Wealth – Give Smart, Feel Good

Are you receiving the optimum benefits of your own generosity?

Ellen Paris. Social Scene 0 Comments

As we begin a new season — one busy with gala fundraisers for so many worthy charities — we’re reminded to plan our giving and evaluate the tax benefits we gain in return for our philanthropic initiatives. Consider these six ways to give — andthe tax implications for each.

1 Charitable Remainder Trust
A charitable remainder trust allows you to transfer property — usually appreciated stock or real estate — into a trust that pays an income for life. Upon your death, the trust terminates, with the remainder passing to your chosen charities. “The tax advantage is you take the income tax deduction immediately for the asset placed in the trust. The asset can be sold by the trust without any capital gains impact for you,” explains Stephen Nill, an attorney specializing in nonprofit giving and CEO of the 120,000-member charitychannel.com.  

2 Charitable Lead Trust
“This is a popular way to give a substantial amount of money,” says Dick Zeigler, a vice president with the Merrill Lynch Global Private Group in Indian Wells. It allows you to transfer property or stock into a trust. Income generated from that asset goes to a charitable organization for a period defined by the trust. At the end of the trust’s term, the principal goes to you or your heirs. This trust can generate a gift tax deduction, so you can transfer property tax-free to your heirs.
3 Charitable Gift Annuity
A charitable gift annuity will provide an income tax deduction and income stream for an agreed period of time. Use caution, because you are banking on the credit- worthiness of the charity. To offer a gift annuity, a charity must be licensed with the state Department of Insurance.

4 Collections
Donating collections, especially art, can be tricky due to valuation issues. Obviously, you want the highest appraisal possible to generate the most generous deduction while staying within IRS guidelines.

5 Donor Advised Funds
Donor advised funds (Fidelity Investments runs one of the country’s largest) are becoming an increasingly popular method of transferring assets to a foundation. The National Philanthropic Trust and the Palm Desert-based Desert Community Foundation are donor advised funds. Donations are made in cash or liquid stock and the income tax deduction taken immediately. You avoid capital gains taxes on assets, because they were not sold prior to inclusion in the fund. You can place the gift with the donor advised fund, then decide later the specific charities and organizations you want to gift.

6 Gifts in Kind
When local homebuilder Peter Solomon of Regency Homes donated $2 million gift to Eisenhower Medical Center, a portion involved engineering and construction of a road at EMC. “We always welcome gifts in kind,” says Lee Vanderbeck, executive director of the Children’s Discovery Museum of the Desert. “The landscape architecture for our building was a gift in kind.” 

— Ellen Paris

How to Evaluate a Charity

Responsible philanthropy is rewarding and challenging for donors. Due diligence is always key while keeping your personal interests at the forefront.

“Interview three board members without the organization’s executive director present,” advises Renata Rafferty, president of Indian Wells-based Rafferty Consulting Group.

Inquire about the organization’s current financial picture and its strategic plan for the next three years. Request board of trustees’ meeting minutes and financials, including budgets and variance reports.

Determine if the organization is engaged in any legal actions. Is any debt being carried? Rafferty cautions, “You don’t want to give money to fight a lawsuit or pay off settlement on a lawsuit or invest in a capital project with a lot of debt.”

Attend a board meeting unannounced. What’s on the agenda: the color of napkins at a ball or upcoming programs, future plans, and finances? Make sure financial documents are being distributed to board members. 

Make an incognito site visit if you’re considering a local organization providing community services or programs. Palm Springs resident Earl Greenburg contributes generously across the valley. “It’s wonderful when you can see, feel, and touch the benefit your gift is affording,” he beams.
— E.P.


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