November is the month of gratitude, so during this month, many charitable organizations and nonprofits have special campaigns and events. Nationwide, we have “Giving Tuesday” which is on the Tuesday after Thanksgiving (November 28th this year) and locally, we have “The Panhandle Gives” which is Monday, November 20th through Tuesday, November 28th this year. See https://www.givingtuesday.org/ and https://www.thepanhandlegives.org/. These programs ask us to slow down and focus on being thankful for our bounty and to help others less fortunate.
- Inter Vivos. Every year, there are several ways to give to your favorite public charitable organization:
Gifts of cash are the easiest gifts for you to make and for the charity to receive. Outright gifts of cash typically provide a charitable income tax deduction dollar for dollar up to 60% of your adjusted gross income (AGI). *
- A Qualified Charitable Distribution (QCD) is a gift of up to $100,000 from your traditional individual retirement account (IRA) (1) directly from your IRA custodian to the qualified nonprofit and (2) after the participant has obtained the age of 70 and a half. A QCD doesn’t qualify for a charitable income tax deduction, but it may lower your income tax bill that year by not having to pick up that amount as income on your own income tax return. (There is more to come on the specifics of this kind of giving in next month’s blog.)
- Gifts of appreciated stock that you have owned for at least a year are particularly beneficial to not only the nonprofit but also to you, the donor. Called harvesting charitable gains, when you identify securities in your portfolio that have an unrealized capital gain, gift them to charity, and the charity sells the securities, they receive the proceeds without having to pay the capital gains on the proceeds. You receive the charitable income tax deduction for the full amount of the proceeds that the charity receives up to 30% of your AGI* without either you or the charity paying the capital gains tax—a win/win for both!
- Gifts in trust in which you set up a structure during your life for a Trustee to manage assets either directly for the nonprofit or with a split interest with individuals such as family members. The split interest trusts can be structured as either a Charitable Lead Trust (CLT) (the charity receives distributions for a term of years or a triggering event and then the remainder is distributed to individuals such as family) or a Charitable Remainder Trust (CRT) (your individual beneficiaries receive income for a term of years, life, or a triggering event and then the remainder is distributed to charity). Depending on how the trust is structured, gifts in trust may provide you some sort of a charitable income tax deduction for the year created and funded.
The above discussion regarding inter vivos gifts applies to gifts to public charities. Gifts to private foundations have less favorable tax consequences that you should talk to your tax advisor about. Additionally, gifts of anything other than cash to a charity have complex rules so you should also consult with your tax advisor before making any of those gifts to ensure that they are handled correctly.
Testamentary. In addition to annual inter vivos gifts, many of us want to leave a charitable gift at our death:
- Gifts of cash or other assets outright and free of trust are the easiest gifts for your Executor to administer and for the charity to receive. Outright testamentary gifts of cash or other assets typically provide a charitable deduction for your Estate.
- Like inter vivos gifts in trust, testamentary gifts in trust can be structured for a Trustee to manage either directly for the nonprofit or with a split interest with individuals such as family members—CLTs or CRTs. Again, depending on how the trust is structured, gifts into charitable testamentary trusts may provide your Estate a charitable deduction for either income tax or estate tax purposes.
Regardless of how you designate your charitable gift at your death, please make sure to periodically check the name of your charitable gift recipient to ensure that it has not changed. Over the last several years, churches have disaffiliated from their nationwide denomination or have even changed denominations, so some church names have changed. Check your estate planning documents to make sure your gift follows your intended recipient. Additionally, although we never anticipate that our favorite charity will struggle or even end, please periodically check on your nonprofit to ensure that it is still alive and well—continuing to serve the purpose for which you have a passion.
Remember that you don’t always have to make a monetary gift to make a difference, there are non-monetary ways to help:
- Volunteer your time or talents with your local nonprofit, or
- Donate food, clothing, and other household items to those nonprofits whose mission is to redistribute to those in need.
Finally, if you don’t know which charity to give to based on your interests or you don’t know much about the charity you are thinking about giving to, go to www.Charitynavigator.org which helps identify charities based upon your interest and may even rate it based on its financial health, accountability and transparency. Or you can go to www.irs.gov to review whether your gift to a charity would provide an income tax deduction (please note that some unincorporated nonprofit organizations don’t obtain a tax exempt status and thus don’t show up on a search on the IRS website). But remember, whatever your financial situation or your passion, there is a way for you to help those less fortunate, not only every November, but every month of the year!
* Keep in mind, contributions in excess of the percentage limitations may be carried forward on your income tax return up to five subsequent years.