Magnify the impact of your gift
December 18, 2016
With Christmas and the year end approaching, it is an excellent time to look back on the year, count your blessings, and plan final end-of-year gifts. The reasons for giving are varied, but by strategically gifting you can magnify the impact of your gift. Here are some of the ways you can gift:
One-time, Direct Gifts to Individuals: The IRS Code limits the gifts one person can give to another person to $14,000.00 per year; or, an unlimited amount directly to a medical facility for another person's medical expenses; or, an unlimited amount directly to an accredited education institution for another person's education expenses. Unfortunately, funding a 529 Plan or Education Savings account does not qualify for the education gifting exemption. This means that you may gift up to $14,000 to one other person, but also help them by directly paying for medical or educational expenses. Couples may give a gift totaling $28,000.
One-time, Direct Gifts to Charity: This has the dual effect of reducing your income taxes and your estate for tax purposes. There is no limit on the amount you may give directly to charity. The IRS defines charity as an "exempt organization"; you may check the IRS website to confirm that an organization is exempt at https://www.irs.gov/charities-non-profits/exempt-organizations-select-check. You may choose to gift real property, stock, or other business assets, which would allow the charitable organization to receive the entire value of the sale, and not incur any capital gains taxes.
Donor Advised Funds: A donor advised fund is an investment account established through a reputable investment advisor. You can donate cash, stocks, real estate or other assets and receive an immediate charitable tax deduction. However, the gift grows in the account until you designate what IRS-qualified charity the funds should be distributed to. This allows your gift to grow income and capital gains tax-free while permitting you the freedom to decide to whom, and when, the gift should be distributed.
Endowments: There are several types of endowments, but the basic structure takes a gift and manages it for a long period of time to benefit a certain charity, establish a scholarship or establish an ongoing grant program. They can be funded from a single or multiple gifts and from a single gifter or from a group. Endowments are often managed professionally with a board of individuals determining how best to spend the funds. Our office has worked with clients to establish scholarship and grant endowments that are administered by organizations like Soroptomist International and the Nevada Land Trust.
Charitable Trusts & Foundations: For larger charitable gifts, and families that desire to instill the value of giving inter-generationally, charitable trusts or private foundations may be established to provide centralized management of the client's charitable gifts. These kinds of trusts and foundations can be created during life or after so that they can provide the benefit of blessing the charitable cause that the founder is passionate about, but also provide tax deductions. These organizations can also be created to last for generations, allowing the founder's passion for giving to be instilled in their descendants.
A Caveat: If you are engaging in this type of gifting, we encourage you to review this matter with your accountant and attorney. Every person and every situation is unique, and you should be fully aware of the tax and legal consequences of large, systematic gifts.
Cassandra Jones and Michael Millward are the attorneys of Heritage Law Group, P.C. Both are residents of Gardnerville, focusing their law practice on estate planning, business planning, and probate. They can be reached at 782-0040 or http://www.HeritageNevada.com.