Public charities are not shy about asking us for money — they depend on our gifts to carry out their philanthropic purposes.

Deciding which charities to support can be a difficult task, because there are many worthy causes and most of us do not have unlimited bank accounts from which to draw.

Giving your retirement assets to your loved ones or to a nonprofit charity leads to many benefits. How will you divide your wealth?

Giving your retirement assets to your loved ones or to a nonprofit charity leads to many benefits. How will you divide your wealth?

The following are some suggestions for wise, charitable giving:

Do Your Homework

The good works of charities often overlap and some groups are more effective than others. To help you rate and compare established charities, visit websites such as www.charitynavigator.org and www.charitywatch.org. Know how much of your gift will go to charitable work versus administrative and fundraising overhead. Of course, running a charity costs money. Raising money also costs money. If these expenses exceed 25 percent of a charity’s revenue, you should ask why. If the charity cannot offer a good explanation, you may want to consider giving to other groups, instead.

Don’t Sell an Appreciated Asset for Cash

If you own Apple stock that you bought in 2006 for $10 per share, don’t sell it now at $150 per share to raise the cash for a charitable gift. You will be allowed an income tax deduction for your cash gift, but you also will be liable for capital gains tax on the difference between the $150 sale price of the stock and the $10 spent to buy that stock.

As a result, you will have less after-tax cash for the charity and your deduction will be limited to the amount of your gift. Instead, think about giving the stock to the charity and receive a larger deduction. The charity then can sell the stock and convert to cash.

The charity will not have to pay capital gains tax and you will receive a deduction for the full, fair-market value of the stock at the time you bestow the gift.

Give from Your Retirement Plan Assets

If you give retirement plan assets to your loved ones upon your death, they’ll likely pay income tax on those assets, resulting in less cash in their pockets. However, if you give those same assets to charity, there will be no income tax payable. To the extent that you can, name charities as beneficiaries of your retirement plan assets and use your non-taxable assets for making gifts to individuals.

If you have reached the age of 70-1/2 and have taken required minimum distributions (RMDs) from your retirement plan, you can give up to $100,000 of your annual RMD to charity. You will not get a deduction for your gift, but you will not have to pay income tax on the gifted portion of your RMD. This works out to be a “win-win” for you and the charity.


SCOTT MAKUAKANE, Counselor at Law
Focusing exclusively on estate planning and trust law.

www.est8planning.com
O‘ahu: 808-587-8227  | 
maku@est8planning.com

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