Assets for Charitable Giving
When thinking of making a charitable gift, the
first image that typically comes to mind is that of writing a check. While gifts of cash are easily
given and received, they may not always be a giver’s best alternative when looking at overall financial,
estate planning, family , and community goals. There are may other assets that may be gifted, each
with its own unique tax advantages. The following descriptions are examples of utilizing assets other
than cash as a gift.
Gifts of appreciated property such as
real estate and securities can generate a “double” tax benefit. In addition to receiving
an income tax charitable deduction for the full fair-market value of the property, the donor
escapes any potential tax on the capital-gain element in the gifted property if it were
instead sold. NOTE: To qualify for this “double” tax benefit, the property must have been
held for more than one year.
You can also donate tangible possessions such as collections of antiques, but be aware that the recipients of such
gifts typically sell them. If your intent is the maintenance and/or improvement of the asset, be specific with
your potential recipient(s). The size of your charitable deduction will depend on whether the recipient organization
can use the property in carrying out its charitable purposes, such as a gift of a painting to a museum. Your deduction
will be lower if the charity will sell the property rather than use it. Gifts of tangible property must also have been
held for more than a year to attain the potential tax benefits for the donor.
IRAs and Retirement Plans.
Retirement assets can be gifted through designation of a beneficiary, which avoids estate and income taxes and can
provide a sizeable gift to the recipient. During your lifetime, these assets can be transferred to a charitable
remainder trust, which can provide an income stream for a designated period with the balance of the trust then
passing to the charity. Further information on charitable remainder trust is found later. Please note that
there are income tax consequences if you use retirement assets to fund a charitable remainder trust. Check
with your advisor for details.
You can gift insurance policies by transferring ownership of the policy to the recipients, providing a tax
deduction at the time of the transfer. If you are paying premiums on the policy at the time of transfer,
you must continue the payments. The amount of your tax deduction will depend on a variety of circumstances,
including whether the policy is paid-up and whether there are outstanding loans, but will often be approximately
the policy’s cash surrender value. Keep in mind that other factors may affect your tax benefits depending on
your specific situation.