Wise Charitable Giving

Charities depend on gifts from people like us to do their good works. That’s why they are not shy about asking us for money. Here are some ideas about maximizing your charitable gifts.

 Do your homework. The good works that charities do often overlap, and some charities operate more efficiently than others. Websites like charitynavigator.org and charitywatch.org can help you rate and compare established charities to find out how much of your gift will go to actual charitable work versus the charity’s  administrative and fundraising overhead. Of course, it costs money to run a charity, and it also costs money to raise money. However, if these expenses exceed
25 percent of a charity’s revenue, you should consider alternatives.

 Don’t sell an appreciated asset to make a cash gift. If you own Apple stock that you bought for $10 per share, don’t sell it now at $175 per share to raise the cash to make a charitable gift. You will get an income tax deduction for your gift, but you will also be liable for capital gains tax on the difference between the $175 sale price of the stock and the $10 that you spent to buy it. You will have less after-tax cash to give the charity, and your deduction will be limited to the amount of your cash gift Instead, give the stock to the charity. This way, you will make a bigger gift and get a bigger deduction.Your deduction will be the full fair market value of the gifted stock. {Play}

 Consider making gifts from your retirement plans. If you give retirement plan assets to your loved ones after you die, they will have to pay income tax on those gifts. So name charities as beneficiaries of your retirement plans and give your non-taxable assets to individuals. If you have reached the age when you must take required minimum distributions (RMDs) from your retirement plan, you can direct up to $100,000 of your annual RMD to go to charity. You will not get a deduction, but you will not have to pay income tax on the gifted portion of your RMD. This works out better for you than a deduction.

SCOTT MAKUAKANE, Counselor at Law
Focusing exclusively on estate planning and trust law.
808-587-8227 | maku@est8planning.com


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