giving does have its tax advantages ...

gifts help sidestep a
double tax trap

tax savings really
add up

Your heirs could be facing a sticky situation that you may not have considered.  Charitable giving may allow you to walk around this double tax trap. 

Legislation that allowed the accumulation of untaxed retirement plan assets encourages saving for retirement.  Retirement plans, however, were not expected to be distributed to heirs without the government collecting taxes on them at some point.  While taxes are assessed at the time of distribution for the asset owners, an even heavier tax awaits heirs of those accounts.

If a person a dies with retirement plan assets in his or her estate, those assets face not only estate taxation, but also income taxation.  For heirs, this double taxation means they may be left less than 35 cents on the dollar.

Attorneys and other estate planning professionals refer to retirement plans as IRD assets.  IRD stands for "income in respect of a decedent" and means essentially that these assets create income to the deceased person and are subject to an income tax. 

The sum of these taxes can be devastating and can reduce the amount that normally would be passed to heirs by more than 65 percent.

A case in point:  If an 85-year-old dies leaving his daughter $2 million in a retirement account, she will receive (assuming she's in the 35 percent tax bracket) only about 30 percent of it - the government will get the rest.

Because taxes are so high, many people consider using retirement assets to make a bequest to a charitable organization like ours will avoid the estate and income taxation of these assets.  Ask us about how we can help you sidestep this double tax trap.

Federal tax code provides for generous tax advantages in exchange for charitable giving.  And additional legislation under consideration could result in expanded tax benefits as a derivative of charitable giving.  Periodic surveys of donors show tax benefits are not the primary motivation for giving, but the advantages are not inconsequential, either.  Findings suggest about 40 percent of donors are influenced by potential tax advantages, especially if long-term capital gains can be shielded from the full blow of capital gains taxes.

In many instances, once the potential tax savings are quantified, you realize you can make a larger gift because the tax benefits have a leveraging effect on the gift process. 

The table below spells out nine different types of charitable gift arrangements, along with the tax benefits that accrue from each.  Note that "avoidance on gain" is mentioned in five of the nine types of gifts.

Charitable gifts generally result in a tax deduction for those who itemize on their federal tax returns.  That benefit shows on seven of the nine giving arrangements outlined in the table.

For contributions of cash to us, gifts are tax deductible (Schedule A of Form 1040) a deduction of up to 50 percent of your adjusted gross income is allowed each year.

If securities with long-term capital gain (held more than one year) are donated, a deduction equal to the market value at the time of the gift is allowed.  The gift is deductible up to 30 percent of your adjusted gross income.  And, with charitable gifts any excess may be carried forward for as much as five years.

Real estate and personal property donated as a charitable gift are deductible at fair market value up to 30 percent of your adjusted gross income.  For appreciated property, the savings can be substantial.