The very lifeblood of your favorite charity is the annual donations that come from regular donors. When a regular donor passes away or stops giving, it may be difficult for the charity to replace the needed income stream. One way to avoid this is for faithful donors to create lifetime endowments or to leave endowments in their estate plans. It doesn’t take an unusually large gift to make a difference.
If you annually contribute $100, then putting $2,000 in an endowment is enough for that level of annual giving to continue in perpetuity. This ratio holds up no matter how much you give each year. An endowment of 20 times an annual gift should allow for the same contribution to continue each year for long after you pass away or stop giving.
Contact your favorite charity for ideas about how to multiply the benefits of your gift — both for you at tax time and for the charity. If the charity is not geared up to manage endowments, you can create an endowment quickly and easily, with very few administration fees. Organizations like the Hawai‘i Community Foundation (which has offices in Honolulu, Waimea, Hilo, Li¯hue and Kahului, and can be found online at www.hawaiicommunityfoundation.org) or the Hawai‘i chapter of the National Christian Foundation (808-524-5678) will assist you.
Creating an endowment fund through an established charitable foundation can also enable you to make gifts to multiple charities. When you create your endowment fund, your gift is immediately tax-deductible (within limits prescribed by the Internal Revenue Code) because the foundation is itself a tax-exempt entity. You can then direct the foundation to send checks to all or any of the charities you support. You can tell the foundation to let the charities know that the gifts came from you or to issue your gifts anonymously.
Moreover, your endowment gift does not have to be cash. If you have stock or real estate that you are considering selling in order to make charitable gifts, you can put those assets directly into your endowment fund and let the foundation sell them. If you sell the assets yourself before you make your gift, you may have to report capital gains and pay taxes on those gains. Your net gift will be the amount of your sales proceeds minus sales costs and taxes.
On the other hand, if you give the assets to the foundation, the foundation can sell them and put the net proceeds into your endowment fund (with no taxes on capital gains), and your potential deduction will be the full fair market value of the gifted assets. If you give more than the law allows you to deduct in any one year, you can “carry forward” your gift and deduct a portion of it over each of the next five years or until you have fully deducted your gift, whichever comes first.
SCOTT MAKUAKANE, Counselor at Law
Focusing exclusively on estate planning and trust law.
Watch Scott’s TV show, Malama Kupuna Sundays at 8:30pm on KWHE, Oceanic Channel 11
www.est8planning.com | O‘ahu: 808-587-8227 | email@example.com