Estate Planning
for Financial Planners
Chapter 9:
Charitable Giving
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Charitable contributions
 Qualified organizations
 Public charity: charitable, religious, education,
government
 Not: your neighbor who lost his job; not Republicans
 Private charity: foundation
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Lifetime Charitable Gifts
 Must give cash or property
 Not value of time
 Only out-of-pocket expenses deductible
 Must reduce contribution by value of benefit received
 Raffle tickets
 Right to purchase athletic tickets: 80%
 Paid before end of year
 Credit cards
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Amount deductible
 Cash
 50%: public charity
 Carryover for five years
 Capital gain property: deduct FMV
 30%: public charity
 Carryover for five years
 Elect 50% limit if use basis instead of
FMV
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Amount deductible
 Tangible personal property
 Related use (car to car museum): deduct FMV
 30%: public charity
 Carryover for five years
 Elect 50% limit if use cost instead of FMV
 Unrelated use: deduct cost
 50%: public charity
 Carryover for five years
 Ordinary income property: deduct cost
 50%
 Carryover for five years
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Substantiation
 Must have:
 a bank record (check) for contribution or
 documentation from charity
 No deduction for:
 Cash contributions to
 Salvation Army
 Church?
 They generally will provide documentation
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Substantiation
 Noncash contributions
 Over $500: attach Form 8283 including
description
 No deduction for used underwear
 Over $5,000: must have qualified
appraisal
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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IRA Contributions
 Must be over 70 ½
 Can contribute up to $100,000 per
person in 2014.
 Why do this?
 Income tax savings
 RMD
 AGI limits
 Estate tax savings
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Charitable Trusts
 Contribute appreciated property to trust
 Receive income for life
 Portion capital gains, portion interest,
portion return of basis
 Get a charitable deduction for value of
remainder interest
 Value of gift – PV annuity payments
 Old person: value of remainder is large
 Section 7520 rate: used for discount
 As of 01/14: 2.2%
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Trusts
 CRAT
 Pays fixed amount or percentage of initial value to
noncharitable benficiary
 Must be at least 5%- similar to a bond
 Must be paid even if need to reduce principal of
trust
 PV annuity increases as section 7520 rate
decreases
 Remainder goes to charity
 Versus lead trust
 Value of remainder interest
 Must be at least 10% of value of assets
transferred to trust
 Decreases as section 7520 rate decreases
© 2007 ME™ (Your Money Education Resource™)
Updated on 12/12/06
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Trusts
 CRUT
 Pays percentage of annual value to
noncharitable beneficiary
 Must be at least 5% of annual value
 Equity interest
 Remainder goes to charity
 Versus lead trust
 Value of remainder interest
 Can add assets to a CRUT; not CRAT
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Updated on 12/12/06
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Charitable Trusts
 Donor is happy
 Charitable deduction for remainder interest
 Income for life
 Asset is removed from estate
 Charity is happy
 Heirs are sad
 Buy life insurance in ILIT to replace value of
asset transferred to charity
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Updated on 12/12/06
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Pooled income fund
 Combined with contributions of other
individuals
 Provides diversification
 Donor retains life interest
 Receive annual income based on
performance of fund
 Remainder goes to charity
 Value of remainder interest
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Updated on 12/12/06
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