1. © 2007 ME™ (Your Money Education Resource™) 1 Estate Planning for Financial Planners Chapter 9: Charitable Giving

2. 2 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 2 Charitable contributions  Qualified organizations Public charity: charitable, religious, education, government  Not: your neighbor who lost his job; not Republicans Private charity: foundation

3. 3 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 3 Lifetime Charitable Gifts  Must give cash or property Not value of time Only out-of-pocket expenses deductible  Must reduce contribution by value of benefit received Raffle tickets Right to purchase athletic tickets: 80%  Paid before end of year Credit cards

4. 4 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 4 Amount deductible  Cash 50%: public charity Carryover for five years  Capital gain property: deduct FMV 30%: public charity Carryover for five years Elect 50% limit if use basis instead of FMV

5. 5 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 5 Amount deductible  Tangible personal property Related use (car to car museum): deduct FMV  30%: public charity  Carryover for five years  Elect 50% limit if use cost instead of FMV Unrelated use: deduct cost  50%: public charity  Carryover for five years  Ordinary income property: deduct cost  50%  Carryover for five years

6. 6 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 6 Substantiation  Must have: a bank record (check) for contribution or documentation from charity  No deduction for: Cash contributions to  Salvation Army  Church? They generally will provide documentation

7. 7 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 7 Substantiation  Noncash contributions Over $500: attach Form 8283 including description  No deduction for used underwear Over $5,000: must have qualified appraisal

8. 8 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 8 IRA Contributions  Must be over 70 ½  Can contribute up to $100,000 per person in 2014.  Why do this?  Income tax savings RMD AGI limits  Estate tax savings

9. 9 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 9 Charitable Trusts  Contribute appreciated property to trust  Receive income for life Portion capital gains, portion interest, portion return of basis  Get a charitable deduction for value of remainder interest Value of gift – PV annuity payments  Old person: value of remainder is large  Section 7520 rate: used for discount As of 01/14: 2.2%

10. 10 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 10 Trusts  CRAT Pays fixed amount or percentage of initial value to noncharitable benficiary  Must be at least 5%- similar to a bond  Must be paid even if need to reduce principal of trust  PV annuity increases as section 7520 rate decreases Remainder goes to charity  Versus lead trust Value of remainder interest  Must be at least 10% of value of assets transferred to trust  Decreases as section 7520 rate decreases

11. 11 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 11 Trusts  CRUT Pays percentage of annual value to noncharitable beneficiary Must be at least 5% of annual value  Equity interest Remainder goes to charity  Versus lead trust Value of remainder interest Can add assets to a CRUT; not CRAT

12. 12 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 12 Charitable Trusts  Donor is happy Charitable deduction for remainder interest Income for life Asset is removed from estate  Charity is happy  Heirs are sad Buy life insurance in ILIT to replace value of asset transferred to charity

13. 13 © 2007 ME™ (Your Money Education Resource™) Updated on 12/12/06 13 Pooled income fund  Combined with contributions of other individuals Provides diversification  Donor retains life interest  Receive annual income based on performance of fund Remainder goes to charity Value of remainder interest