Charitable Planning

By understanding the basic features of charitable gift annuities and charitable bargain installment sales, you can strategically unlock assets, create tax deductions and set up structured payments for your heirs while also supporting your favorite charities. These simple programs include:

1. The charitable bargain installment sale, which provides either an immediate or deferred structured income payout to your family for a set number of years.
2. The traditional charitable gift annuity, which creates an immediate or deferred lifetime payout for up to two individuals.

Many people create this substantial charitable tax deduction then utilize it to unlock or re-characterize qualified money in a tax-free manner.

For example, let’s say you have an adjusted gross income of $100,000. You utilize existing cash assets to fund a charitable program that creates a $50,000 tax deduction. The deduction can either be utilized to help reduce your AGI, you can do a $50,000 Roth conversion or take a $50,000 qualified distribution, potentially without any tax consequences.

The charitable program also creates a structured inheritance without the costs of setting up or administering a trust.

When funding charitable programs with appreciated assets such as securities and real estate, not only do you benefit from the immediate charitable income tax deduction, but either all or a portion of the capital gains taxes you would otherwise have to pay are eliminated.

Additionally, the income tax deduction from a charitable program may reduce your overall income tax bracket and as a result, could lower your applicable capital gains tax rate.

Lastly, with the new, higher capital gains tax bracket of 20% now in place for certain taxpayers, charitable planning can be even more of a useful tool.

One benefit of a reinsured charitable program versus a Charitable Remainder Trust is that with a trust, the charity usually has to wait to receive funds until the payout period is over. In the case of a non-reinsured charitable gift annuity, the annuitant(s) have to die before the charity has any funds available. However, when a charity reinsures an income obligation, the money available for use by charities is freed up immediately.

Overall, charitable planned giving is one of the few programs available that helps provide a variety of tax and income benefits and should be strongly considered as an additional planning tool for the individual or family.