Five tips for year-end giving: It’s not too early to plan

If you are like many people, you give major gifts toward the end of the year. This probably occurs for several reasons. The closing of the tax year encourages itemizers to think about income tax deductions; a barrage of appeals from charities increases awareness of the need for gifts; and many folks are simply more disposed to end the year by making charitable gifts.

Here are five tips to help with your year-end giving:

1. Calculate your income. Try to estimate your tax liability for the year. Did your unearned income increase? Did you sell any appreciated assets? Will you owe more taxes? These factors may lead you to increase your giving before December 31. You may even want to move some of your giving forward from next year to create a larger income tax deduction for this year. If you don’t usually itemize, you may find this “grouping of gifts” useful in order to take advantage of an itemized return every other year. In any case, by the time you fill out your income tax return next spring it will be too late to make charitable gifts for this year.
    
2. Review your stocks, especially those held for more than one year. Which ones have appreciated most? It may be prudent for you to make your year -end gift using one or more of these stocks. Here’s why: If you sell the stock, you incur capital gains tax on the appreciation. However, if you give the stock to your church and allow your church to sell it, no one pays tax. And you get a charitable tax deduction for the fair market value of the stock at the time you give it, just as if you had made a cash gift. And more: if you can’t use all the charitable income tax deduction this year, you can carry it forward for up to an additional five years. Gifts of appreciated stock are deductible up to 30 percent of your adjusted gross income.
    
3. Your church, through the ELCA Foundation, offers a variety of life-income plans to fit your needs. You can make a gift now, obtain tax benefits, and receive income for the rest of your life. Sound too good to be true? A few minutes of your time will convince you otherwise.
    
4. Do your giving early. This is especially true if you want to make a gift of non-cash assets (stock, real estate, etc.). It also applies to life-income gifts (gift annuities, pooled income fund contributions, trust agreements, etc.). Your professional advisor(s) (accountants and lawyers) are often very busy as the year winds down. The sooner you can begin your gift activity, the better it will be for everyone concerned.
    
5. Talk to your advisor. Before making any significant gift to your church or to ministries, you should have your accountant, attorney, or other advisor help you understand the impact of your gift on your income tax return and your estate.

Margaret’s Legacy

Margaret (not her real name) is a faithful member of an ELCA congregation in our area. She loves the Lord and the church—especially it’s educational institutions. In her 70 years, the church and its ministries have been at the center of her life. Regular financial support for the church is a given for Margaret and the source of great joy for her.

Margaret wanted to make a special gift to her favorite Lutheran college, but as the thought about it, she didn’t see how that could be possible, given the facts that she is a widow and needs income from her accumulated assets. That’s when Margaret discovered that she could both give a gift and provide additional income for herself for the rest of her life through a charitable gift annuity.

She invited the ELCA Foundation Regional Gift Planner to visit with her to explain how a gift annuity could work for her. Margaret decided to give $5,000 to the church from a savings account that was yielding about 3% interest. In exchange, the ELCA agreed to provide her with a guaranteed fixed income for life. She now receives an annuity payment of $360.00 per year. Of that, $196.56 is tax–free. She also received a charitable tax deduction of $1,873.00 on her gift. If she is in the 15% tax bracket and itemizes deductions, Margaret saved $281 on her taxes for the year she made the gift.

Margaret has increased her income from this asset from $150 to $360 per year and saved on her taxes at the same time. More important, Margaret has the joy of knowing that, when she dies, her gift will go to the college she designated and help fulfill one of her favorite ministries.

In picture form, Margaret’s charitable gift annuity works this way:

To learn how a Charitable Gift Annuity or another life income agreement might help you “Leave a Legacy for Ministry,” contact Pr. Dennis Hallemeier using the information listed on the 'Contact Us' page.

Please note a correction: 2010—not 2001!

In the July-August issue my finger went astray and typed “2001” as the year that the estate tax repeal takes effect in the tax law Congress passed this summer. The effective year is, in fact, 2010 and should have appeared that way in the article, “Wills vs. Trusts—A Checklist.”

At the same time, it’s worth noting that Congress included a “sunset” provision in the new law. In 2011 the estate tax is scheduled to revert to the provisions enacted for 2002. The decade of nearly annual changes looks like this:

*The amount of an estate not subject to estate taxation.

Confusing? One commentator says:

A very practical question facing all tax counsel is how to plan in the midst of this uncertainty. Can one trust Congress to not change the estate tax code for the next 10 years? History suggests that this would be an extraordinarily optimistic viewpoint. Given the moderate cost of the increase of the applicable exclusion amount to $1 million in 2002, $1.5 million in 2004 and $2 million in 2006, it seems reasonable to plan for the next 5 years. . . . Moving farther into the future becomes extremely problematic. There are very few people who will now build their estate plan on the assumption that the estate tax will indeed be repealed in 2010, prior to the reinstatement of the estate tax . . . in 2011.

Charles Schultz, Crescendo e-notes, 4 June 2001

 All of this suggests two things:

1. As a practical matter, consult your tax and legal advisors as you plan for the distribution of your estate (and review your plans regularly); and
2. As a faithful matter, “provide yourselves with purses that do not grow old, with a treasure in the heavens that does not fail, where no thief approaches and no moth destroys. For where your treasure is, there will your heart be also.” (Luke 12:33b-34)

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You can express your faith through your will or trust. Write a Christian preamble, stating the importance of faith in your life. Give a bequest to your favorite ministries of a specific sum or property or percentage of your estate.

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Information and examples in this newsletter are for educational purposes only and should not be considered tax or legal advice. Please consult your tax or legal advisors about your own will, trust or estate plan.

Content Copyright (c)2000, Lutheran Planned Giving in the Arkansas-Oklahoma and Central States Synods.  All rights reserved.