Charity Can be Self-Serving
Like me, I'm sure all of you have favorite non-profits that you try to help whenever you can. Maybe the hospital, hospice or youth center, the local arts, music and theater organizations (can't forget the historical society and conservation groups!), and the schools that helped us get where we are today. They all certainly need our help right now, what with public funding sources cut way back or entirely MIA, and with their regular supporters struggling to stay afloat themselves. So consider this a plug for all those organizations, particularly the local ones - our area would be a completely different - and much less wonderful - place without them.
But there can also be quite a lot in this for us, too, besides the the warm inner glow we feel when we help out. Current gifts provide help right away, as well as income tax deductions, of course, and the excess can be carried over if it's more than we can take in one year. However, charitable giving can also provide us with income we never had before if we play our cards right. Let's say, for example, that you were smart enough to buy Apple when it was just a blossom. Now it's exploded and there's Apple-sauce everywhere; but you can't sell it without giving back a sizable chunk of the profits on Schedule D. Except for feeling like an investment wizard, you're not getting much to show - like dividends! - for your early confidence and savvy judgment.
So, what to do? Consider a "charitable gift annuity" with your organization of choice. Turn over some (a bite?) of the Apple to the non-profit; they will sell it without any capital gain tax, because they're tax-exempt after all; and they'll pay you an annual income for the rest of your life. The rate of return will be based on your age when you set up the CGA, but I guaranty it will be much more attractive than what you're now getting from a CD or a money market fund or a US Treasury. And you'll get a charitable deduction right away for the residual amount the non-profit will receive when you're no longer in need of income, if you get my drift.
What if your organization has no CGA to offer? That's actually the case with most of our small area non-profits. Don't give up, though, because you can do the same thing through the New Hampshire Charitable Foundation. They'll do everything I just described and pay you themselves, then keep making an annual payment to your favorite non-profit long after you've gone to your reward.
Of course, you can instead (or also) make a charitable bequest in your will or trust, or make the lucky non-profit a beneficiary of some or all of your retirement plan benefits or life insurance proceeds. Those options will help them out, too, but you won't have the income or the income tax deduction in the meantime. My point is, why not have it both ways.
And here's my final point about charitable giving in general: Instead of your kids feeling like they got cheated out of some of your largess when they see you providing for worthy organizations, they may actually be inspired to follow in your footsteps - which would make this a triple play!
(Posted June 11, 2012)
But there can also be quite a lot in this for us, too, besides the the warm inner glow we feel when we help out. Current gifts provide help right away, as well as income tax deductions, of course, and the excess can be carried over if it's more than we can take in one year. However, charitable giving can also provide us with income we never had before if we play our cards right. Let's say, for example, that you were smart enough to buy Apple when it was just a blossom. Now it's exploded and there's Apple-sauce everywhere; but you can't sell it without giving back a sizable chunk of the profits on Schedule D. Except for feeling like an investment wizard, you're not getting much to show - like dividends! - for your early confidence and savvy judgment.
So, what to do? Consider a "charitable gift annuity" with your organization of choice. Turn over some (a bite?) of the Apple to the non-profit; they will sell it without any capital gain tax, because they're tax-exempt after all; and they'll pay you an annual income for the rest of your life. The rate of return will be based on your age when you set up the CGA, but I guaranty it will be much more attractive than what you're now getting from a CD or a money market fund or a US Treasury. And you'll get a charitable deduction right away for the residual amount the non-profit will receive when you're no longer in need of income, if you get my drift.
What if your organization has no CGA to offer? That's actually the case with most of our small area non-profits. Don't give up, though, because you can do the same thing through the New Hampshire Charitable Foundation. They'll do everything I just described and pay you themselves, then keep making an annual payment to your favorite non-profit long after you've gone to your reward.
Of course, you can instead (or also) make a charitable bequest in your will or trust, or make the lucky non-profit a beneficiary of some or all of your retirement plan benefits or life insurance proceeds. Those options will help them out, too, but you won't have the income or the income tax deduction in the meantime. My point is, why not have it both ways.
And here's my final point about charitable giving in general: Instead of your kids feeling like they got cheated out of some of your largess when they see you providing for worthy organizations, they may actually be inspired to follow in your footsteps - which would make this a triple play!
(Posted June 11, 2012)
