MCF Insights: The Time for Giving
By: Alan Carr
Why did American charitable donations increase five percent, to over four hundred billion dollars last year1? Is it because of the “Halo effect” that makes you feel great when you assist someone in need? Or is it because we truly want to help the people that are less fortunate than ourselves? No matter your reason, most people can agree that charitable giving is a great and necessary action. With the end of the year quickly approaching, the time for increased giving is around the corner as well. This article will provide an alternate view of a few reasons for philanthropic giving.
Tax Deductions
For people that that are not as altruistic, tax deductions are an additional reason that giving to others can benefit you. While sadly your contribution of hard labored hours cannot be deducted from your income tax, both property and monetary contributions are deductible2. For those filers who still itemize, these gifts are generally deducted using the fair market value (FMV) of the gift at the time of donation, and is limited by the donor’s adjusted gross income (AGI). While there are a few asset types limited to thirty percent of an individual’s AGI, the large majority of cash gifts to public charities can be up to a sixty percent deduction from AGI. You can also carry forward these excess contributions for up to five years.
Charitable Lead Trust
If the thought of giving away assets forever is a daunting thought, a charitable lead trust (CLT) may be appropriate for you. Through a CLT, you give your chosen charity use of an asset and the right to any income generated from the asset for an agreed upon amount of time3. After the specified amount of time has lapsed, the asset can revert back to yourself or whoever you choose. You may even receive an income tax deduction on the value given to the organization.
Leaving a Legacy
Throughout our lifetimes individuals grow connections to foundations that they enjoy supporting. For many this is an important aspect of their legacy that they do not want to fade away once they pass. It is possible to make sure that your legacy and your donations carry on by incorporating them into your estate planning4. This can not only ensure that your remaining assets will go to a good cause but also relieve your kin of the tax nightmares that can come from inheriting large assets. A second way to ensure that your legacy is properly preserved while you age is to incorporate altruistic giving through a life insurance policy5.
References:
1 USA, Written by Giving. “Giving USA 2018: Americans Gave $410.02 Billion to Charity in 2017, Crossing the $400 Billion Mark for the First Time.” Giving USA: 2015 Was America's Most Generous Year Ever | Giving USA, 13 June 2018, givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-charity-in-2017-crossing-the-400-billion-mark-for-the-first-time/.
2“Tax Benefits of Giving.” Charity Navigator - Rating for YMCA of Greater Omaha, Charity Navigator, 31 Jan. 2018, www.charitynavigator.org/index.cfm?bay=content.view&cpid=31.
3“Charitable Lead Trusts.” Fidelity Charitable, Fidelity, www.fidelitycharitable.org/philanthropy/charitable-lead-trusts.shtml.
4Schnaubelt, Catherine. “How To Incorporate Philanthropic Giving Into Your Estate Plan.” Forbes, Forbes Magazine, 11 Oct. 2018, www.forbes.com/sites/catherineschnaubelt/2018/10/11/how-to-incorporate-philanthropic-giving-into-your-estate-plan/#3ed81cfa6230.
5“Charitable Gifts of Life Insurance.” IRS Releases Publication on Sales and Other Dispositions of Assets | Planned Giving Design Center, 23 Apr. 2014, www.pgdc.com/pgdc/charitable-gifts-life-insurance.
*This article is published by MCF with permission.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Please click here to review our full disclosure.