© 2007 me™ (your money education resource™) 1 estate planning for financial planners chapter 9:...

© 2007 ME™ (Your Money Education Resource™)

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Estate Planningfor Financial Planners

Chapter 9:Charitable Giving

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© 2007 ME™ (Your Money Education Resource™)Updated on 12/12/06

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Charitable contributions Qualified organizations

Public charity: charitable, religious, education, government Not: your neighbor who lost his job; not Republicans

Private charity: foundation

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Lifetime Charitable Gifts Must give cash or property

Not value of time Only out-of-pocket expenses deductible

Must reduce contribution by value of benefit received Raffle tickets Right to purchase athletic tickets: 80%

Paid before end of year Credit cards

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Amount deductible Cash

50%: public charity Carryover for five years

Capital gain property: deduct FMV 30%: public charity Carryover for five years Elect 50% limit if use basis instead of

FMV

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Amount deductible Tangible personal property

Related use (car to car museum): deduct FMV 30%: public charity Carryover for five years Elect 50% limit if use cost instead of FMV

Unrelated use: deduct cost 50%: public charity Carryover for five years

Ordinary income property: deduct cost 50% Carryover for five years

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Substantiation

Must have: a bank record (check) for contribution or documentation from charity

No deduction for: Cash contributions to

Salvation Army Church?

They generally will provide documentation

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Substantiation

Noncash contributions Over $500: attach Form 8283 including

description No deduction for used underwear

Over $5,000: must have qualified appraisal

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IRA Contributions

Must be over 70 ½ Can contribute up to $100,000 per

person in 2014. Why do this?

Income tax savings RMD AGI limits

Estate tax savings

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Charitable Trusts Contribute appreciated property to trust Receive income for life

Portion capital gains, portion interest, portion return of basis

Get a charitable deduction for value of remainder interest Value of gift – PV annuity payments

Old person: value of remainder is large Section 7520 rate: used for discount

As of 01/14: 2.2%

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Trusts CRAT

Pays fixed amount or percentage of initial value to noncharitable benficiary Must be at least 5%- similar to a bond Must be paid even if need to reduce principal of

trust PV annuity increases as section 7520 rate

decreases Remainder goes to charity

Versus lead trust Value of remainder interest

Must be at least 10% of value of assets transferred to trust

Decreases as section 7520 rate decreases

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Trusts CRUT

Pays percentage of annual value to noncharitable beneficiary

Must be at least 5% of annual value Equity interest

Remainder goes to charity Versus lead trust

Value of remainder interest Can add assets to a CRUT; not CRAT

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Charitable Trusts Donor is happy

Charitable deduction for remainder interest Income for life Asset is removed from estate

Charity is happy Heirs are sad

Buy life insurance in ILIT to replace value of asset transferred to charity

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Pooled income fund

Combined with contributions of other individuals Provides diversification

Donor retains life interest Receive annual income based on

performance of fund Remainder goes to charity Value of remainder interest

© 2007 me™ (your money education resource™) 1 estate planning for financial planners chapter 9:...

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