Planned Giving ProgramPlanned gifts are flexible. They can be designed to meet your need and expectations, and you are in control of the timing of the gift. There are two basic paths: real property and liquid assets. You and your advisers may decide your planned gift should be based upon the real property you own, such as land, securities, a corporation, fine art and collectibles. For other contributors, the best giving instrument might include retirement assets, life insurance or cash.
For an asset you have held for more than 12 months, you can deduct its full fair-market value and offset as much as 30 percent of your adjusted gross income for that year. The unused portion of the deduction can carry forward for five more years.
Gifts of residential, commercial or rental property offer several considerable tax-saving benefits. When you make a gift of real estate, you may claim the full fair-market value as an immediate tax deduction (up to the annual limitation) and avoid capital gains on the sale. By contributing the real estate now, the asset, including its appreciation from your original cost basis, is removed from your estate, thereby reducing exposure to estate taxes.
Retained life estate interest can be an excellent planned gift. You establish the gift, contributing your primary residence, farm or even a second home to The Roofing Industry Alliance for Progress and keep the right to live in and use the property for your lifetime. You also can ensure a second person gets the use of the property before the real estate asset is transferred to the Alliance. On the date the planned gift is made, you receive an immediate tax deduction for a portion of the appreciated value of your home.
Securities are subject to capital gains taxes, and this affects your market gain and profits. By contributing appreciated assets you have held for at least 12 months, you will completely avoid capital gains taxes, and your charitable deduction is set at the full fair-market value of your gift.
Your long-range financial plan will need to address the effects of income tax and estate tax on any retirement asset you hold. Unfortunately, for your heirs, this tax "layering" can reduce the value of your retirement asset by up to 80 percent. You can create an estate plan that leaves retirement assets to the Alliance at a considerable tax savings for all your beneficiaries. This can be a direct transfer, or you can place the retirement asset into a trust. A trust format will provide a steady stream of income for your named heirs during their lifetimes. Eventually, the amount held by the trust is distributed to the Alliance after their deaths.
When used as a gift instrument, life insurance enables you to make a planned gift far greater than your out-of-pocket commitment. If you have a fully paid existing policy that you no longer need, contributing it to the Alliance provides a tax deduction based on the current value of the policy. You may choose to set up a new insurance policy, naming the Alliance as owner and beneficiary. You then make an annual, tax-deductible contribution to the Alliance that it uses explicitly to pay the new policy's premium. The face value of the policy will provide an eventual major gift to the Alliance, made possible at a reasonable cost to you, as donor.
In recent years, many of us find we have more cash on hand. We have shifted a portion of our assets from long-term securities into a far more liquid portfolio. Cash gifts offer direct tax benefits for contributors. The deduction can offset up to 50 percent of your adjusted gross income in any one year. The carry-over provision enables you to carry forward any unused portion of the cash gift deduction for an additional five years. Yes, the gift is made now—out of current cash—but it also is well-planned.
The Economic Growth and Tax Relief Reconciliation Act of 2001 significantly alters the estate planning concepts that have been in place for several decades. However, the "phased-in" nature of the estate tax exemption increases and tax-rate deductions may be affected by the next four congressional elections and two presidential elections. You and your advisers should review your personal estate plan, but keep in mind, the law may change yet again before 2011. No single approach is right for every person.
For more information about planned giving, contact Alison LaValley, NRCA Vice President of Member Services and Development, at (847) 299-9070, ext. 7573 or e-mail firstname.lastname@example.org.