a matter of the head and the heart. The original article is worth reading, especially if you want to have a better understanding of the motivations behind generosity.

Reference: The New York Times (June 28, 2013) “Two Paths for Charitable Giving: From the Head or From the Heart”

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Old Age Disability And The Long Goodbye Saginaw, MI

Conserving Land by Conservation Easement

Sometimes the greatest charity of all is simply doing nothing. At least that may be the case when it comes to being charitable with the land you own. Why? Because the charity consists in preserving the land from development instead of capitalizing on its highest and best economic use. Enter the conservation easement. The perennial problem with easements, however, is the question of valuation of the “potential value” of the land. The entire point behind an easement is that the land itself (or the façade, as the case may be with urban-dwellers) has intrinsic value worth saving. This can be hard to put into concrete numbers. But then again, there always remains the risk that certain persons may look to maximize the charitable deduction for an easement through creative valuation. This theme was picked up in a recent Forbes article titled “Conservation Easement No Deduction For Hypothetical Vineyard.” The lesson is less outlandish than the title suggests – not every problem comes from supposing the remote possibility of a vineyard, a stadium, or a skyscraper. Rather, when asking for the easement you need to settle upon one out of every possible use of the land and the IRS has to agree that potential use is the best and most likely use. The IRS has a presumption against any big dreams, you might say, and that can be difficult to overcome. Proper valuation is a key component of any purchase, gift, or act of charity. When it comes to easements, however, the subject of valuation may be more difficult to capture accurately. Placing an effective easement means building a case and an effective understanding of the true potential to any land given.

Reference: Forbes (June 5, 2013) “Conservation Easement No Deduction For Hypothetical Vineyard”

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Giving Your IRA For Good Saginaw, MI

Not having enough retirement income from your IRA can be a pretty serious problem. On the other hand, having too much retirement income outside of the IRA can be a bit of a problem, too. Have you heard of the Charitable IRA Rollover? A Charitable IRA Rollover lets you give to your favorite charity while avoiding taxes on IRA distributions. Consequently, this is a very popular win-win strategy for taxpayers who would rather be “voluntary philanthropists” as opposed to “involuntary philanthropists.” A recent Kiplinger article titled “Who Can Transfer IRA Funds to Charity?” explains the ins and outs of Charitable IRA Rollovers. Essentially, not everyone has the option to transfer their IRA distributions directly to charity. For starters you must be older than age 70-1/2, the same age upon which you are required to take Required Minimum Distributions from your IRA. And not by coincidence. Read the original article for a better perspective on the politics behind the planning. Suffice it to say Congress has elected to give you a choice between taxation and charitable giving. The Charitable IRA Rollover gives you this option. Beware! All of this must be done According to Hoyle or you may get caught in a tax trap. Nevertheless, this alternative is well worth considering as part of your overall retirement, estate and charitable planning.

Reference: Kiplinger (April 30, 2013) “Who Can Transfer IRA Funds to Charity?”

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Family Foundations – Doing Well by Doing Good Saginaw, Michigan

There are a lot of things that can keep a family together, just as there are many ways to keep a business together. But, then again, there are just as many ways to drive the family or the business apart. Regardless, ensuring continuity of both your family harmony and your family business is as much an art as it is a science. For a family with means, and perhaps also as a model for a family with fewer resources, a family foundation may offer just a unifying bond. A family foundation represents a way of doing good as a family and even making those foundation goals the goals of the family itself. This kind of unifying goal was explored by CNBC in an article titled “Family Foundations Prepare for the Next Generation.” If you are the family member who established the family foundation, the goal should expressly be to include and to establish a succession for your family foundation. In point of fact, a family foundation is like a family business and shares many of the same concerns, anxieties, and goals. Now, even a family of modest means can see the value in the family foundation model. If for no other reason, your family foundation can be a means of doing good as a family and letting everyone in the family work together to accomplish that good end. Is there some goal around which your family can come together?

Reference: CNBC (February 9, 2013) “Family Foundations Prepare for the Next Generation”

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Family Foundations – Doing Well by Doing Good Saginaw, Michigan

There are a lot of things that can keep a family together, just as there are many ways to keep a business together. But, then again, there are just as many ways to drive the family or the business apart. Regardless, ensuring continuity of both your family harmony and your family business is as much an art as it is a science. For a family with means, and perhaps also as a model for a family with fewer resources, a family foundation may offer just a unifying bond. A family foundation represents a way of doing good as a family and even making those foundation goals the goals of the family itself. This kind of unifying goal was explored by CNBC in an article titled “Family Foundations Prepare for the Next Generation.” If you are the family member who established the family foundation, the goal should expressly be to include and to establish a succession for your family foundation. In point of fact, a family foundation is like a family business and shares many of the same concerns, anxieties, and goals. Now, even a family of modest means can see the value in the family foundation model. If for no other reason, your family foundation can be a means of doing good as a family and letting everyone in the family work together to accomplish that good end. Is there some goal around which your family can come together?

Reference: CNBC
(February 9, 2013) “Family Foundations Prepare for the Next
Generation”

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Valuations Matter – Making Your Gifts Count Saginaw, Michigan

Qualifying for the charitable tax deduction is not simply a matter of giving, then claiming the deduction. No, there are a few steps to take and items of proof to gather if you want your generosity to count at tax time. Fundamentally, you need to prove the value of what you have given, but that can get complicated when you are giving in the form of things. You need an appraisal of any thing you give (e.g., art, a house, an easement, or a service), and you need that appraisal to answer all the tax man’s questions even before he asks them. In short, appraisals can get tricky. For example, if you give art you need an art appraiser, and if you give real estate you need a real estate professional. However, what if you give interest or stock in a company? Then the appraisal becomes even trickier. When you are giving less than obviously valued interest, then you might want to consider the advice given in a recent Forbes article titled “It's Hard To Satisfy The Qualified Appraisal Requirement For A Charitable Contribution If You Appraise The Wrong Property.” The problem with interest or stock in a company is that the interest or stock is different than the things the company owns. So, 10% of the stock in a company with $5 million in assets is not (necessarily) equivalent to 10% of $5 million. Such is the case, even when the sole purpose of the company is to hold well-documented and appraised assets worth $5 million. In a “simple case,” the IRS likely will provide leniency and determine that such and such an appraisal was “substantially compliant” if not fully so. Nevertheless, the greater the business complexity, the greater the risk of misstep and attending (and costly) determination of insubstantial compliance. An appraisal is a very necessary step when recognizing the tax implications of any transfer of property that is more than simply money itself. In the end, when giving to charity or to loved ones it just stings all the more when your attempted good deed is punished.

Reference: Forbes (February
5, 2013) “It's Hard To Satisfy The Qualified Appraisal
Requirement For A Charitable Contribution If You Appraise The Wrong Property”

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When Charitable Giving Goes Global Saginaw, Michigan

International borders aren’t even lines in the sand, in most instances. When it comes to crossing borders for charitable endeavors, one would think processes and protocols would help ease the effort. Unfortunately, the globalization of individual charitable giving, just like the globalization of the economy, has brought with it more complexity and attending legal challenges. This is an increasing trend, too. According to the 2012 Giving USA Study of charitable giving, international giving has been increasing for the past several years. This increase has come despite the struggling economy and overall challenges to domestic giving. In fact, international giving has experienced a 15.2% growth from 2009 to 2011, with the data yet to come for 2012. To gain an appreciation of the challenges that have come with this unprecedented rate of growth, it’s worth reading a recent article by WealthManagement.com titled “Giving Without Borders.” In practical reality, giving without borders often requires analyzing all relevant “borders” to determine how each side of the border will account for the gifts. Indeed, “gift” can be something of a misnomer with the rise of “impact investments.” All the same, when an individual decides to transcend borders with generosity, the laws of each nation and a tangle of international law may come into play. Accordingly, if you are inclined to make your charitable mark outside of the United States, then be forewarned and forearmed when it comes to the potential tangle of laws you will need to navigate.

Reference: WealthManagement.com (January 14, 2013) “Giving Without Borders”

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Fiscal Cliff Falls on the Charitable “Rich” Saginaw, Michigan

It’s quite fortunate that there were relatively few casualties in the fiscal cliff deal. In fact, some areas of the tax law became better, or at least safer, because the laws are now more predictable. Nonetheless, there were certain casualties and, according to a great many writers, charitable giving and donors themselves were cut a raw deal. The fiscal cliff deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks.” Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those “stealth taxes” working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners. For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year. Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have an increase in your AGI. So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days.

Reference:

Forbes (January 9, 2013) “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks”

 

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When Gifts Become a Burden Saginaw, Michigan

It’s an awkward thing to give away or sell a gift made to you. However, it can be even more awkward when you can’t hold onto a gift. No, this is not a post-Christmas catastrophe, rather it’s the very real problem so many museums face every year. One museum currently on the hook is the Brooklyn Museum in New York. The New York Times recently reported on its plight regarding a gifted collection in an article titled “Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned.” It seems that in 1932, Colonel Michael Friedsam gave a massive collection to the then fledgling museum. Nevertheless, since then the museum has grown and has too much to put on its walls, no longer displays items like historic battle axes, and half the Colonel’s collection turned out to be fakes or “not of museum quality.” Bottom line: the museum wants to give or sell the artworks and stop paying the exorbitant storage and restoration fees. Now, it’s not that the museum is unappreciative. No, it’s more complicated even than that. Unfortunately, the Colonel’s will legally excludes any option the Colonel’s estate executor hasn’t signed off on. Even more unfortunately, the last executor died in 1962. The lesson for those with artworks worth preserving for future generations is to include alternatives permitting like-minded individuals (executors) to further your objectives for your gifts in the future. The Colonel and his estate planners couldn’t have foreseen the next 90 years, but therein lies the challenge. Predicting the future can be a very tricky thing and, certainly, a very inexact science. So, how are your gifts structured?

Reference: The New York Times (January 15, 2012) “Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned”

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Fiscal Cliff Deal Opens Door to Last-Minute Charitable Contributions

If you are past age 70-1/2, you probably already know that you must take required minimum distributions (RMDs) from your traditional IRA, and that you must pay income taxes on those distributions (this does not apply to Roth IRAs). What you may not know is, if you are charitably inclined, the American Taxpayer Relief Act (commonly referred to as the Fiscal Cliff Deal) allows you to avoid income taxes by directing those RMDs to a qualified charity with an IRA Charitable Rollover. The rule applies for 2013, and includes a small window of opportunity for 2012 donations as well. We have had this deal before, but Congress let it expire at the end of 2011. So, it’s likely that most people already took their 2012 RMDs, as required by law, before December 31st. If you didn’t, though, Congress has given you until January 31st, 2013 to make a charitable contribution that can satisfy all or part of your RMD for 2012. Confused? You may want to read more about it in the Forbes article, “Fiscal Cliff Deal Allows Giving IRA Assets to Charity.” If this giving strategy sounds appealing to you, bear a few things in mind: • To qualify, your donations must be directed from your IRA to the charity, and cannot be distributed to you first. Ask the account custodian to send the distribution directly to the charity. • Your donations cannot go to donor-advised funds, supporting organizations or private non-operating foundations. Otherwise, the money can go to any organization to which you can make a gift that would qualify as a charitable deduction on your tax return.

Reference: Forbes (January 2, 2013), “Fiscal Cliff Deal Allows Giving IRA Assets To Charity

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Charitable Giving Slows for Überwealthy Saginaw, Michigan

Well in the wake of confetti and political rancor brought on by New Year’s Eve and New Year’s Day, respectively, the numbers are starting to come in on the state of charitable giving for 2012. Unfortunately, and according to a summary post by the Chronicle of Philanthropy entitled “America’s Wealthiest Donors Slow Their Giving,” 2012 was not a good year for charities or a big year for donors. In fairness, 2012 will first and foremost go down as a year of great indecisiveness, whether it was the presidential election or the deal that brought us over the fiscal cliff. But political indecisiveness gives rise to a tricky environment for charitable intentions. That said, the largest gifts by American philanthropists totaled a whopping $5.1 billion, except when you account for the fact that Warren Buffet gave away $3 billion of that total. By comparison, the largest gifts by American philanthropists totaled $2.6 billion in 2011. Without Buffet’s gifts, the 2012 total would have been $2 billion, falling under 2011’s totals. Now, this kind of assessment isn’t an entirely fair estimate of the direction of the charitable energies of all donors. In fact, the list only accounts for the top ten public donors, thereby ignoring the many small donors who you may recognize as those not being featured on the cover of Forbes. Nevertheless, it seems to be indicative of an overall mood. So, if 2012 was all indecision and waiting, what can we expect in terms of philanthropy for 2013 now that we’ve got some answers and direction on the tax front? What are your plans and what is important for you as a donor?

Reference: The Chronicle of Philanthropy (January 1, 2013) “America’s Wealthiest Donors Slow Their Giving”

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An Integral Time for Giving Saginaw, Michigan

The 4th quarter of 2012 is well on its way, and typically this is a time when non-profits bring in the most donations. Charities are feeling the full effect of the economic struggles we’ve been hit with in recent years, making this time a make-or-break giving season. Why would this December be an especially trying time for charities? US News and World Report offered their own pithy list not too long ago and it’s worth a pause: “Nonprofits Face Challenging End-of-Year Giving Season.” Simply put, at a time when the services of charities have been needed more than ever (with hurricanes, droughts, and winter storms all taking their tolls during a sluggish economy) charitable giving has, understandably, been less than “generous.” That said, as a recent article published by the Chronicle of Philanthropy indicates, the “Average Gift by the Wealthy Has Declined Since 2009.” If you’re inclined to contribute to a worthy cause before year’s end, you are well-advised to visit with your estate attorney or financial advisor about ways to best leverage your gift both for charitable and tax purposes. There are many strategies available that may make a larger gift more affordable than you think. As we near the end of the 2012, lend your attention to your giving plans and make steps to get the ball rolling …before it drops in Times Square.

References: US News and
World Report (November 12, 2012) “Nonprofits Face Challenging End-of-Year
Giving Season”

The Chronicle of Philanthropy (October 29, 2012) “Average Gift by the Wealthy Has Declined
Since 2009”

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Charitable Giving Options Saginaw, Michigan

Sometimes the act of giving can be complicated, especially when it comes to setting up foundations in the style of Bill Gates and the upper 1%. A recent Forbes article provides some alternatives you may want to consider. The article is titled “Five Ways To Be Charitable Even If You Aren't Bill Gates.” Luckily, the “five ways” do not require the complexities of family foundations. Here are the Forbes tips for your charitable consideration: 1. Give the gift of education. Have you thought about giving to your own children or grandchildren and in the form of a 529 college savings plan or a direct gift to the college? 2. Give your IRS distribution to charity. Since you have to take your required minimum distribution anyhow, send it directly to a charity instead. This option is available for the remainder of 2012, but its future is uncertain. 3. Name your charity as your beneficiary on your retirement account. This option is appropriate if you’ve decided that any retirement funds left over should eventually pass to charity instead of loved ones. Be sure to designate your charitable beneficiaries accordingly! Note: The full amount of your retirement account given to charity is income tax free. If left to a non-charity, then the full amount is taxable as ordinary income. 4. Donor-advised funds. By giving to a donor advised fund, you can give today, take the charitable deduction in this year’s taxes, but decide which charities to benefit next year or beyond. They are easy to establish too. 5. Charitable gift annuity. Are you keen on the idea of receiving a guaranteed lifetime monthly income, especially as an assurance in old age? If you also want to benefit charity in the process, then consider hitting two birds with one stone by opting for a charitable gift annuity. Be sure to consult with your financial, tax and legal advisors regarding these giving options in order to choose the best plan for your donations.

Reference: Forbes (September
20, 2012) “Five Ways To Be Charitable Even If You Aren't
Bill Gates”

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Anonymous Charitable Giving

The act of giving in itself is extremely rewarding, which is why many donors do not wish to be recognized for their gifts. These donors prefer to give anonymously to avoid uninvited attention for many reasons, ranging from religious convictions to protecting themselves from theft. Whatever your reason, consider taking steps to ensure your own anonymity even as you go out and try to ensure the wellbeing of your favorite charities. How do you give anonymously? In short, this is a common predicament and there are several established charitable vehicles for giving with solutions that promise some amount of anonymity. Some, as you may expect, are better than others. For a breakdown and analysis of these vehicles, take a look at a recent Forbes article titled “How To Stay Anonymous When You Give To Charity.” Some examples on how to give under the radar include setting up a private foundation, using advisors as intermediaries, and donating online. In the end, the best solutions tend to vary based on the nature of the assets you intend to give, the scope of your giving, and on the charitable recipients.

Reference:  Forbes (September 19, 2012) “How To Stay Anonymous When You Give To
Charity”

For more information, see www.jerryreiflawyer.com

 

Key Charitable Donors Give Big

The key donors in the world of charitable giving think big when it comes to giving away their fortunes, and they have even bigger goals in mind for their charities. A recent Forbes article offers some insights into the thoughts and intentions of uber-wealthy philanthropists. The grist for this journalistic mill was recently a summit held in New York. The article bears the catchy title of “How to Give Away A Billion Dollars.” It’s worth reading the original article, if not only for a few reported mission statements. One thing to note is the tension between farsighted concerns and legacy in particular, against the desire to see immediate effect and business-like efficiency. This is a very real tension and just may affect how you go about your own charitable giving.

To gain more insight on this
topic, you can also research the future of charitable giving with Forbes’ companion piece titled “How The Next Generation Of Wealth Is
Revolutionizing Philanthropy As We Know It.” 

References: Forbes
(September 18, 2012) “How to Give Away A Billion Dollars”

Forbes (September 18, 2012) “How The Next Generation Of Wealth Is
Revolutionizing Philanthropy As We Know It.”

For more information, see www.jerryreiflawyer.com

 

An Integral Time for Giving Saginaw Michigan

The 4th quarter of 2012 is well on its way, and typically this is a time when non-profits bring in the most donations. Charities are feeling the full effect of the economic struggles we’ve been hit with in recent years, making this time a make-or-break giving season. Why would this December be an especially trying time for charities? US News and World Report offered their own pithy list not too long ago and it’s worth a pause: “Nonprofits Face Challenging End-of-Year Giving Season.” Simply put, at a time when the services of charities have been needed more than ever (with hurricanes, droughts, and winter storms all taking their tolls during a sluggish economy) charitable giving has, understandably, been less than “generous.” That said, as a recent article published by the Chronicle of Philanthropy indicates, the “Average Gift by the Wealthy Has Declined Since 2009.” If you’re inclined to contribute to a worthy cause before year’s end, you are well-advised to visit with your estate attorney or financial advisor about ways to best leverage your gift both for charitable and tax purposes. There are many strategies available that may make a larger gift more affordable than you think. As we near the end of the 2012, lend your attention to your giving plans and make steps to get the ball rolling …before it drops in Times Square.

References: US News and
World Report (November 12, 2012) “Nonprofits Face Challenging End-of-Year
Giving Season”

The Chronicle of Philanthropy (October 29, 2012) “Average Gift by the Wealthy Has Declined
Since 2009”

For more information see www.jerryreiflawyer.com

 

Annual Gift Exclusion to Increase in 2013 Saginaw, Michigan

Any victory, large or small, is worth celebrating. So when it was projected that the annual gift exclusion will increase from the current $13,000 to $14,000 per year per person in 2013, many people are thrilled to see this change in the tax code. This increase has been a small victory heralded by the financial press, included in a recent CBS MoneyWatch article titled “Gift-tax limits to rise in 2013.” Now, the extra $1,000 may not sound like much if you haven’t been making full use of your gift limits. Nevertheless, when it comes to tax advantage wealth transfers, every little bit helps. In fact, annual giving to loved ones is a time-honored tradition and strategy. Every portion of your estate given removes that much from coming under the estate tax scythe at your death. Remember: beginning in 2013 you can transfer $14,000 per year per person, to as many persons as you see fit, without reducing your lifetime exclusion (currently $5.12 million, but we’ll see what comes of that in 2013). In addition, these gifts don’t count as charitable gifts either, which are without limit and can provide significant tax deductions when done correctly. If you are looking for even more ways to maximize your wealth transfers through gifting, then consult the original article. For example, two very specific and useful suggestions are to make gifts to cover educational costs (i.e., tuition) or medical costs. Gifting is a great way to transfer wealth to future generations, and any small victory (even a $1,000 increase in the annual gift exclusion) is worthy of attention and consideration.

For more information, see www.jerryreiflawyer.com

Reference: CBS MoneyWatch
(October 10, 2012) “Gift-tax limits to rise in 2013”

Annual Gift Exclusion to Increase in 2013 Saginaw, Michigan

Any victory, large or small, is worth celebrating. So when it was projected that the annual gift exclusion will increase from the current $13,000 to $14,000 per year per person in 2013, many people are thrilled to see this change in the tax code. This increase has been a small victory heralded by the financial press, included in a recent CBS MoneyWatch article titled “Gift-tax limits to rise in 2013.” Now, the extra $1,000 may not sound like much if you haven’t been making full use of your gift limits. Nevertheless, when it comes to tax advantage wealth transfers, every little bit helps. In fact, annual giving to loved ones is a time-honored tradition and strategy. Every portion of your estate given removes that much from coming under the estate tax scythe at your death. Remember: beginning in 2013 you can transfer $14,000 per year per person, to as many persons as you see fit, without reducing your lifetime exclusion (currently $5.12 million, but we’ll see what comes of that in 2013). In addition, these gifts don’t count as charitable gifts either, which are without limit and can provide significant tax deductions when done correctly. If you are looking for even more ways to maximize your wealth transfers through gifting, then consult the original article. For example, two very specific and useful suggestions are to make gifts to cover educational costs (i.e., tuition) or medical costs. Gifting is a great way to transfer wealth to future generations, and any small victory (even a $1,000 increase in the annual gift exclusion) is worthy of attention and consideration.

For more informati

Reference: CBS MoneyWatch
(October 10, 2012) “Gift-tax
limits to rise in 2013”

on, see www.jerryreiflawyer.com

 

Hurry Up or Wait? A Giving Dilemma Saginaw, Michigan

Hurry up! No, wait! Well, which is it? It all depends on your giving strategy. If you want to take advantage of current charitable giving options you better “hurry up” and get those gifts lined out. But if you are apprehensive about a possible increase in your taxes for next year, you may decide it’s best to “wait” and set those gifts aside for 2013 deductions. The rallying cry of “hurry up and wait” regarding charitable giving was sounded by Reuters in a recent article titled “Charitable giving in unclear tax times.” One reason for playing “wait and see” is that we are still in the dark when it comes to the tax implications 2013 will bring. In fact, that darkness may not lift until long after the election, especially with retroactive tax policies a possibility. Nevertheless, giving is easy, as far as major financial moves go. So you can wait and see if some definitive answer pops up before year’s end. If 2013 will be a bad year tax-wise, and the gift can wait until 12:01 a.m. on New Year’s Day, then the deduction can do the most good to offset new taxation. But, on the other hand; you might not want to waste the giving opportunity this year, and a deduction for 2012, by that minute. Unfortunately, your legal, financial and tax advisors likely do not have a crystal ball to help you make the call. So what will your giving strategy be for this year and beyond?

For more information, see www.jerryreiflawyer.com

Reference: Reuters (October
18, 2012) “Charitable giving in unclear tax times”

Anonymous Charitable Giving

The act of giving in itself is extremely rewarding, which is why many donors do not wish to be recognized for their gifts. These donors prefer to give anonymously to avoid uninvited attention for many reasons, ranging from religious convictions to protecting themselves from theft. Whatever your reason, consider taking steps to ensure your own anonymity even as you go out and try to ensure the wellbeing of your favorite charities. How do you give anonymously? In short, this is a common predicament and there are several established charitable vehicles for giving with solutions that promise some amount of anonymity. Some, as you may expect, are better than others. For a breakdown and analysis of these vehicles, take a look at a recent Forbes article titled “How To Stay Anonymous When You Give To Charity.” Some examples on how to give under the radar include setting up a private foundation, using advisors as intermediaries, and donating online. In the end, the best solutions tend to vary based on the nature of the assets you intend to give, the scope of your giving, and on the charitable recipients.

Reference:  Forbes (September 19, 2012) “How To Stay Anonymous When You Give To
Charity”

 

Key Charitable Donors Give Big

The key donors in the world of charitable giving think big when it comes to giving away their fortunes, and they have even bigger goals in mind for their charities. A recent Forbes article offers some insights into the thoughts and intentions of uber-wealthy philanthropists. The grist for this journalistic mill was recently a summit held in New York. The article bears the catchy title of “How to Give Away A Billion Dollars.” It’s worth reading the original article, if not only for a few reported mission statements. One thing to note is the tension between farsighted concerns and legacy in particular, against the desire to see immediate effect and business-like efficiency. This is a very real tension and just may affect how you go about your own charitable giving. To gain more insight on this topic, you can also research the future of charitable giving with Forbes’ companion piece titled “How The Next Generation Of Wealth Is Revolutionizing Philanthropy As We Know It.”

References: Forbes
(September 18, 2012) “How to Give Away A Billion Dollars”

Forbes (September 18, 2012) “How The Next Generation Of Wealth Is
Revolutionizing Philanthropy As We Know It.”

Charitable Donors (And Charities) Hit Hard by Recession

We’ve all been affected by the financial crisis surrounding the recession. With less money coming in during these tight financial times, there is less available to spend …and also less to give to those who are in need. The Chronicle of Philanthropy offered some quantifiable perspective on the crisis in the non-profit sector over these past three years in an article titled, “Giving by the Rich Dropped $30-Billion During Recession.” Indeed, from 2007 to 2009 charitable giving dropped by some $31 billion amongst those with incomes of $200,000 or more according to recent data from the IRS. If you move to the other end and count individuals earning $100,000 or less annually, the charity deficit runs up another $4 billion or so. Keep in mind, since these are IRS numbers, this only reflects actual charitable contributions for which deductions were taken. Ultimately, these numbers will be seen and felt by the non-profit sector, to include your favorite charities and those they serve. As we approach the end of the year and the season of giving, have you made plans for your charitable gifts this year?

Reference: The Chronicle of Philanthropy (August 29, 2012) “Giving by the Rich Dropped $30-Billion During Recession”

Appraisals and Gift Taxes

If you are gifting to family this year and want to survive IRS challenges, then contact a professional appraiser promptly for the real worth of those assets! With the $5.12 million lifetime gift exclusion set to expire on December 31, 2012, many families will be looking to make significant wealth transfers this year, especially of family business interests. Accordingly, if your plans involve giving things rather than money, then the IRS will want to know the “value” of the gift itself. That’s why a professional appraisal is essential. A recent article by Reuters, titled Appraisers are your gatekeepers to gift tax deadline, shed more light on why this step is so important for gifting. Don’t let the increasing demand for appraisal services leave you short of getting your gifts assessed! If you want to take advantage of the generous gift tax laws, then there’s no time to waste.

Reference: Reuters (August 8, 2012) “Appraisers are your gatekeepers to gift tax deadline”

CHARITABLE GIVING / TAXES

The bridge is out. As the current tax code barrels down the track there seems to be no one in the engine room. If, or when, the tax code pitches (“sunsets” on December 31, 2012) over the edge, one major casualty will be the current charitable deductions. In many ways, charitable deductions are the common point of unity between savvy tax planners of all income levels. There are so many ways to give, and give wisely. This said, if the current laws change for the worse, either by expiring or by getting twisted in an unfavorable way, it could spell trouble in a host of ways for a host of people. To get a better handle on some problems that may arise and the kinds of steps to take in 2012 while there’s time, you will find plenty of resources to research. Want to get the 2012 deduction, but still have some extra time to think about which charities to benefit? If yes, then consider a “donor advised fund.” Read more about this approach in The Wall Street Journal article titled “Invasion of the Charity Snatchers!” So, you are concerned about facing a maximum cap on your eligible deductions read another WSJ article titled “Charitable Deductions Under Fire.” And, finally, if you are hoping to mitigate the tax burden of taking a required minimum distribution from your IRA by contributing it to charity instead, then don’t miss the Forbes article titled “The IRA Charitable Donation in 2012.” In conclusion, although there remains great uncertainty regarding the future of charitable tax planning, there is plenty of information to keep you informed.

Reference: The Wall Street Journal (June 8, 2012) “Invasion of the Charity Snatchers!”

The Wall Street Journal (June 8, 2012) “Charitable Deductions Under Fire”

Forbes (May 26, 2012) “The IRA Charitable Donation in 2012”

Giving Real Estate to Charity? (Remember the Appraisal!)

When it comes to charitable giving success, you must dot all the i’s and cross all the t’s. Remember, with the IRS and the tax court, the devil truly is in the details. This was the lesson Joseph Mohamed, Sr., a generous (and wealthy) real estate developer, recently learned. Rueters recently reported on his case in an article titled “A harsh lesson on charitable contributions.” It seems Mr. Mohamed had more than the requisite charitable intent but failed to follow the strict rules required to claim the deduction for his generous contribution of real estate worth in excess of $18.5 million. The problem? If you make a charitable contribution in the form of real property worth more than $5,000, then the real estate must be properly appraised and the appraisal must accompany the donation form. Unfortunately, Mr. Mohamed (who, ironically, is a certified appraiser) failed to follow this fundamental requirement. Even though the tax court conceded that the real estate in question likely was worth at least $18.5 million, the deduction was not granted.

Reference: Reuters (June 1, 2012) “A harsh lesson on charitable contributions”