Financial Planning for
Charitable Giving ’Tis the season to consider short- and long-term gift giving options BY WHAT’S UP? MEDIA
Americans are characteristically inclined toward being generous—giving up precious time, sharing practical knowledge, and donating money to assist those less fortunate in our society. While our generosity is personally rewarding, the charitable contributions we make entitle us to benefits provided for in the tax code— one being the tax-saving advantages associated with our financial support of the causes we care deeply about. With the recent changes in federal tax laws and varying economic forecasts, coupled with end-of-the-year financial tidying, it’s a good time to take stock of your personal finances and make some decisions that may have been on hold. Consulting with a financial advisor or estate-planning specialist is a wise first step. You should also discuss how their fees are structured for the expertise you will require. Estate-planning requires a strategy for maximizing and preserving assets, minimizing tax obligations, maintaining overall financial health, and
reaching long-term goals. Part of the process involves a well-developed plan for charitable giving whereby your gifts allow you certain tax benefits—if you itemize deductions on your federal tax return and the donations are made to IRS-approved, “qualified charitable organizations” that exist and operate exclusively to support public purposes, such as tax exempt, 501(c) (3) nonprofits. These generally include cultural, educational, health, human services, religious, scientific, fraternal, veterans’ groups, and, with restrictions, state and local governments. The IRS maintains an up-to-date list of qualifying organizations and “qualified charitable organizations” in detail. Before giving to any charity, check its financial statements to ensure donations are responsibly managed and spent primarily on its programs and stated mission—not on salaries and fundraising. Charity ratings, statistics on charitable giving, and a host of other useful information is available on various Internet websites.
There are many options for supporting “qualified” charities and benefiting from tax savings; advantages and tax implications depend upon the type of gift, how it’s gifted, and other considerations. Each type of donation has annual limits on the amount you can deduct. In planning your gifting strategy, you’ll need to consider:
1. Where you want your assets to go 2. Who your beneficiaries will be 3. How your assets will be titled, particularly when it comes to ownership of trusts 4. Asset management 5. Whether gifts will be outright, term-limited, or deferred 6. Whether gifts provide income for you, as well as benefit your heirs and charity 7. Tax implications, and make decisions about many other important factors
In our region, the Community Foundation of Anne Arundel County and Mid-Shore Community Foundation in Easton, among several others, are public charities that manage charitable gifts to 501(c)(3)
nonprofit organizations. Donors are guided through the maze of gifting options, and vehicles are tailored to their personal philanthropic goals. Both make gift-giving easy and offer you the alternative to either: 1) support charities through existing community foundation funds, or 2) establish a private family foundation by starting your own fund for philanthropic giving that operates as a tax-exempt, 501(c)(3) nonprofit without subjecting you to the associated tax burdens and administrative headaches. Whatever your long-term charitable or financial goals may be, a financial professional can guide you through the maze of options and suggest the charitable-giving “vehicles” most suited to your particular needs and desired outcomes. Below are some options to consider when structuring a plan to preserve your wealth, create a lasting legacy, and provide for your heirs—so that they, too, can show generosity through meaningful contributions of their own.
whatsupmag.com | November 2020 | What’s Up? Eastern Shore
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