Charitable Giving Is On The Rise
July 8, 2011
A recent report from the Giving USA Foundation and the Center on Philanthropy at Indiana University shows that charitable giving nationwide rose 3.8% in 2010. This increase comes after two years of steep declines. The study estimates that donations from all sources, including individuals and businesses, totaled $290.9 billion in 2010. This figure is still down from the peak of $310.6 billion in 2007.
Even during tough economic times, there are many compelling reasons to make charitable contributions:
- To leave a lasting message or to memorialize a family member or friend;
- To make a positive impact on or to improve the community in which you live;
- To help organizations that helped you as you grew up or that helped you get through hard times;
- A feeling of satisfaction – As Dr. Ellen Langer, a professor in the Psychology Department at Harvard University, says, “Giving makes us feel capable, competent, and generous…and it is important for our psychological well-being”; and
- Tax Savings – Charitable donations are tax deductible. These donations may reduce your taxable income and lower your tax bill.
The IRS has put together several tips to help ensure your contributions pay off on your tax return. First, if your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Additionally, you cannot deduct contributions made to specific individuals, political organizations and candidates. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game, or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution, and the amount of the contribution. To claim a deduction for contributions of cash or property of $250 or more you must have a bank record, payroll deduction records, or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
In addition to traditional lifetime gifts that most people think of when they think about charitable giving, many options are available as part of larger financial and estate plans. Options such as a traditional bequest in a will or living trust are available to almost anyone. It may also make sense to designate a charity as the beneficiary of your retirement plan or life insurance policy, or even to donate the life insurance policy itself to your favorite charity.
There are also ways to benefit your charity by partnering with the charity, and using methods such as a charitable remainder trust, charitable gift annuity, or charitable lead trust. A charitable remainder trust involves placing assets into a trust from which you or a designated beneficiary receives income for the remainder of the beneficiary’s life. The “gift” part of this trust is that after your or any named beneficiary’s lifetime, the remaining value of the assets in the trust then pass to the charitable organization. A charitable lead trust, on the other hand, is a trust created to reduce gift and estate taxes on assets you pass to your heirs. This is a complex giving option that involves establishing a trust either now (an inter vivos trust) or after your lifetime (a testamentary trust) that makes either a fixed or percentage payment to the charity for a set amount of time. After the time period is up, the principle in the trust then passes to your heirs. A charitable gift annuity typically involve transferring assets to a charitable organization in exchange for the charity’s contractual promise to make fixed annuity payments back to the donor.
All of these options should be completed in conjunction with a plan that takes into account your future need for these funds, and the possible tax implications of your decision. Before making any decisions, you should first consult with a knowledgeable elder law attorney and your financial advisor to ensure that you are making the correct choice that is suitable for your situation.
Regardless of how you choose to give, before you make any charitable gift, be sure to check out the organization at one or more of the charity watchdog websites, such aswww.charitynavigator.org or www.givewell.org. These organizations exist to help individuals make intelligent giving choices by providing information on charities and their financial health. If you are interested in making a donation for tax reasons, also review the list of organizations in IRS Publication 78 (available online at http://www.irs.gov/app/pub-78/) to see if the organization is eligible to receive tax-deductible charitable contributions.
More information about charitable giving is available on Oast & Hook’s website. Under the publications section, see the article entitled “What You Should Know About Planned Giving” and “Charitable Giving.” The attorneys at Oast & Hook can discuss with you how to best achieve you charitable intentions as part of a larger estate and financial plan. We can work with you to determine which charity may be best for you and how to implement your plan to have the maximum effect for both your charity and you. The attorneys at Oast & Hook can assist clients with their estate, financial, insurance, long-term care, veterans’ benefits and special needs planning issues.
Brian Boys is an elder law attorney with Oast & Hook, and he practices in the areas of estate planning, estate and trust administration, special needs planning, guardianships and conservatorships, and litigation. Mr. Boys also works with personal injury attorneys and their clients to provide consultation on issues ranging from estate planning, maintaining public benefits, and the need for a guardian and/or conservator.
O&H: Allie, we’ve heard that the current feline concierge at the Algonquin Hotel in New York City is an award winning cat. Please tell us about her.
Allie: Sure! The Algonquin has had a history of feline concierges dating back to the 1930s. Matilda, the current resident, is a Ragdoll who was named Cat of the Year at the Westchester (New York) Cat Show. She has the run of the hotel, except for the dining areas and kitchen, but prefers to watch the guests entering and leaving the hotel from her personal chaise lunge in the lobby. Her other favorite places include the baggage carts and behind the computer at the front desk. The general manager’s executive assistant helps answer her e-mail. For more information and to see a picture of this beautiful cat, please visit Matilda’s webpage atwww.algonquinhotel.com/algonquin-cat. Wow, I can see why Matilda won her special award; she is gorgeous. I enjoyed my days as Oast & Hook’s assistant office manager. Now I’m enjoying my retirement! See you next week!
If you are interested in having an Oast & Hook attorney speak at your event, phone Darcee Hale at 757-399-7506. Past topics include estate planning, long-term care planning and veterans benefits.
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