Get
More from Giving
In 2001,
Americans gave more than $200 billion to charity.1
That’s roughly equal to Switzerland’s gross domestic product or more than
double Australia’s annual tax revenues.2
Donated assets can help needy people and worthy causes. They can also help
business owners reduce income taxes and potential estate taxes. IRS data shows
that more than half of deductible charitable contributions are made in cash.3
Yet there are other ways of giving that may help provide greater
dollar-for-dollar benefits to the giver and the receiver.
As you read about these strategies, consider whether it would be more beneficial
to give from personal or business assets.
Charitable Remainder Trust (CRT)
When a donor transfers assets to an irrevocable trust and names a charity as the
beneficiary, the donor may receive regular income payments from the trust
throughout his or her lifetime, even though the assets are typically no longer
considered part of the donor’s estate.4
Afterward, the charity receives what remains in the trust.5
Contributions aren’t limited to cash. Stocks, bonds, and real estate can
typically be placed in a CRT without the donor incurring capital gains taxes,
even if the assets are highly appreciated. Typically, the donor also receives a
current income tax deduction based on the present value of the future gift to
charity.
Charitable Lead Trust (CLT)
A
CLT is nearly the opposite of a CRT. Assets are placed in an irrevocable trust,
and the charity can receive income generated by the trust during the donor’s
lifetime. Afterward, the donor’s heirs receive what remains in the trust.
Determining whether to give personal or business assets depends on a range of
factors. For example, your business may be structured in a way that reaps a
greater tax benefit from charitable donations than if you were to give from
household assets. Your estate plan or spouse’s income and level of giving may
also influence which assets are best to give.
Giving can be a reward in itself. But a giving strategy with greater potential
benefits for the charity and your family can be even more rewarding.
1) Giving USA,
American Association of Fundraising Counsel, 2002
2) CIA World Factbook, 2002
3) Internal Revenue Service, 2002
4) The use of trusts involves a complex web of tax rules and regulations. You
should consider the counsel of an experienced tax professional before
implementing such strategies.
5) Bear in mind that not all charitable organizations are able to use all
possible gifts. It is prudent to check first. The type of organization you
select can also affect the tax benefits you receive.
© 2003
Emerald Publications
