PG Calc’s March Featured Article discussed the practical challenges of making a charity the beneficiary of an IRA and other qualified plans upon the donor’s death. The process of completing the beneficiary designation form is complicated and bureaucratic. And then there's the matter of collecting the proceeds after the donor's death.
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Most gift planning professionals have heard of charitable lead trusts (CLTs), where the charitable beneficiary receives payments, typically for a term of years, and the remainder is distributed to one or more non-charitable beneficiaries at the end of the term. Historically, these trusts have been used – or at least contemplated – by donors whose wealth exposes them potentially to paying gift or estate tax. This type of lead trust is called a non-grantor charitable lead trust. At the end of the term, the assets remaining in the trust are distributed to persons other than the donor (grantor), and most typically, to members of the donor’s family.
I’ll tell you what’s up. The IRS discount rate, the interest rate used in computing the deduction for gift annuities, charitable remainder trusts, retained life estates, and charitable lead trusts. It’s edged upward a full percent in the last 6 months, and it appears likely to continue that trend for the rest of 2018 as the Federal Reserve continues to gradually raise interest rates.
Charities market beneficiary designations of 401(k)s, IRAs and other qualified plans as an easy, low-cost way to make a tax-wise planned gift. This is true for the most part. The details of completing a beneficiary designation can be more challenging than they appear, however. There are pitfalls and potential mistakes that can result in a failed beneficiary designation and no gift to charity.
The new tax law, which went into effect January 1st, has prompted a lot of discussion about the impact it will have on charitable giving. Of course, there’s no way to fully predict how donors will react to the changes in deductions (standard and itemized) and reduced tax brackets. But somewhat lost in the conversation has been the wide variety of other benefits that lead donors to make a charitable gift in a particular way.
On December 22, 2017, the President signed into law an “Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” That’s quite a mouthful, so this article will refer to the law as the “Tax Reform Act” for convenience. There has been some alarm in the charitable community about the impact of this law on charitable giving. The intention of the analysis that follows is twofold. First, it explains which laws affecting planned giving have changed and which laws remain intact. Second, it offers five suggestions on the best ways donors can continue to make tax-efficient planned gifts.
PG Calc's Jeffrey Frye and his colleagues in our Client Services department have reviewed all the product support calls we received this year and have culled out the ten top calls for 2017. These calls cover a broad spectrum of topics and questions, the answers to which will be of great interest to users of PG Calc's products. We will follow this article with a posting of the top 10 planned giving questions for the year, so keep an eye out for that article in a future eRate.
Under Republican leadership, Congress is working feverishly to complete the details of sprawling tax reform legislation, the Tax Cuts and Jobs Act, and have it on President Trump’s desk for his signature by the end of this year. The House bill was voted on and approved on November 16. On the same day, the Senate Finance Committee approved their version of the package.
There is one important – and often overlooked – question to ask spouses who are funding a charitable gift annuity (CGA) with appreciated securities: “Who owns the securities?” Not knowing the answer to this question can result in a triggering of capital gains taxes never anticipated by the donors - and a donor relations nightmare for the gift officer.
Including revocation language serves two purposes. First, it may enable the donor to avoid making a taxable gift to the annuitant. Second, it preserves flexibility in the event of a change in circumstances, such as the dissolution of a marriage. The decision on whether to include the revocation language is ultimately the donor’s, but it is helpful if the charity understands the issues to help inform that decision.