I had the privilege of attending the Carter Center’s Winter this weekend in San Diego.

Carter Center’s Winter Weekend

The Weekend was an opportunity for the many supporters of the Carter Center to gather in a relaxed atmosphere and learn more about the Carter Center and its many philanthropic activities, including: waging peace (through election monitoring and programs to advance civil rights), fighting disease (such as the near-elimination of “river blindness”), and countless other programs. Part of the Weekend consisted of an auction of various donated items and Presidential memorabilia. The auction raised $1.6 million in furtherance of the Carter Center’s activities.

While attending the Weekend, I had the pleasure of attending a replaying of the interview which President Carter gave to Piers Morgan last week on CNN. What was interesting was that President Carter himself was there to narrate the interview and answer questions from the audience. He has incredible energy and drive, especially for someone who, at eighty-eight, could simply choose to coast.

I have the great pleasure of serving the Carter Center as a member of its national Planned Giving Advisory Council. Just as the Carter Center serves the world, the Council serves philanthropic organizations and the estate planning community in general. The Council’s purpose is not just to further the Carter Center and its laudable projects, but the cause of philanthropy and estate planning itself.

The great work of the Carter Center reminds me how important it is to raise the topic of charitable giving during the initial consultation. The estate planning process is foreign to most clients. Even the savviest client may not know that there are options for charitable giving that can reduce the net cost. For example, a charitable remainder trust can provide a tax benefit for the client while benefitting the charity. Raising the issue does the client a service, as well as helping the broader community.

Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com

Hardly a week goes by without news of yet another wealthy person giving away a large sum of money to a college, university, hospital, medical research facility, cultural institution, or any one of dozens of other institutions or causes.

The very wealthy are giving gifts at an astounding rate. The top five Forbes 400 members including Warren Buffet, Stephen Mandel, and Mark Zuckerberg, gifted a total of $3.7 billion in 2010 and 2011.

Clearly, many wealthy individuals view their legacy as more than the accumulation of financial assets. They want to be remembered for their charitable giving, for helping others, and to make an impact on society.

Of course, not just the super-rich practice philanthropy. Many people give meaningful gifts of all sizes or volunteer tirelessly for all sorts of causes.

So, what about you and your clients? Certainly many of your clients have an affinity to a cause or an institution and certainly some have thought about philanthropy. But perhaps they’re not aware of their options for giving, or of the tax advantages of doing so.

Here’s a handy list of ways for you or your clients to give back:

In kind. You or your clients may contribute your time or expertise to a charitable organization. While you cannot take a charitable deduction, but you get direct experience with the charity and how it uses its resources. That can be invaluable in determining whether it is a good use of your time and money later on.

Directly. This is the simplest form of giving, especially when there are no strings attached to the gift. This can be done during life, or a brief clause in a Will or Trust can suffice. This may be a good option for any client, especially for those with smaller gifts to bestow.

Retirement account gifting. A client can name a charity as a beneficiary to his or her IRA or employer-sponsored retirement plan. Of course, certain rules such as spousal approval often apply, so be sure to guide your clients accordingly. In 2011, individuals over 70 ½ can even do a “charitable rollover” of $100,000. This is a directly charitable contribution of the IRA during life. This can be advantageous because it avoids limits on income tax deductions, etc. But, hurry, the “charitable rollover” is set to expire after this year.

A charitable lead trust. This trust pays income to a charity chosen by the giver for a certain term. It may be set up during life or at death. After that term, the trust principal passes to family members or other beneficiaries.

A charitable remainder trust. This is the reverse of a lead trust because trust income is payable initially to the grantor or other non-charitable beneficiaries for the term of the trust. After that, the principal goes to the donor’s chosen charity. Again, this may be set up during life or at death.

Set up a private foundation. Individuals can make tax-deductible donations to a private foundation. Foundations can be trusts or non-profit corporations. Again, donations may be made during life or at death. For large sums, private foundations provide greater control for the donor but have significantly greater reporting requirements, etc.

Stephen C. Hartnett, J.D., LL.M. (Tax)
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com

What would a permanent repeal of the estate tax do to the nonprofit sector? At first blush, it might not seem like estate taxation and philanthropy have much of a link. But there’s a strong connection.

Built in to the federal estate tax is a deduction for charitable bequests. Plus, charitable donations made during a person’s lifetime reduce that person’s taxable estate, also reducing the ultimate estate tax bill.

Study after study has found that, because of the way charitable contributions are treated within the framework of the estate tax, the tax actually increases the rate of charitable giving. The converse also appears to be true; a permanent repeal of the estate tax would reduce the rate of charitable giving.

According to a 2003 Brookings Institution report:

We find that estate tax repeal would reduce charitable bequests by between 22 and 37 percent, or between $3.6 billion and $6 billion per year. Previous studies are consistent with this finding, and also imply that repeal would reduce giving during life by a similar magnitude in dollar terms. To put this in perspective, a reduction in annual charitable donations in life and at death of $10 billion due to estate tax repeal implies that, each year, the nonprofit sector would lose resources equivalent to the total grants currently made by the largest 110 foundations in the United States.

http://www.brookings.edu/articles/2003/0617taxes_bakija.aspx

According to the National Center for Charitable Statistics, there are over 1 million public charities in the United States in additional to the countless private foundations and other charities. Without an estate tax, nonprofits would suffer a catastrophic blow.

Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
6050 Santo Road, Suite 240
San Diego, CA 92124
858-453-2128
www.aaepa.com