Michael P. Romero | Vice President/Relationship Manager, Heritage Trust Company
Blair Hull | Associate of Philanthropic Services, Argent Trust Company
Many of us are taught early in life that it is better to give than receive. This maxim often becomes the foundation for our charitable and philanthropic contributions, which typically occur in the later stages of our lives, when many feel a desire to give back to the communities and causes that have played important roles in their lives.
We all want our charitable contributions to make a difference. We feel a responsibility to give – whether it’s in the form of volunteering, donating clothes or household items or, most importantly, money to support organizations that are making our world a better place to live.
Charitable giving by individuals in 2019 increased 4.7% to $310 billion, according to Giving USA Foundation’s “Annual Report on Philanthropy for the Year 2019.” Total giving by individuals, bequests, foundations and corporations rose 4.2% to $450 billion.
Fortunately, Americans are not letting the coronavirus pandemic stop their charitable giving. A Coinstar-Feeding America poll found that 44% of people surveyed said they will increase giving this year, while 39% said they would contribute about the same. The poll also found that 60% of Americans said they feel they have a responsibility to help those in need.
To be generous with your wealth you don’t need to have a bank account the size of Bill Gates’ or Warren Buffet’s. You simply need to be smart about using the best tax-saving and estate planning strategies to maximize the wealth you distribute to your favorite organizations. Here’s how you do it:
Set up a trust to donate to charities
Individuals and couples can maximize their charitable contributions through effective trust and estate planning. Placing assets in a trust – irrevocable or revocable (also known as a living trust) – provides different benefits depending on the form of trust selected. In general, a trust provides:
• Control: Grantees can specify the exact terms of how much, when and to whom distributions are made
• Privacy: Trust assets may be able to pass outside of probate and not become public record
Revocable trusts can be amended, which allow the grantor to change how the assets are distributed. However, they do not provide asset protection from creditors or allow grantors to take advantage of federal gift and estate tax exemptions. Irrevocable trusts, which cannot be easily amended once the document is signed, do provide these protections and exemptions. Talk to your tax advisor or a trust specialist to determine which trust structure meets your financial needs and long-term giving goals.
Take advantage of qualified charitable distributions
Most people who regularly contribute to charities and nonprofits during their working years want to continue giving later in life. Individuals and couples can tap into retirement savings to fund their giving plans. Through what the IRS calls a qualified charitable distribution (QCD), contributions can be made directly from retirement accounts – a traditional, inherited or SIMPLE IRA, for example – to nonprofits and philanthropic organizations.
As expected, the IRS places limits on QCDs, such as:
• Persons must be at least 70½ years old on the date the QCD is requested
• QCDs can count toward required minimum distributions (RMD), but the funds must be taken out of the retirement account by the RMD deadline (usually December 31)
• Funds must be transferred directly to the qualified charity from your retirement account
• The maximum annual QCD is $100,000 (double that for married couples)
Designate charities as a beneficiary
Another option that provides a lasting legacy is designating a favorite organization(s) as the beneficiary of all or part of your retirement accounts, such as an individual retirement account, 401(k) or 403(b). Because nearly all charities and philanthropic organizations are tax exempt, upon your death those organizations can withdraw those funds tax-free.
You can also name a charity or philanthropic organization as the beneficiary of your life insurance policy. The paperwork is as easy as changing the name on the policy. Additionally, policy owners can share the wealth and name multiple beneficiaries.
A focused, charitable giving strategy can maximize the wealth shared with organizations that are making a difference, while also helping individuals, couples and families achieve their long-term financial and giving goals.
If you would like additional information about charitable giving, please contact one of our professionals at Argent Philanthropic Services or Heritage Trust Company.
