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An Overview of Charitable Giving Options

Explore various charitable giving options like planned gifts, charitable recipients, community foundations, and more. Learn about types of funds and organizations for effective estate planning and maximizing tax benefits. Understand strategies for current and deferred gifts, including charitable bequests and beneficiary designations. Discover the nuances of different assets, be it cash, property, or IRAs, and avoid common pitfalls in charitable giving. Navigate the complexities of charitable gift annuities and gain insights into the regulatory environment. Benefit from expert advice on structuring charitable gifts to align with your estate plan.

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An Overview of Charitable Giving Options

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  1. An Overview of Charitable Giving Options Southwest Washington Estate Planning Council October 14, 2014 Presented by Bill Zook Vice President PG Calc Incorporated

  2. Charitable Giving • Nature of Giver • Nature of Gift • Nature of Recipient • Parties Other Than Giver and Recipient • What’s Timeless, What’s Timely Overview of Charitable Giving Options

  3. Definitions • Planned Giving/Gift Planning • Planned Gift • Estate/Legacy Planning Overview of Charitable Giving Options

  4. Characteristics of Planned Gifts • Assets vs. Income • “Assisted Giving” vs. Solo Endeavor • Donor’s Timing vs. Charity’s Timing • Heart vs. Head • Endowment (vs.) Other Use • Deferred (vs.) Current Overview of Charitable Giving Options

  5. Types of Charitable Recipients • Various Public Charities • Community Foundations • Supporting Organizations • Private Operating Foundations • Private Non-operating Foundations Overview of Charitable Giving Options

  6. Various Public Charities • Many Organizations, Many Missions • Gifts: Unrestricted vs. Restricted • Superior Tax Benefits for Donors Overview of Charitable Giving Options

  7. Community Foundations • “Special” Public Charities • Make Grants to Other Pub. Chars. (Mostly) • Foci/Constituencies • Types of Funds Overview of Charitable Giving Options

  8. Community Foundation Funds • Unrestricted/Discretionary • Area-of-Interest • Designated • Donor Advised Overview of Charitable Giving Options

  9. Supporting Organizations • Three Types • Established by Donor or by Public Charity • Treated as Public Charity • Often Paired with Donor Advised Fund Overview of Charitable Giving Options

  10. Private Operating Foundations • Do What Public Charities Do • Not Publicly Supported • Treated as Public Charity Overview of Charitable Giving Options

  11. Private Non-operating Foundations • Make Grants to Public Charities (Mostly) • Not Publicly Supported • Inferior Tax Benefits for Donors Overview of Charitable Giving Options

  12. Continua of Control Public Charity Private Non-operating Foundation Donor Advised Fund Discretionary Fund Overview of Charitable Giving Options

  13. Universe of Planned Gifts • Current • Deferred Overview of Charitable Giving Options

  14. Current Gifts • Outright Transfers of Various Types of Assets (Irrevocable) • Bargain Sales (Irrevocable) • Charitable Lead Trusts (Irrevocable*) Overview of Charitable Giving Options

  15. Deferred Gifts • Bequests (Revocable) • Beneficiary Designations (Revocable) • Charitable Gift Annuities (Irrevocable) • Charitable Remainder Trusts (Irrevocable*) • Pooled Income Funds (Irrevocable) • Retained Life Estates (Irrevocable) Overview of Charitable Giving Options

  16. Outright Transfers • Cash • Long-Term Appreciated Capital Assets (Don’t Sell!) • Ordinary Income Property • Special Case: Tangible Personal Property Overview of Charitable Giving Options

  17. Outright Transfers: What Can Go Wrong • LTCG Assets Sold, Not Transferred • STCG Assets Used to Make Gift • Loss Assets Used to Make Gift • Tangible P. P. Dynamics Not Understood • Transfer Delays • Valuation Misunderstood Overview of Charitable Giving Options

  18. Charitable Bequests • Three Basic Ways to Structure • Contingency Options • Estate Tax Benefits Overview of Charitable Giving Options

  19. Bequests: What Can Go Wrong • Wrong Charity Is Named • Donor Loses Capacity to Revise • Changes in Estate Size Skew Unrevised Plan • Donor Fails to Clear Restrictions with Charity Overview of Charitable Giving Options

  20. Beneficiary Designations • Bank/Brokerage Accounts • Life Insurance Policies • Some Commercial Annuity Contracts • IRAs/Qualified Retirement Plans • Probate & Other Estate Planning Issues Overview of Charitable Giving Options

  21. Beneficiary Designations: What Can Go Wrong • Designation Not Coordinated with Rest of Estate Plan • Custom Beneficiary Designation Resisted by Financial Institution • Pecuniary Designation Incapable of Being Fulfilled Overview of Charitable Giving Options

  22. “IRD” Assets • Basis Can’t Be Stepped up • IRD Not Taxable for Charities • Mix and Match Overview of Charitable Giving Options

  23. Lifetime Gifts of IRA/QRP Assets • A Wash at Best • Withdraw Cash, Give LTG Capital Assets • “Charitable Rollovers” (IRA vs. QRP) Overview of Charitable Giving Options

  24. Charitable Gift Annuities • Contractually Fixed Annual Payments for 1 or 2 Lives • Typically Funded with Cash or LTCG Marketable Securities • Attractive Rates • Immediate or Deferred Payments • Partial Charitable Deduction • Favorable Taxation of Payments Overview of Charitable Giving Options

  25. CGAs “vs.” Commercial Annuities • Extent of Regulation (by WA, Other States, & U.S.) • Payment Options • Annuity Rates • “Reinsurance” Options Overview of Charitable Giving Options

  26. Gift Annuities: What Can Go Wrong • Gift Not Coordinated with Rest of Estate Plan • Donor Regards Arrangement as Strictly Financial • Charity Exhausts Contribution Overview of Charitable Giving Options

  27. Charitable Remainder Trusts • Two Types: CRATs & CRUTs • Various Conditions Must Be Met • Typically Funded with LTCG Assets • Partial Charitable Deduction • Payment Taxation Depends on Investment Results Overview of Charitable Giving Options

  28. CRTs (continued) • Payments Can Be “Deferred” with Some CRUTs • Trustee Issues/Options • “Non-Qualified” CRTs Overview of Charitable Giving Options

  29. CRTs: What Can Go Wrong • Payout Rate Is Too High • Inappropriate Structure Selected • Improper Assets/Investments • Trust Taxation Not Understood • Incompetent Trustee • Insufficient Assets • Trust’s Name Exposes Donor’s Identity Overview of Charitable Giving Options

  30. Charitable Lead Trusts • Two Types: CLATs and CLUTs • CLTs Are Not Tax Exempt • Still, Certain Conditions Must Be Met • Grantor vs. Non-grantor • Current Appeal of CLATs Overview of Charitable Giving Options

  31. CLTs: What Can Go Wrong • Improper Assets/Investments • Payout Rate Too High/Trust Term Too Long Overview of Charitable Giving Options

  32. “Charitable GRAT” Alternative • GRAT Basics • No Choice of Discount Rate • Donor Shares GRAT Benefit with Charity • Benefit Can Be Cash or Securities Overview of Charitable Giving Options

  33. Retained Life Estate Arrangements • RLE Basics • Low Discount Rate = Higher Deduction • Options If Donor/Tenant Wants to Move Overview of Charitable Giving Options

  34. RLEs: What Can Go Wrong • Life Tenant Fails to Maintain Property Adequately • Life Tenant and Charity Fail to Agree on Details If Property Needs to Be Repaired or Sold Overview of Charitable Giving Options

  35. Charitable Bargain Sales • Mechanics • Tax Deduction • Prorating of Basis • Suitable Types of Assets • Installment Option Overview of Charitable Giving Options

  36. Bargain Sales: What Can Go Wrong • Capital Gain Recognition Out of Sync with Availability of Charitable Deduction Overview of Charitable Giving Options

  37. Relevant Categories of Life Insurance • Whole Life • Universal Life • Term Overview of Charitable Giving Options

  38. Giving Options with Life Insurance • Transfer of Paid-up Policy • Transfer of Policy with Premiums Owing • Purchase of New Policy • Choices for Charity, Once It Owns Policy • Beneficiary Designations • Other Options??? Overview of Charitable Giving Options

  39. Life Insurance: What Can Go Wrong • If Payments Still Need to Be Made on Policy Owned by Charity, Donor Stops Making Them • Charity Makes Disposition of Policy It Owns That Upsets Donor Overview of Charitable Giving Options

  40. Wealth Replacement Insurance • Outright Gifts vs. Life Income Gifts • What Is Amount of Wealth to Be Replaced? Overview of Charitable Giving Options

  41. Dispositions of CRT Income Interests • Complete or Partial “Cash-out” • Complete or Partial Gift to Remainder Beneficiary(ies) • Conversion to New Life Income Arrangement Overview of Charitable Giving Options

  42. Tax Considerations • Cost Basis of Income Interest Is Zero • Low Discount Rate = Major Roadblock for Some CRUTs • The More Beneficiaries, the More Complexity • Appraisal Required If Charitable Disposition Made Overview of Charitable Giving Options

  43. Non-tax Considerations • Spendthrift Provision Can Be a Problem • Court or Attorney General May Need to Be Involved • Winding up Trust Requires Careful Attention Overview of Charitable Giving Options

  44. Dispositions of Other Non-charitable Interests • CGA: Cash out, Surrender, Convert to New CGA • PIF: Cash out, Surrender, Convert to CGA • RLE: Addressed Previously • CLT: Charity Cash-out May Be Possible Overview of Charitable Giving Options

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