As a New Year begins and you consider the goals you have for yourself and your loved ones, you may be asking what are the ways you can create your legacy? While there are ways to create your legacy with your estate planning attorney by making bequests to family members, there are other ways. One of the most frequently used planning options, to ensure your legacy outlives you, is to make a donation to some form of charity.  

How do we do this to accomplish your estate planning goals? There are a number of strategies we may employ to ensure your legacy works the way you want it to. In fact, thanks to the Protecting Americans From Tax Hikes Act of 2015 (PATH), certain taxpayers can make charitable contributions directly from an IRA. This charitable rollover provision allows taxpayers over age 70 ½ to exclude annually up to $100,000 from gross income for “qualified charitable distributions” from an IRA. Only individuals who have attained age 70 ½ may make a qualified charitable distribution. The charitable donee must be an organization that qualifies for a charitable income tax deduction by an individual other than a private foundation, or a donor advised fund or a supporting organization under Internal Revenue Code Section 509(a)(3).

Let us explain more on this topic. For federal income tax purposes, a taxpayer can deduct cash contributions to publicly supported charitable organizations, hospitals, churches, schools, and universities up to 60 percent of his or her adjusted gross income. A taxpayer who donates securities or real estate owned for more than a year to these organizations can deduct the fair market value of the property up to 30 percent of his or her adjusted gross income. Fair market value can be defined as the price that property would sell for between a willing buyer and a willing seller, with neither being required to buy or sell and both having reasonable knowledge of the relevant facts. Further, a person may choose to increase his or her income tax deduction for long-term held securities or real estate to 50 percent of adjusted gross income by electing to deduct the gift on the basis of what it cost to purchase the securities, or cost basis, rather than its fair market value.

If a gift of cash is made to a private foundation, the charitable deduction is limited to 30 percent of the donor’s contribution base, again with a five-year carry forward. Excess contributions not deducted the same year in which the gifts are made generally can be carried over and deducted over the next five years. This carryover, however, expires with the death of the donor. If a donor who wants to make gifts in excess of this year’s contribution limit is in frail health and married to a healthy spouse, the donor may want to consider transferring the property to be contributed to the healthy spouse. Then the healthy spouse could make the gift and continue to receive the benefit of the carryover in subsequent years after the death of the spouse in frail health.

Your legacy is important.  With our help it can survive you with minimal impact to your current standard of living.  You can plan ahead with your estate planning attorney and make these decisions early to ensure that you are aware of all the options. We can help you structure your charitable donations to ensure they accomplish your wishes.  Do not hesitate to contact our law firm now, or any time throughout the New Year, to schedule an appointment.