Tax-wise giving strategies can help leverage the dollars donated. If you have an interest in supporting the SDCLT, staff is willing to work with you and your attorneys and/or estate planners. When you are ready, contact us to set up a time to meet and discuss your particular situation. First, however, please take a moment to read the following brief examples of charitable giving strategies. While this is not a compete list, it should give you some ideas for consideration.

Stock or Securities

Other than land, one of the least expensive ways to make a donation to the SDCLT is through a gift of appreciated securities. This method takes advantage of tax rules that allow a donor to deduct from current income the full current value of donated securities.

If you bought or otherwise acquired securities many years ago, you may have a very low cost basis that would require the payment of significant capital gains taxes if you sold them. By donating these securities to the SDCLT, you might be able to give even more than you thought possible. As the donor, you avoid paying capital gains tax on an appreciated security, and you receive a charitable deduction for the full fair market value of the stock when the gift is made, providing that you have held the stock for more than one year.

There is no Federal Alternative Minimum tax impact arising from gifts of appreciated securities. The stock must be saleable by the SDCLT, but eligibility under Rule 144 is sufficient.

Every person’s tax situation is different. Your tax advisor can tell you how the actual numbers would work out in your case.

Life Estate

A “Life Estate” allows the donor to transfer ownership of real estate – a home or even a second home (including condominiums and cooperatives) – to the SDCLT while retaining use of the real estate for the life of the donor and spouse. The benefit is that an immediate income tax deduction is earned, which would not be the case if the gift were made in the form of a bequest.

Charitable Trusts

Charitable Remainder Trusts

It is possible to make a gift to the SDCLT on a deferred basis so that a spouse or child can receive the benefit of income from an asset for a period of time prior to transfer to the SDCLT. The general term for such a gift is “Charitable Remainder Trust.”

Charitable Remainder Trusts, while irrevocable, provide a way to meet family planning goals and at the same time provide an opportunity to support the SDCLT in the future. You can create such a trust during your lifetime or upon your death by transferring assets to a trustee who, under the terms of the trust instrument, invests and manages those assets for the benefit of your beneficiaries.

With a Charitable Remainder Trust, you irrevocably transfer cash, securities, or property to your Trust. The Trust pays you (or your designated beneficiaries) a payout which represents a percentage of the trust assets. The percentage can be a “Unitrust” payout or an “Annuity” payout. With a Unitrust payout, the trust reflects the market, so your income is variable. Because income increases with trust growth, the Unitrust can provide an excellent hedge against inflation. With an “Annuity” payout,” the payout is based on the value of the assets at the time the “Annuity Trust” is established and remains fixed for the term of the agreement. At the termination of the Trust (either at the death of income beneficiaries or after a specified term of years), the remainder is transferred to the SDCLT.

When you create a Charitable Remainder Trust, you are entitled to a significant income tax deduction generally equal to the current value of the property you contribute less the present value of the Unitrust or Annuity payouts to be made to you or to your beneficiaries. The value of the Unitrust or Annuity payouts depends upon the expected term of the trust, the percentage to be paid, and the fair market value of the assets used to fund the trust. The value of the deduction you may claim is limited to a percentage of your Adjusted Gross Income (AGI).

When the Unitrust or Annuity interest ends, the trust terminates and the principal is available for the use of the SDCLT.

Charitable Lead Trusts

A Charitable Lead Trust can be described as a mirror image of the Charitable Remainder Trust. During the term of the Charitable Lead Trust, an annuity or Unitrust amount is paid to the charity and, upon the expiration of the term, the remaining assets of the trust are paid over to the non-charitable remaindermen – usually the donor’s children. Upon funding a Charitable Lead Trust, the donor generally does not receive an income tax deduction. However, the amount of the gift to children is reduced for gift tax purposes by the value of the annuity or unitrust interest given to the charity. The longer the trust term, and the higher its payout rate, the greater the gift tax savings. Further, future appreciation on the contributed assets is not subject to further gift or estate taxes when the trust terminates. This is an excellent strategy to enable a Trustor to save on gift and estate taxes while benefiting the SDCLT.

Bequests

Many donors elect to provide support in the form of a bequest, effective at the donor’s death and specified in a will or trust agreement. Such charitable bequests are fully deductible for federal estate tax purposes. The structure of a bequest can take many shapes. Frequently, it is a specific figure or asset. Alternatively, it can be a residual estate – or percentage thereof – after non-charitable bequests to family members are fulfilled. In addition, bequests can be given in the form of “illiquid assets” such as art objects, antiques, real estate, rare books, etc. These assets often are troublesome because, in spite of their high valuations, executors may sell these items at depressed prices in order to pay estate taxes. Conveying illiquid assets to the SAN DIEGO CLT by bequest eliminates this problem. Your estate planner can draw up wills or trusts with bequests that effectively shelter your assets.

If you have an interest in supporting SDCLT, staff is willing to work with you and your attorneys and/or estate planners.

Give us a call at (619) 495-8393.