Tuesday, January 15, 2019
Donating to charity can be done for a multitude of reasons: giving back to society, tax saving, creating or extending a family legacy, or standing behind a specific cause or foundation. Whatever the purpose behind the giving, it is important to understand the various ways you can give to maximize impact while reaping the applicable benefits.
Here are a number of avenues to donate your assets to charity.
- Outright Gifts of Cash, Securities and Real Estate
- This is the easiest way, and the majority of charities accept this method.
- Giving Tangibles
- Art and other collectibles are governed by different rules, and many charities may not be equipped to accept the gifts. If the organization is able to accept the gifts, the associated income tax deduction also depends on other factors.
- Charitable Gift Annuity
- This arrangement is part charitable gift, part purchase of an annuity contract with a term equal to the life of the donor.
- Donor-Advised Funds
- DAFs are accounts set up within a charitable organization, and the donor contributes personal assets to the account where the contribution can be invested and grow tax-free until a grant is made to a qualified charity.
- Retained Life Estate
- The donor can gift a home, farm, or other form of property to a charitable organization but retain a life estate. When the donor dies, the property passes to the charity.
- Family Foundations
- Foundations require significant administrative oversight, and the average person may not be able to create one. For those clients than can create a foundation, they can maintain complete control and pass that control on to others.
- Charitable Remainder Trust
- This is an irrevocable trust where the grantor or other non-charity receives a certain stream of income during the term of the trust, then the remainder passes to a charitable organization when the trust ceases to exist.
- Charitable Lead Trust
- This is an irrevocable trust where a charity or charities receive a certain amount during the term of the trust, then the remainder passes to the donor's heirs and the culmination of the trust.
- Charitable LLC
- This is a new method, and is governed by applicable state corporate law. The LLC is not tax-exempt, but the income tax liability as well as deductions and losses are passed through.
See Catherine Schnaubelt , 9 Ways to Gift Your Assets to Charity, Forbes, January 9, 2019.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.