Philanthropy 101: Estate Planning During the Pandemic

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Posted: December 22, 2020
Category: SDSCF Blog
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Let’s take a minute and talk about giving – to your loved ones and to non-profits who are in such need these days. 

GIVING TO FAMILY AND LOVED ONES

My guess is that there is someone you know who is really hurting during this pandemic – maybe out of a job, lost a business, can’t afford a tutor or caregiver for his/her children, or the cost of care for a loved one. If you can afford it, why not help them now with a “warm hand” rather than with a “cold hand” after your death? 

Remember, you can give up to $15,000 each year to as many individuals as you wish without reporting the gifts to the IRS. You don’t pay tax and the recipient doesn’t pay any tax. 

You can also give more than the annual exclusion amount, but you are required to file a gift tax return then and any amount over $15,000 is deducted from the $11,580,000 exemption per person in 2020. For most individuals, that’s not an issue, but keep in mind that this could change in the future.

PHILANTHROPIC GIVING

Every day – especially now during the holiday season – you probably receive solicitations from non-profits asking you to make a charitable gift. They all are in great need these days. But how do you decide which ones to support? 

Start by asking these questions:

  • What are you passionate about? 
  • Can you afford the donation? 
  • Where will your dollars make a significant difference? 
  • Should your donation go to the local chapter or to national? 
  • Are you sure that the name of each charity is correct? (There are similar names of charities.)

Benefits of Giving Before the End of 2020

We don’t know what the future tax laws will be, so make your charitable gifts now to take advantage of the current deductions.

Giving from Your IRA

If you are 70 ½ or older, you are probably familiar with the qualified charitable distribution, whereby you can transfer all or a portion of your RMD right from your IRA to a charity or charities up to $100,000 a year. You pay no tax on this distribution from the IRA; however, you also don’t get a tax deduction. With the standard deduction as it is now, this may work well for you.  Even though nobody is required to withdraw his/her RMD in 2020, maybe you should give that amount to charity anyway? 

Making a Gift of Appreciated Stock

Another option for gifting to a non-profit during lifetime is to transfer appreciated shares of stock or appreciated interests in real property – and let the charity sell that asset. There are significant tax benefits to you in giving this way since you will be entitled to a tax deduction for the fair market value of the gift (not what you paid for it).

If you want to do legacy giving to non-profits,  consider naming charities as beneficiaries of your retirement accounts (not your Roth IRAs).  Remember, the non-profits pay no tax upon distribution, people do! 

The old-fashioned way of giving is to provide for your individual or charitable beneficiaries in your will, trust, or as a beneficiary of your life insurance by stating an amount or a percentage of your estate. That works well! 

Giving from a Donor Advised Fund

You may already have a donor-advised fund whereby you have already received a tax deduction when you funded your account.  The money is just sitting there, so this is a perfect time to distribute some of it to your favorite charities when they are providing services to those in need. If you don’t yet have a fund, opening one now at a community foundation is a great way to receive immediate tax benefits, support a local nonprofit, and have discretionary dollars to grant out to other organizations as you see fit in the future.

The last piece of advice: Be sure to consult with your trusted, experienced professional advisors, including your attorney, accountant and financial advisor – and plan ahead!



Nancy Spector is a certified specialist in estate planning, trust & probate law


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