The other day, I received a call from a longtime donor. He had several different types of appreciated assets and wanted to inquire which one would be best suited for a charitable gift. Before discussing technicalities, I asked about his motivation. He wanted to ensure that the Jewish community would always be as welcoming to new members as it was when he first arrived in the country 50 years ago. His future gift to the Jewish community is just one of many that I have had the privilege of bringing to life, helping him fulfill his legacy.
Gift planning, planned giving and deferred giving are among the many names charitable organizations use to describe the type of charitable giving that entails a bit more planning than just writing a check or sending a contribution via text message. These planned gifts have one characteristic in common: They are vehicles that enable you to document your future intentions. For that reason, we at the S.F.- based Jewish Community Federation and Endowment Fund call them legacy gifts.
Legacy gifts can be made during your lifetime or can come from your estate. Because they often use complex assets with significant tax consequences, donors often seek the counsel of an attorney, accountant or other adviser to help them structure the gift. One of the primary benefits of legacy giving is that it allows donors who are not able to make significant gifts during their lifetime to do so from their estate. Most often, a legacy gift is a simple bequest (large or small) that you may include in your will or living trust.
A charity’s gift-planning director can help you get started. Here are some gift vehicle options:
Gifts given during your lifetime
Appreciated marketable securities are a popular gift option because they can be deducted at the fair market value of the gift and you, the donor, will not incur capital gains tax on the appreciation. Gifts of real estate are another preferred gift vehicle because they, too, can be deducted at fair market value. Many organizations will accept gifts of life insurance, with which the donor agrees to make tax-deductible gifts to the charity to cover premium payments, rather than paying the insurance company directly.
Several giving options actually generate income during your lifetime and are, thus, called life-income gifts. Charitable remainder trusts provide income to you or your loved ones for life, with the remainder value going to charity when the life income beneficiary passes away. Some charities, including the federation, offer pooled income funds, which are similar to charitable mutual funds. Others offer charitable gift annuities, which provide you with fixed income for life with the remainder going to charity. In California, charities must be licensed by the state Department of Insurance. The federation is a licensed gift annuity issuer and frequently partners with other organizations that do not have their own annuities license.
Gifts given from your estate
The most popular gift is a bequest in your will or living trust. You may designate a specific amount or piece of property, a percentage of your estate, or the remainder of your estate. If you already have a will, bequests may be added with a simple amendment or codicil. While not technically part of your estate, retirement plan designations — the 401(k) or IRA — are simple legacy gifts that are made after your lifetime. For the past several years, IRA charitable rollovers have enabled donors to use their IRA required minimum distributions for charitable purposes and not pay tax on the withdrawal. As of now, there has been no update from Congress as to whether the IRA charitable rollover will be in effect for 2015.
Now that we’ve covered the logistics of gift vehicles, it is up to you to decide the destination and purpose of your gift. If you’re not sure about how to put your charitable gift to use but would like to get an upfront tax deduction, consider creating a donor-advised fund. The federation has an extensive donor-advised fund program and our philanthropic advisers can work with you and your family to promote intergenerational philanthropy, helping you achieve your philanthropic goals well into the future.
Linda Solow Jaffe, J.D., CFRE, is director of gift planning for the S.F.-based Jewish Community Federation. To participate in the JCF’s Centennial Legacy Campaign or for general legacy and gift planning information, contact [email protected].