Local philanthropy has many benefits
The Post 9-11 Charitable Blues isn’t the name of a band.It’s recognition that contributions to local and regional charities – following 9-11 and the stock market slide – are way down. With the economy turning around, if you believe the indices and prognosticators, it is time to reconsider charitable contributions.Local charities, like the Truckee Tahoe Community Foundation, are in a position to help. The foundation assists in a range of areas, from youth programs and the arts to animal care, to education and the environment, to local nonprofits working with the needy.The Truckee Tahoe Community Foundation shepherded more than $2 million into our community last year. There are many other charitable organizations worthy of your contribution – Boys & Girls Club, Tahoe Forest Hospice and Tahoe Truckee Excellence in Education, just to name a few.Through properly planned charitable bequests, you can preserve and transfer wealth to your family and, at the same time, make a huge difference in a small community with your philanthropy. Your contributions to local organizations go further than to your well-funded alma mater (to expose my bias).When we die, the government gets a chunk – too much. The trick is to convert the part of your estate that Uncle Sam normally gets, some call it “social capital,” into contributions that improve your community – and save taxes while you’re doing it. Through good planning, everyone wins except Uncle Sam.What’s surprising is that charitable contributions aren’t just for the rich. The income tax breaks are significant – deductions of up to 50 percent of adjusted gross income, which looks pretty decent compared to estate taxes as much as 60 percent.Whether your motivation is passion for the community or avoiding taxes, there is a plethora of estate planning tools at your disposal.As we discussed last month, a simple will is one means of disposing of your property. It is easy to name a charity as a beneficiary. In fact 80 percent of all planned gifts come from wills. There are even more creative vehicles like Charitable Remainder Trusts, Unified Credit Trusts, Life Insurance Trusts, Family Limited Partnerships, generation-skipping transfer trusts and more.Here’s how a Charitable Remainder Trust works: You have appreciated stock (you used to) that if you were to sell would create a huge capital gains tax. So you give stock to a charity. If you need cash flow, keep the income from the stock for yourself during your lifetime. You get a tax deduction at the fair market value of the stock less the value of the income you keep.You could consider funding an Irrevocable Life Insurance Trust (ILIT), perhaps funded by the contribution, for your kids, which would then pay upon your death outside of your estate, as a substitute for the cash given to the charity. When properly funded and administered, ILITs are a great way to accomplish two objectives.You avoid paying capital gains tax, create an income for your life and dramatically reduce estate taxes, while making a sizable donation to your favorite charity rather than the IRS. It beats two other options: leaving the stock (or real estate) to your kids and paying merciless taxes, and when they sell, paying taxes again, or selling the stock and leaving the money to your kids and paying taxes twice.Like everything else, the hardest step is the first. You should confer with an expert, not just think about it. I encourage you to do so.Happy holidays.Jim Porter is an attorney with Porter-Simon, with offices in Truckee and Reno. He is a mediator and was the governor’s appointee to the Bipartisan McPherson Commission and the California Fair Political Practices Commission. He may be reached at email@example.com or at the firm’s Web site http://www.portersimon.com. This column is a reprint of a previous Law Review.
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