Sharon Thornton
JD, LLM, Exec. VP &
Chief Philanthropy Officer
Most people want to donate to causes they believe in deeply – whether it’s spur of the moment for an urgent need like the situation Houston is dealing with, or a larger donation to a nonprofit that benefits their own community.
It’s easy to open the wallet for smaller amounts, but the large gifts can be something many worry about. How can I donate the way I’d like, but without leaving myself vulnerable to later financial needs?
It’s so important to have a balanced approach to money, and planned giving is a way to meet those concerns. It’s possible to give now, but pay later. It’s even possible to give in a way that fuels tax benefits, diverting funds from Uncle Sam to Uncle Mark (ANY beneficiary – children, a spouse, etc.).
These three ideas are something you can discuss with any estate planning attorney.
1. Donate Real Estate.
Did you know it’s possible to donate the home you’re currently living in−and continue to live there for the remainder of your lifetime? The arrangement can include a spouse, too.
It’s an excellent way to support a nonprofit you care about in a major way that doesn’t change your lifestyle. For someone who isn’t concerned with leaving real estate to heirs, it can be a tidy solution.
Larger nonprofits (such as Sun Health Foundation) often have in-house legal counsel that can handle all paperwork for you at no charge, in gratitude for the gift, further softening any immediate financial impact.
2. Donate retirement plan assets or stock.
For those 70 ½ years of age or older, up to $100,000 can be donated from an IRA as an “IRA charitable rollover” without having to pay income tax on the money. For those who haven’t taken their required minimum distribution from their IRA, this counts. For the wealthy, donating the assets rather than taking their distribution may help the donor avoid certain penalties that come with a higher income, such as increased Medicare premiums.
There are other benefits, too. Not only is it not taxable for the charity, but the charitable deduction is not subject to the typical percentage limitation on charitable deductions. There’s also no capital gains that would come if someone were to sell their shares and donate the proceeds.
Gifts can range from a few hundred dollars to the full $100,000 and for married couples, both spouses may be eligible.
Depending on the size of a retirement account and total wealth of a donor, some never feel the impact of the donation and may even realize added income from the tax benefits.
When it comes to donating stock, the donor avoids capital gains tax, receives a charitable income tax deduction, and the gift can be made during the donor’s lifetime, after the donor and/or a spouse passes away, or at a specified date.
3. Donate benefits from a life insurance policy.
It’s very simple to name your favorite non-profit as the beneficiary of a life insurance policy. This is a wonderful way to make a larger gift than some can afford using their liquid financial resources. It also may be possible to enjoy immediate tax benefits, even though the donation will go to the charity at a later date. It can improve cash flow immediately as a charitable income tax deduction for the initial donation plus premiums paid in the future.
As with any financial strategy, it’s important to consult with experienced professionals, including legal counsel. State and federal regulations often vary from year to year, and discussing the full spectrum of estate planning options is in your best interests.
After all, making a fully educated decision is never a bad idea, right?
If you would like free, no-obligation assistance to learn more about charitable giving and how you might support Sun Health Foundation, Sharon Thornton, JD, LL.M, can be reached at 623-832-5582 or [email protected].
