Charitable Giving

Make Giving Back Part of Your Financial Plan

Our reasons for giving to charity are as individual as we are. Many contribute out of a desire to give something back to communities or organizations that have helped them in the past, such as an alma mater, a youth organization or a hospice. Some give because of personally held values, principles or religious convictions. Others hope to create a legacy that will last long into the future.

Whatever their reasons, Americans give generously, even in challenging economic times. Charitable giving statistics reported by the National Philanthropic Trust show that 65 percent of U.S. households give to charity. Americans gave $298.3 billion in 2011, a nearly 4 percent increase from 2010.

Although many families and individuals give generously, the vast majority doesn’t give in a planned way. Most employ a charitable-giving strategy once referred to as checkbook philanthropy and which could now be called click-and-give philanthropy with the evolution of social media and the ease of online contributions. This really isn’t a strategy, but rather the unplanned giving of small amounts to a variety of charities, commonly in cash and often in reaction to solicitations with the best pitches.

Nearly every day new opportunities to donate money are presented to us via email, Facebook and other online venues for everything from celebrity Kickstarter projects to friends participating in walk-a-thons. There are many worthy causes, and it is wise to earmark a certain amount of funds annually to support the efforts of your friends and families raising money for causes that are important to them, as well as for  disaster relief and other needs, as they arise.

Yet, those who also plan their charitable giving enjoy many tangible benefits, in addition to the satisfaction of assisting the charity of their choice. Planned giving is an organized approach that evaluates your personal values, selects charitable organizations and gift-giving vehicles that best reflect those values, and maximizes the financial and tax benefits of the gifts.

According to the authors of Giving: Philanthropy for Everyone (Quantum Press), making planned charitable gifts during your lifetime can increase the value of your estate to pass to your heirs, can convert non-income-producing assets into an income stream for you, and can delay capital gains taxes on the sale of highly appreciated property. It can also help you achieve specific education, business and family goals.

Still, only a quarter of affluent households make planned gifts, according to a survey by Giving Capital. Why don’t more people plan their giving? There are several reasons. Among the most common is that planned giving takes time. Many people know little about the details or benefits of planned giving, so they put it off. Many also perceive planned giving as too complex and too expensive, and some worry about jeopardizing their own financial situation through giving.

A comprehensive giving plan can address all of these obstacles and concerns, while allowing you to make a positive and lasting impact to a charity that is important to you.

By |2019-08-14T14:00:12-07:00July 23rd, 2013|Charitable Giving, Estate Planning, Financial Planning|

Arizona Income Tax Credits Help Schools and Working Poor

Arizona offers several tax credits for individuals paying state income tax. They include the Working Poor Tax Credit for donations to qualified charitable organizations, the Public School Tax Credit (including charter schools), and the Private School Tuition Tax Credit. The credits do not reduce your tax liability; rather they allow you to specify how your state income tax dollars are used. You are permitted to take advantage of any or all of these tax credits each year, which can equate to hundreds of your tax dollars being donated to the worthy charities and schools of your choice.

How does it work? It’s pretty simple.

You give money to the qualified organization – for example, $200 to the Salvation Army, for the working poor credit. Then you complete Arizona form 321, that transfers to line 26 on Form 140 and you get 100 percent credit against line 19 (as though you had paid through withholding or quarterly estimates).

If you do your own taxes, read through the Arizona instructions carefully. For the most part, you can look at your form 140 line 19 to determine the maximum credit. Keep in mind, you must pay taxes to receive the credit. In addition, your credits can not exceed what you pay. For example, if you only pay $300 in state income tax, you may only claim $300 in credits in the current year.

These credits are fairly simple to apply, however everyone’s situation is different, and the rules can and do change from year to year. Take the time to review and understand the credits and rules each year.  (For example, there are now two private school credits; please read through carefully if you’re taking advantage of both private school credits).

Most qualified organizations do a good job of explaining the process, as well, so take a moment to explore their websites for information and instructions. You may also wish to consult with your tax advisor or financial planner for additional information and filing requirements of the individual tax credits.

For more information on the public school (including charter schools) and private school tuition tax credit donations, click this link to the Arizona Department of Revenue official site.

For more about the working poor tax credit, including a list of qualifying charitable organizations, click here.

By |2019-08-14T14:00:16-07:00November 27th, 2012|Charitable Giving, Taxes|

Family Foundations: An Estate Planning Option

A family foundation derives its assets from the members of a single family, in which the donor and the donor’s relatives play a significant role in managing the foundation. Aside from helping families channel their philanthropic ambitions, family foundations can form a legacy of community involvement and responsible citizenship for generations to come. Family foundations also offer potential tax- and estate-planning benefits for its founders.

There are two types of family foundations: private foundations and supporting organizations. Private foundations, the more common of the two, offer more flexibility and control (i.e., they can select and oversee their own board of directors and grant-making decisions), while supporting organizations enjoy more favorable tax treatment.

Gifts made to either type of family foundation are generally tax deductible from the donor’s annual income tax, yet these deductions differ depending on the foundation’s structure, the type of property or asset contributed, and the donor’s income level. As a general rule, all gifts to a family foundation are removed from the donor’s estate, avoiding estate or gift taxes.

By |2019-08-14T14:00:17-07:00August 15th, 2012|Charitable Giving, Estate Planning|

Charitable Giving and Estate Planning

Including charitable giving strategies within your estate plan can be an effective way for you and your family to enjoy an income stream during your lives, earn tax savings, and maintain a significant degree of control over assets.

Donor-advised funds are one of many options. A donor-advised fund is a tax-advantaged charitable giving vehicle that offers maximum flexibility to take tax deductions and recommend grants to charitable organizations. By definition, donor-advised funds are public charities under Section 501(c)(3) of the Internal Revenue Code, and contributions to such funds are tax deductible.

Donor-advised funds are particularly family-friendly, as parents and children can consolidate their giving activities through a single fund account. In addition, children can be named as successors to a fund, ensuring the continuation of a family’s giving legacy.

Another significant advantage of a donor-advised fund is its capacity to accept any one of a variety of assets as a charitable contribution. Checks/wire transfers, commercial paper, mutual fund shares, securities, bonds, and restricted stocks all are acceptable assets. In addition, the account has the potential to grow over time, increasing the donor’s giving power.

By |2019-08-14T14:00:17-07:00August 1st, 2012|Charitable Giving, Estate Planning|

Gifting: a win-win proposition

Did you know that there’s a wealth-transfer technique you can use to reduce your taxable estate and keep more of your assets for your heirs? You can make annual gifts of up to $13,000 ($26,000 per married couple) to as many people as you wish without incurring federal gift taxes.

An example: A married couple with three children could reduce their estate by $78,000 each year if $26,000 were given to each of their children.

Gifting can be used in a number of unique ways. You can use annual gifts to help build a college fund for a child, grandchild, relative or even a friend — by contributing to a 529 plan account, a Coverdell Education Savings Account, or a UGMA/UGTA account. In fact, 529 plans have special rules that allow you to make five years’ worth of contributions in one year without incurring any gift taxes — that’s $65,000 for individuals and $130,000 for married couples.

Gifts can also be used to build wealth for future generations, as well as help a child, relative or friend fund a down payment on a home, buy a car or start a business. Your financial advisor can help you determine how annual gifts might fit into your overall financial plan.

Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.