You are at: Planned Giving > For Advisors > Article of Month
Anita is a 78-year-old widow with a moderate-sized estate. While she doesn't receive much income, she lives comfortably on her late husband Jim's retirement plan. She and her husband met at college more than fifty years ago. When Jim was alive, they donated to their favorite charity every year. Now that Jim has passed on, Anita wants to continue their legacy of supporting the organization's mission. However, she is concerned that giving too much too quickly may cause her to sacrifice either her future standard of living or her children's inheritance. After much discussion with the major gifts officer at the charity and consultation with her estate planning attorney, she decides to include the charity in her estate plan with a $500,000 bequest of her late husband's retirement account combined with a relatively modest immediate gift of $40,000. With this blended gift, Anita is able to help the charity meet its immediate goals while also providing for the future. For her generosity, she will be entitled to a $40,000 charitable income tax deduction.
Bill is 75 years old and in good health. He has been a faithful supporter of his favorite charity for the past half century. Bill recently heard about an endowed gift and believes that would be a great way to continue to support the charity for years to come, even after he passes away. Bill doesn't want to dip too deeply into his savings all at once, however. Although he is in good health, he realizes that the uncertainties of advancing age could get expensive. Therefore, Bill decides to make a series of annual endowed gifts of $20,000 for the foreseeable future. This way, he is satisfied that he is protecting himself financially against the uncertainty of the future while also building up the charity's endowed fund. He also goes to see his lawyer to discuss executing a codicil to his will, intending to complete the endowment with a bequest of $500,000 from his estate. Bill will receive immediate charitable income tax deductions of $20,000 with each annual gift, potentially saving him $6,600 in taxes each year.
Collin is 72 years old. Last year, he began taking the required minimum distribution from his IRA. This increased his income so much that he was pushed into a higher tax bracket. He recently visited with his financial advisor and discussed ways to lessen his tax burden in the current year. His advisor mentioned the IRA charitable rollover. Collin learned that he could direct up to $100,000 from his IRA this year to a qualified charity. The amount transferred would count against his RMD, which means he would not have to pay any income tax on the charitable distribution. Collin is excited about this idea. He has been making regular gifts to charity, but by taking advantage of the IRA charitable rollover, Collin can continue to give without having to worry about bracket creep and higher taxes. Collin has also met with his estate planning attorney and has decided to designate his favorite charity as the beneficiary of his IRA. His charitable giving plan now includes making annual charitable gifts through an IRA rollover each year with the balance of the IRA designated to charity when he passes away.
Navigating the Unrelated Business Income Tax – Part II
Navigating the Unrelated Business Income Tax – Part I
Beneficiary Designations – Part IV
Beneficiary Designations – Part III
© Copyright 2018 Crescendo Interactive, Inc. All Rights Reserved.PRIVACY STATEMENTThis site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice.For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.