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Interest Rates Indicate a Great Time for Charitable Lead Trusts

May 21, 2013

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Previously, I blogged about the low interest rate environment and how that results in a great opportunity for a donor with charitable objectives who also wishes to pass assets to the next generation free of federal estate or generation-skipping transfer tax. To read that posting about Charitable Lead Trusts, click here. Well, rates have continued to stay at historic lows.  The IRS just announced the rates available for June of 1.2%.  These low rates mean that it’s easier then ever for these trusts to be productive to pass even more cash to lower generations free of transfer tax. So, if you think that the trust’s investment strategy could beat the IRS-decreed rate of 1.2%, while also benefiting charity, June is the time.

For an overview regarding the basics of lifetime CLTs, see A Primer on Lifetime Charitable Lead Trusts.

Cyber Assistant Delay to 2012

January 24, 2012

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Cyber Assistant Delay to 2012

January 24, 2012

Authored by: Kim Civins

As we pointed out in our Oct. 19, 2010 entry, it might have been worthwhile to delay filing a new Form 1023 until the IRS launched its “Cyber Assistant” online version which enabled online filing at a substantreduced fee. However, buried in Internal Revenue Bulletin 2011-1 is the following statement:

“… the Service does not expect Cyber Assistant (a Web-based software program designed to assist organizations in preparing their application for recognition of exemption under § 501(c)(3) of the Internal Revenue Code (Form 1023)) to become available in 2011.”

Therefore, if you were waiting to file a Form 1023 until this service was available, you might consider proceeding with the paper version, even at the higher fee. Generally, an organization has 27 months from the date of formation to file the Form 1023, and if the tax exempt

A Commitment to Charitable Giving and the Giving Pledge.

October 13, 2010

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Have you heard about the Giving Pledge? Forty U.S. billionaires have committed to give at least 50% of their wealth to charity. Here is the website to check it out as well as the billionaires’ personal pledge letters: givingpledge.org. The likely suspects are there: Buffett, Gates, Ellison, Turner. I’m seeing the same idea in my practice, just on a smaller scale.

I’m continually amazed at so many of our estate planning clients’ commitment to philanthropy, and these individuals aren’t necessarily the childless. Many have children, grandchildren, and actually have very strong relationships with them, not necessarily the dysfunction you might suspect when you find out a client wants to give substantially all of his or her wealth to charity, although there are occasionally those who are “disinheriting” the kids for various reasons.

October 2010 Presents An Even Better Time for a Charitable Lead Trust

September 22, 2010

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In July, I blogged about the low interest rate environment and how that results in a great opportunity for a donor with charitable objectives who also wishes to pass assets to the next generation free of federal estate or generation-skipping transfer tax. To read that posting about Charitable Lead Trusts, click here. Well, September rates ticked downward, and, in the last few days, the IRS announced the rates available for October transfers to such trusts as ticking down even more. Therefore, what I said before goes double now. (Well, not technically double, but meaning much more.) These lower rates mean that it’s even easier for these trusts to be productive to pass even more cash to lower generations free of transfer tax. So, if you think that the trust’s investment strategy could beat the IRS-decreed rate for October of 2.0%, while also benefiting charity, October is

IRS Releases Ten Tips for Taxpayers Making Charitable Donations

August 26, 2010

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The IRS is always so helpful, and has just published “Ten Tips for Taxpayers Making Charitable Donations” (IRS Summertime Tax Tip 2010-21). You can view the item on the IRS website by clicking here and the website has links for IRS publications along the charitable giving lines. Since most of you that read this blog are affiliated with tax-exempt organizations as officers, advisors or consultants or advise high-net-worth charitable donors, this may be a resource for your donors or clients, or maybe you actually are inclined to give yourself, not that there’s any pressure or anything.

Charitable Income Tax Deduction Limitations – Part II – Gifts of Appreciated Assets

August 17, 2010

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Last week, I posted about the income tax deductibility limitations for gifts of cash to a public charity versus a private foundation.  Today:  the same analysis but for long-term, capital assets that have a fair market value at the date of the donation higher than the donor’s cost basis in the property.

In general, the AGI* deductibility limitation for gifts of long-term holdings of appreciated assets made to public charities (or “50% charities”) is reduced to 30% unless the donor elects to step down the deductible contribution base of the long-term capital gain property from fair market value to cost basis. Therefore, in general, gifts of long-term appreciated marketable securities to a public charity can be deducted at their fair market value on the date of the gift, subject to the 30% AGI deduction limitation, and any overage may be carried over for up to five additional tax years, but if the donor

Charitable Income Tax Deduction Limitations – Part I – Gifts of Cash

August 13, 2010

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Maybe it’s a little premature, as it’s still summer in most of the country, but as we approach year end, perhaps it’s a good time for a refresher on the charitable donation income tax limitations.  Personally, I’m not at the stage of my wealth lifetime where these issues apply to me.  However, I aspire to have issues like these to worry about someday.  For those of you already there, or for those of you who have clients or donors who are, here is a reminder of the deduction amounts and limitations for gifts of cash to a public charity versus a private foundation.

In general, gifts of cash made to public charities receive the most favored tax treatment. These organizations are generally referred to as “50% charities” because the AGI* percentage limitation for income tax deductions applicable to charitable contributions to these organizations is 50%. These organizations are favored because

August 2010 Interest Rates Indicate a Great Time for a Charitable Lead Trust (“CLT”)

The rate that the IRS uses to calculate the present value of an annuity has dropped to 2.6% for August. This is historically a very low rate, as just two years ago the rate was 4.2% and within the last decade the rate reached 8.2%. Clients are generally aware that such low rates present estate planning opportunities for vehicles such as Grantor Retained Annuity Trusts, where the ability of the trust to obtain an investment yield higher than 2.6% presents real family wealth transfer opportunities. However, clients with charitable intentions need to be aware that the same low interest rate is of substantial benefit in family wealth planning involving CLTs.

A CLT is both a family wealth transfer vehicle, as well as a charitable giving vehicle. A trust is established which pays an annuity to charity for a period of years, and at the end of that term of years,

IRS Confirms Timing of Deductibility of Donations by Credit Card

July 22, 2010

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Each year, sometime in early December, my spouse and I discuss our charitable donations to be made prior to year-end. We look at what donations we made up to that point, and then together decide what we’re going to donate prior to December 31 so that we can deduct these donations on that year’s income tax return. Once we decide our charities and amounts, we set about to implement our plan. Frequently, that means going online and giving via credit card payment through the organization’s website.

Frankly, it never occurred to me that because I actually pay these credit card bills in January of the following year that there could be an argument that because I actually paid the amount the following year I couldn’t deduct it the year in which I clicked “confirm donation” on the website.

I’m in luck. The IRS recently confirmed that you can

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