Despite recent tax changes dramatically increasing the standard deduction, many people in the Coulee Region continue to give generously to charities. And as another season of giving rolls around, many again will be deciding whether to give, to whom and how much.
If you have resources to give, one of the first steps is selecting a charity. The best reason to give to a charity is because you believe in its mission. Ultimately, giving is an act of benevolence, so you may want to start by looking at your church, organizations in which your children are involved or those that advance causes that are important to you.
Once you've found a charity that appeals to you, do your homework to ensure it's worthy of your support. Request an annual report and look for information about how much of the budget goes to administrative costs versus programs. Find out who's on the board of directors and who else supports the organization. It's also helpful to find endorsements from objective, third-party organizations.
There are many ways to maximize the value of your good will. One of the most common before this year was to claim gifts as tax deductions. But the standard deduction this year has changed to $12,000 if you are single and $24,000 if you are married and file jointly, so it's not likely to benefit most people.
Another method is to give appreciated stock. The charity can sell the stock without paying taxes on it. If you sold it yourself to give cash to the charity, you would be required to pay tax on any appreciation first, thereby reducing the amount available to give the charity.
You can also establish charitable remainder trusts. They allow you to place assets in a trust to provide income to you over a period of time. At the end of that period, the remaining assets are turned over to the charity of your choice.
Trusts can be funded with an assortment of assets, including bonds, mutual funds, stocks and real estate. This technique eliminates capital gains taxes on the assets placed in the trust and provides you with both an income stream and a potentially sizable charitable income tax deduction — all while benefiting your chosen charity.
Some people give life insurance policies to charity by naming the chosen organization as a beneficiary, which qualifies as an estate deduction after death.
If you're considering large gifts to charity, it's wise to talk with your accountant, financial adviser or other tax consultant to be sure you understand all the benefits, restrictions and tax issues regarding your gift.
With a little planning on the front end, you'll likely find you're able to give a more significant gift with more lasting benefits — for both your chosen charity and yourself.
By Maureen Kinney, estate planning attorney at Johns, Flaherty & Collins, SC. For an estate planning attorney in La Crosse, call 608-784-5678.