June 2000 Newsletter

Charitable Giving

As Julie Tripp said recently, "It's time to ‘commit charity.' Many individuals today have the motive, the means and the opportunity." This article will provide an overview of the various techniques and strategies that clients may use for charitable giving, which you can then discuss in more detail with your estate planning attorney and CPA. Let's start with the simpler and then advance to the more complex strategies.

Direct Gifts: Giving money to the charity of your choice is simple and quick. You receive an income tax deduction for the gift (as long as you itemize deductions on your tax return), and the charity can spend the money as it chooses. If you give appreciated stock or other assets, you also give away the income tax bill on any unrealized gain.

Volunteer Time: Giving time is another way to ‘commit charity.' There are many volunteer opportunities where you will feel greatly appreciated.

Giving Circles: Create a group of friends that pool funds and make joint decisions on charitable giving. The Washington Women's Foundation has 250 members who contribute $2,000 annually, and have committed $2 million over five years to finance projects they vote to fund.

Charitable Gift Account or Donor Advised Fund: Cash or securities can be contributed to a pooled fund that is professionally managed. You receive an income tax deduction for the amount of your gift when you contribute (subject to AGI limitations). You can then make recommendations for charitable grants of $500 or more at any time to support any number of charities. These are offered by mutual fund families and charitable organizations.

Community Foundations: Community foundations administer charitable gifts and bequests, and make grants to qualified charitable organizations. The Oregon Community Foundation was established in 1973 and offers a number of alternative funds donors can choose from, including donor advised funds.

Family Foundation: Families can create their own private foundation and retain personal control and flexibility over their giving. This is a nice way to involve all family members in charitable giving, and educate the next generation in your goals and values.

Charitable Lead Trust: You can set up a charitable trust and contribute funds that are invested. The income from the trust is given to charity each year for a certain number of years. Any balance in the trust at that time is distributed to beneficiaries, such as children or grandchildren. The income tax deduction for the donor is calculated at the time of the trust's funding.

Charitable Remainder Trust: This is just the reverse: the income from trust assets are given to non-charitable beneficiaries for a number of years (or lifetime), and the remainder of the assets are given to charity at the end of the income term. Donors can benefit by contributing appreciated but non- income-producing assets to the trust, and receive a lifetime cash flow.

Charitable Gift Annuity: This is a contract between the donor and the charity. Funds or securities are contributed and the donor designates a person to receive annuity payments (which can be paid over a lifetime, in a lump sum or in installment payments over a few years).

For example, Oregon Health Sciences Foundation has a college annuity plan that allows grandparents to make a charitable contribution today with a payout date of the grandchild's 18th birthday. The grandchild can receive a lump sum at age 18, or take the annuity in 4 annual installments during school. A $10,000 gift on behalf of a 7 year old child would produce a $4,275 charitable tax deduction for the grandparent donor, and payouts totaling $15,164, over the 4 years from the child's age 18- 21.

Supporting Organization: This structure provides more tax benefits than the family foundation and more control than a donor-advised fund. It is closely tied to a public charity or charities of the donor's choice, and the donor and family members can serve as board members, along with members appointed by the charity.

These are just a few ideas for you to consider for your charitable giving plans. Here are some resources:

Oregon Community Foundation - 503-227-6846
Northwest Giving Project - 503-226-6340
Oregon Health Sciences Foundation - 503-228-1730
McKenzie River Gathering Foundation - 503-289-1517

The Schwab Fund for Charitable Giving
1-800-746-6216 or http://www.schwabcharitable.org/

Vanguard Charitable Endowment Program
1-888-383-4483 or http://www.vanguardcharitable.org/

Charitable gifts can be made during lifetime or through a bequest in your will. The Leave a Legacy program is a public awareness campaign to encourage every person, regardless of income level, to make a will and designate a charity in it. Currently, 60% of Americans die without a will, and of those with a will, only 10% designate charities.

Lifetime gifts of cash to established charities, community foundations and supporting organizations can be deducted up to 50% of adjusted gross income (AGI); gifts of appreciated assets are limited to 30% of AGI. Cash gifts to private or family foundations are limited to 30% of AGI for cash and 20% of AGI for appreciated assets. Unused amounts can be carried forward and used for a number of tax years.

Investment Boot Camp

Our first presentation of the "all in one" investment program for clients and friends of the firm in April was a big success, so we are offering three more dates for this year. Most investment presentations tell you how to invest your money; this one tells you what investing really is, and why you need to care about risk. Call Betsy at 242-1715 to register for the date that works for you:

Saturday June 17- 9:30 to 11:30 am
Wednesday, September 20 - 3:30 to 5:30 pm
Friday, October 13 - 11:30 to 1:30 pm

On Our SOAG Reading Table

Unified Credit Amount Up

For the next two years, the amount of assets you can give away during lifetime or at death without estate taxes (the unified credit exclusion amount) has increased to $675,000. Future planned increases are:

2000-2001 $675,000
2002-2003 $700,000
2004 $850,000
2005 $950,000
2006 and later $1,000,000

Deborah will be out of the office on vacation from June 22 through July 1 and again from July 24 through September 4. Please contact Betsy or Steve Hewitt if you need anything during that time.

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