Learn about the types, benefits of PLANNED GIVING

By Celeste Edenloff Alexandria Echo Press

People can impact their community’s future through planned giving. According to the Alexandria Area Community Foundation’s executive director, A.J. Koewler, planned giving helps people meet their personal, financial and estate planning goals by making a lifetime or testamentary charitable gift.

And that doesn’t always mean donating cash, said Koewler.

Through the AACF, there are four other ways to give, including through the gifts of stocks and bonds, real estate, retirement assets and insurance.

In this first of a two-part series, Koewler looks at the gifts of stocks and bonds and also the gift of real estate.

Stocks And Bonds

Donating appreciated securities, including stocks or bonds, is an easy and tax-effective way for people to make a gift to a charitable fund with the AACF, said Koewler.

The benefits of gifts of stocks and bonds, she said, include the following:

Avoid paying capital gains tax on the sale of appreciated stock.

 Receive a charitable income tax deduction.

Use the proceeds from the sale of the stock or bond to support AACF.

She also said that there are special rules for valuing a gift of stock. The value of a charitable gift of stock is determined by taking the mean between the high and low stock price on the date of the gift. Mutual fund shares are valued using the closing price for the fund on the date of the gift.

Real Estate

Donating appreciated real estate, such as a home, vacation property, undeveloped land, farmland, ranch or commercial property can make a great charitable gift to support the causes you care most about by setting up a fund with AACF.

Koewler listed some benefits to the gift of real estate, including the following:

Avoid paying capital gains tax on the sale of the real estate.

 Receive a charitable income tax deduction based on the value of the gift.

Leave a lasting legacy and support the causes you care about most.

Real property may be given to AACF by executing or signing a deed transferring ownership, said Koewler. People may deed part or all of their real property to AACF or a planned giving vehicle. The gift will generally be based on the property’s fair market value, which must be established by an independent appraisal. Here are some ways real estate may be gifted, according to Koewler.

An outright gift – When you make a gift of real estate you have owned longer than one year, you qualify for a federal income tax charitable deduction equal to the property’s full fair market value. This deduction lets you reduce the cost of making the gift and frees cash that otherwise would have been used to pay taxes. By donating the property to AACF, you also eliminate capital gains tax on its appreciation.

A gift in your will or living trust – In as little as one sentence or two, you can ensure that your support of the organizations you care most about can be continued into perpetuity. A gift of real estate in your will or trust allows you the flexibility to change your mind.

A retained life estate – Perhaps the tax advantages of a gift of real estate are appealing to you but you want to continue using the property during your lifetime. You can transfer the property to AACF but keep the right to occupy the property. You continue to pay real estate taxes, maintenance and insurance. Because your gift would be irrevocable, you would qualify for the federal income tax charitable deduction for a portion of your home’s value.

A bargain sale – Selling your property to the AACF at less than fair market value is called “a bargain sale.” The difference between the actual value and the sale price is considered a gift to the AACF. This type of real estate gift can be a useful way to dispose of property that has increased in value, and it is the only gift vehicle that can give you a lump sum of cash and a charitable deduction (when you itemize) at the same time.

A charitable remainder trust – Real estate works well with only certain variations of charitable remainder trusts. You can contribute any type of appreciated real estate you’ve owned for more than one year, provided it’s unmortgaged, in exchange for an income stream for life or a term of up to 20 years. The donated property may be a residence (a personal residence must be vacant upon contribution), undeveloped land, a farm or commercial property. Your estate planning attorney, who will draft your trust, can give you more details.

A charitable lead trust – You could consider funding a charitable lead trust with real estate that is income-producing and expected to increase in value over the term of the trust. It’s a great way to transfer appreciated real estate to your family and benefit the causes you care about most.

A donor advised fund – Using a gift of real estate to establish a donor advised fund is something that intrigues many individuals. By gifting real estate, you avoid capital gains taxes and qualify for a federal income tax deduction based on the fair market value of the property when you itemize on your taxes.