Bob Hughes with Bever Dye, LC, explains a variety of giving options for donors
Deciding to give a financial gift to a university might be an easy decision for some. Supporters often feel a personal satisfaction knowing that future graduates will benefit from their contributions and that, as donors, they can make a difference.
There are many ways to give a financial gift to a university. In fact, deciding on what type of financial gift to give can be a longer process than actually making the decision to give. We’ve listed a few giving options that can act as a starting point in the decision-making process.
Bob Hughes, estate attorney at Bever Dye, LC, in Wichita, helps explain those ways.
Charitable donations of appreciated stock
Donating appreciated stock rather than cash can increase tax benefits. This tax-planning tool is derived from the general rule that the deduction for a donation of property to charity is equal to the fair market value of the donated property. Where the donated property is “gain” property, the donor does not have to recognize the tax gain on the donated property. These rules allow for the “doubling up,” so to speak, of tax benefits — a charitable deduction, plus avoiding income tax on appreciation in value of the donated property.
Charitable deductions from an individual retirement account (IRA)
Donors can have distributions made directly to the university of their choice from an IRA. A popular way to transfer IRA assets is via a tax provision, which allows IRA owners who are 70 ½ years of age or older to direct up to $100,000 of their IRA distributions to charity. The money given to the charity counts toward the donor’s required minimum distribution, but doesn’t increase the donor’s adjusted gross income or generate a tax bill.
Charitable reminder trusts
A charitable remainder trust (CRT) is a powerful estate-planning tool, which may enable a donor to reduce their liability for income and estate taxes, and diversify their assets in a tax-advantaged manner. A CRT is an irrevocable trust that makes annual or more frequent payments to the trustee and/or spouse typically until death of the survivor. What remains in the trust then passes to a qualified charity. Two advantages that come with a CRT are: first, the donor obtains a current income tax charitable deduction for the value of the charity’s interest in the trust and second, the CRT is a vehicle that can enhance the donor’s investment return because it pays no income tax, so it can generally sell an appreciated asset without recognizing any tax gain.