We’re now well into the 25 Days of Giving Series and it’s my intent to provide different aspects and strategies of charitable giving. Given that it’s the season of joy, sharing, and love it’s a great time to be thinking about smart giving (the kind that doesn’t involve gift wrappings, stockings, or bows). Read on to learn how the charitable remainder trust could be a valuable giving tool.
Charitable Remainder Trust, defined
A charitable remainder trust (CRT) is a split interest trust that pays out income to one or more non-charitable beneficiaries for life (or lives) or a term of years not to exceed twenty. The selected payout rate may not be less than 5%, and no more than 50%, of fair market value (FMV) of assets originally placed in trust. At the end of the trust term, the remaining trust assets (the remainder interest) is distributed to charity selected by the donor; the actuarial value of the charity’s remainder interest must be at least 10% at the time of the trust’s creation.
Benefits of a CRT
Note that a useful attribute of a CRT is flexibility. Although Donor’s transfer of property to the trust is irrevocable, a CRT provides for Donor the right to change charitable beneficiaries.
Note also the tax benefits of a CRT. Donor may receive a federal income tax charitable deduction for the value of the remainder interest in the year of the transfer, Donor may transfer assets without recognition of capital gain tax, and there is no estate tax on the property passing to Charity.
Two forms: CRAT and CRUT
CRTs take one of two forms: a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT). There are important differences:
A CRAT pays an annuity to the income beneficiary at a selected payout rate that is a percentage of the assets valued at the time of the trust creation. Additional contributions to the trust are not permitted.
A CRUT pays a percentage of the annual value of the trust assets, a unitrust amount, to the income beneficiary. Additional contributions to the trust are permitted.
A Net-Income CRUT (NICRUT) permits the trustee to distribute an annual payment that is the lesser of the specified percentage of value in that year, or the net income actually earned by the trust in that year.
A NIMCRUT is a CRUT with a net-income limitation subject to a make-up provision. Like a NICRUT, the terms of a NIMCRUT direct the Trustee to pay the lesser of the specified percentage of the value of the trust assets in that year or the net income actually earned by the trust in that year. However, if the payout is less than the specified percentage is paid out in one or more years, the accumulated “income deficits” will be made up in a subsequent year from the excess income above what is the specified percentage of the value of the trust assets in that year.
A Flip CRUT permits the trust to begin its existence as a NICRUT or NIMCRUT, then “flip” into a standard CRUT on the occurrence of a specific triggering event, as provided in the trust document. The flip option is attractive when Donor wishes to donate to the CRUT illiquid or hard-to-market assets, such as real estate or closely held stock.
Knowing if the CRT is a best choice for your charitable giving can be difficult, so I advise speaking with your trusted professional advisors to evaluate your situation. This concept can be confusing, so don’t hesitate to reach out for more information and explore how a charitable remainder trust could be beneficial to you. Feel free to contact me at any time at Gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.
Thanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues to inspire others to also make meaningful year end gifts this season…and plan ahead for 2020 charitable goals.
Under the current tax code, you may have changed the ways in which you give or the tax-beneficial strategies you employ with your charitable giving as compared to previous tax laws. What hasn’t changed, is that you may choose to deduct from your federal income tax any charitable contributions of money or property made to qualified organizations if you itemize your deductions. But, there are record keeping requirements you’ll want to stay on top of, so you’re not scrambling during tax time!
Payroll deduction substantiation
Making a charitable deduction directly from your paycheck is a great and steadfast way to be sure to meet your charitable giving goals. For charitable contributions made via payroll deductions, the donor needs two documents to substantiate the gift:
a pay stub, W-2, or other document furnished by the employer that sets forth the amount withheld from the taxpayer during a taxable year by the employer for the purpose of contributing to a charity;
a pledge card or other document prepared by or at the direction of the charity that shows the name of the charity.
Donors who give to a local United Way or other organizations that funnel contributions to other charities need to only obtain the pledge card or other document from the United Way and not from the affiliated charities which ultimately receive the money.
Tax law requires that for any contribution of $250 or more, the taxpayer must substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the charity. For payroll deductions, the contribution amount withheld from each payment of wages to a taxpayer is treated as a separate contribution for purposes of the $250 threshold.
So, for example, a taxpayer who gave $300 over the course of a year through payroll deductions, $30 per paycheck over ten paychecks, would not trigger the $250 substantiation requirement. The substantiation requirement would only kick in if $250 or more is withheld from each paycheck.
If any of this is confusing, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together!
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/04/guilherme-stecanella-465088.jpg36485472Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-23 15:38:382020-05-18 11:28:3825 Days of Giving: Substantiation Requirements of Charitable Gifts made by Payroll Deduction
If you choose to itemize your taxes, charitable contributions can reduce your tax bill. Generally you would choose to itemize when the combined total of your anticipated deductions (like charitable gifts) add up to more than the standard deduction. For 2019 taxes the standard deductions are:
$12,200 for single individuals
$12,200 for married, filing separately
$24,400 for married filing jointly
$18,350 for head of household
If you do choose to itemize, limits on federal income tax charitable deductions are quite high, but they do exist. Keep this in mind as you make any year-end donations. The specific limitations are complicated, and there are numerous exceptions. The limits are based on your AGI (adjusted gross income). AGI is an individual’s total gross income minus specific deductions.
A quick rule-of-thumb for different types of donated assets to public charities:
Appreciated capital gains assets (such as stock) up to 20% of AGI
You can deduct transportation costs and other expenses related to volunteering
Note that these rates are for public tax-exempt organization and private operating foundations. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income. (Check out these IRS status codes and deductible limits if you’re unsure of an organization’s limit.)
As I mentioned, most people won’t exceed these limits indicated above, but it can happen. For instance, if Jane Donor is a retiree living off of savings and donates more than her investments yield over the year, her limit could be exceeded. The good news is that in this case the IRS allows you carry over excess contributions for up to five following tax years.
Don’t forget to take these steps if you plan to itemize your charitable deductions:
Make sure the nonprofit organization is a 501(c)(3) public charity or private foundation
Keep a record of the contribution (usually the tax receipt from the charity)
Depending on the donation amount/type, you may need to obtain a qualified appraisal to substantiate the claimed value of the deduction
Subtract the value of any benefits you received for your charitable contribution before you deduct it
I’m happy to advise on your situation and help you maximize your charitable giving for this tax year. I can be reached by phone at 515-371-6077 and by email at gordon@gordonfischerlawfirm.com.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/ben-white-170542.jpg40166016Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-22 23:44:192020-05-18 11:28:3825 Days of Giving: Quick Rule-of-Thumb on Charitable Deduction Limits
25 Days of Giving: Charitable Remainder Trusts
Charitable Giving, Nonprofits, Taxes & FinanceWe’re now well into the 25 Days of Giving Series and it’s my intent to provide different aspects and strategies of charitable giving. Given that it’s the season of joy, sharing, and love it’s a great time to be thinking about smart giving (the kind that doesn’t involve gift wrappings, stockings, or bows). Read on to learn how the charitable remainder trust could be a valuable giving tool.
Charitable Remainder Trust, defined
A charitable remainder trust (CRT) is a split interest trust that pays out income to one or more non-charitable beneficiaries for life (or lives) or a term of years not to exceed twenty. The selected payout rate may not be less than 5%, and no more than 50%, of fair market value (FMV) of assets originally placed in trust. At the end of the trust term, the remaining trust assets (the remainder interest) is distributed to charity selected by the donor; the actuarial value of the charity’s remainder interest must be at least 10% at the time of the trust’s creation.
Benefits of a CRT
Two forms: CRAT and CRUT
CRTs take one of two forms: a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT). There are important differences:
A CRAT pays an annuity to the income beneficiary at a selected payout rate that is a percentage of the assets valued at the time of the trust creation. Additional contributions to the trust are not permitted.
A CRUT pays a percentage of the annual value of the trust assets, a unitrust amount, to the income beneficiary. Additional contributions to the trust are permitted.
Variations of CRUTs
Several variations of the CRUT are permitted under the Internal Revenue Code:
Knowing if the CRT is a best choice for your charitable giving can be difficult, so I advise speaking with your trusted professional advisors to evaluate your situation. This concept can be confusing, so don’t hesitate to reach out for more information and explore how a charitable remainder trust could be beneficial to you. Feel free to contact me at any time at Gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.
25 Days of Giving: Substantiation Requirements of Charitable Gifts made by Payroll Deduction
Charitable Giving, Taxes & FinanceThanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues to inspire others to also make meaningful year end gifts this season…and plan ahead for 2020 charitable goals.
Under the current tax code, you may have changed the ways in which you give or the tax-beneficial strategies you employ with your charitable giving as compared to previous tax laws. What hasn’t changed, is that you may choose to deduct from your federal income tax any charitable contributions of money or property made to qualified organizations if you itemize your deductions. But, there are record keeping requirements you’ll want to stay on top of, so you’re not scrambling during tax time!
Payroll deduction substantiation
Making a charitable deduction directly from your paycheck is a great and steadfast way to be sure to meet your charitable giving goals. For charitable contributions made via payroll deductions, the donor needs two documents to substantiate the gift:
Donors who give to a local United Way or other organizations that funnel contributions to other charities need to only obtain the pledge card or other document from the United Way and not from the affiliated charities which ultimately receive the money.
Payroll deductions of $250 or more
Tax law requires that for any contribution of $250 or more, the taxpayer must substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the charity. For payroll deductions, the contribution amount withheld from each payment of wages to a taxpayer is treated as a separate contribution for purposes of the $250 threshold.
So, for example, a taxpayer who gave $300 over the course of a year through payroll deductions, $30 per paycheck over ten paychecks, would not trigger the $250 substantiation requirement. The substantiation requirement would only kick in if $250 or more is withheld from each paycheck.
If any of this is confusing, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together!
25 Days of Giving: Quick Rule-of-Thumb on Charitable Deduction Limits
Charitable Giving, Taxes & FinanceIf you choose to itemize your taxes, charitable contributions can reduce your tax bill. Generally you would choose to itemize when the combined total of your anticipated deductions (like charitable gifts) add up to more than the standard deduction. For 2019 taxes the standard deductions are:
If you do choose to itemize, limits on federal income tax charitable deductions are quite high, but they do exist. Keep this in mind as you make any year-end donations. The specific limitations are complicated, and there are numerous exceptions. The limits are based on your AGI (adjusted gross income). AGI is an individual’s total gross income minus specific deductions.
A quick rule-of-thumb for different types of donated assets to public charities:
Note that these rates are for public tax-exempt organization and private operating foundations. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income. (Check out these IRS status codes and deductible limits if you’re unsure of an organization’s limit.)
As I mentioned, most people won’t exceed these limits indicated above, but it can happen. For instance, if Jane Donor is a retiree living off of savings and donates more than her investments yield over the year, her limit could be exceeded. The good news is that in this case the IRS allows you carry over excess contributions for up to five following tax years.
Don’t forget to take these steps if you plan to itemize your charitable deductions:
I’m happy to advise on your situation and help you maximize your charitable giving for this tax year. I can be reached by phone at 515-371-6077 and by email at gordon@gordonfischerlawfirm.com.