Christmas is a season for kindling the fire for hospitality in the hall, the genial flame of charity in the heart. ~ Washington Irving
My favorite charity is the Westfield Area Y. I get a lot of pleasure from making a difference to kids wrestling with obesity or a child that needs safe and nurturing day care because their parent is ill and struggling to make ends meet. The Y with my help makes a tremendous difference in their lives. I generously give of my time, talents and treasure. I am deeply committed to the mission of youth development, healthy living and strengthening community. Do you have a favorite charity?
Philanthropy cannot only give you great personal satisfaction, it can also give you a current income tax deduction, let you avoid capital gains tax, and reduce the amount of taxes your estate may owe when you die.
There are many ways to give to charity. You can make gifts during your lifetime or at your death. You can make gifts outright or use a trust. You can name a charity as a beneficiary in your will, or designate a charity as a beneficiary of your retirement plan or life insurance policy. Or, if your gift is substantial, you can establish a private foundation, community foundation, or donor-advised fund.
Making outright gifts
An outright gift is one that benefits the charity immediately and exclusively. With an outright gift you get an immediate income and gift tax deduction.
Make sure the charity is a qualified charity according to the IRS. Get a written receipt or keep a bank record for any cash donations, and get a written receipt for any property other than money.
Will or trust bequests and beneficiary designations
These gifts are made by including a provision in your will or trust document, or by using a beneficiary designation form. The charity receives the gift at your death, at which time your estate can take the income and estate tax deductions.
Another way for you to make charitable gifts is to create a charitable trust. You can name the charity as the sole beneficiary, or you can name a non-charitable beneficiary as well, splitting the beneficial interest (this is referred to as making a partial charitable gift). The most common types of trusts used to make partial gifts to charity are the charitable lead trust and the charitable remainder trust.
Charitable remainder trust
A charitable remainder trust is the mirror image of the charitable lead trust. Trust income is payable to you, your family members, or other heirs for a period of years, then the principal goes to your favorite charity. A charitable remainder trust can be beneficial because it provides you with a stream of current income–a desirable feature if there won’t be enough income from other sources.
Private family foundation
A private family foundation is a separate legal entity that can endure for many generations after your death. You create the foundation, then transfer assets to the foundation, which in turn makes grants to public charities. You and your descendants have complete control over which charities receive grants. But, unless you can contribute enough capital to generate funds for grants, the costs and complexities of a private foundation may not be worth it.
Tip: One rule of thumb is that you should be able to donate enough assets to generate at least $25,000 a year for grants.
If you want your dollars to be spent on improving the quality of life in a particular community, consider giving to a community foundation. Similar to a private foundation, a community foundation accepts donations from many sources, and is overseen by individuals familiar with the community’s particular needs, and professionals skilled at running a charitable organization.
Similar in some respects to a private foundation, a donor-advised fund offers an easier way for you to make a significant gift to charity over a long period of time. A donor-advised fund actually refers to an account that is held within a charitable organization. The charitable organization is a separate legal entity, but your account is not–it is merely a component of the charitable organization that holds the account.
Once you transfer assets to the account, the charitable organization becomes the legal owner of the assets and has ultimate control over them. You can only advise–not direct–the charitable organization on how your contributions will be distributed to other charities.
‘Tis love that makes the world go round, my baby.
Family, love and home for the holidays is what I crave at this time of year. My wish is for all of us to have a loving home and loving friends and family to share it with us. Blessings to the unfortunate amongst us that are suffering with a heavy heart and may they find peace.
Wishing you a happy and prosperous new year.