Benefits of Giving

Although many affluent families and individuals give generously to charity, the vast majority of them do not give in a planned way, and that hurts both the donors and ultimately the charities. The majority of affluent households employ a charitable-giving strategy often referred to as "checkbook philanthropy." This is not a strategy at all, but the unplanned way of giving of small amounts to a variety of charities, commonly in cash, often in reaction to solicitations.

The following are commonly asked questions by donors.

What exactly is planned giving?
Why are so few affluent households making planned gifts?
What are their benefits?

Planned giving is an organized approach to giving that evaluates the donor's personal values, selects charitable organizations and gift-giving vehicles that best reflect those values, and maximizes the financial and tax benefits of the gifts. Benefits of Giving

Why don't households that are more affluent plan their gifting? Several reasons:

planned giving takes time
many don't know enough about the details or benefits of planned giving
many perceive planned giving as too complex and too expensive
some worry about jeopardizing their own financial situation through giving.

Planned giving addresses these concerns, while providing some of the following benefits.

Influence

The nature of how charitable giving is done changed in recent years, particularly as the front end of the baby boom generation reaches the point where they can afford to make sizeable gifts. First, many of today's donors are less inclined to simply pass on most of their wealth to their children, and are more inclined to pass on a greater portion to charitable organizations.

Second, donors, particularly the self-made affluent, want greater influence over how their gifts are spent. Instead of simply writing a check to an omnibus charity that makes the distribution decisions, they want to be actively involved in how and where their money targets those charities they deeply care about. That is why those who plan their donations often establish various foundations or charitable remainder trusts, or restrict their gifting wishes for their donor-advised funds.

Efficient use of money

Planned giving makes use of techniques that maximize the dollar amount that ultimately benefits the charity. For example, the gifting of stock avoids the donor's payment of capital gains taxes, and thus leaves more to the charity. However, sometimes it's not possible to gift stock directly to smaller charities, so the donor must employ other charitable vehicles to accomplish such a gift. It may make more sense to give during one's lifetime instead of waiting until death. On the other hand, you might be able to leave more to a charity over the long run by deciding on a five percent payout rate from a charitable remainder unitrust rather than a ten percent payout rate.

Tax benefits

Although many affluent make donations out of a genuine desire to give, tax benefits play an important role. For one thing, the tax benefits often make it financially feasible for the donor to make a gift. Charitable remainder trusts and gift annuities, for example, provide the donor with lifetime income while ultimately benefiting the charity. Furthermore, as exemplified by the gifting of appreciated property, the tax savings benefit the charity as well.

Teach your children

Planned giving involving ongoing influence such as through donor-advised funds or foundations can be an excellent way to involve the donor's children. They can help decide who is to receive gifts, and in some cases can continue that role after the donor's death. Our legacy of being philanthropic is one of the values each parent should pass on to their children.

Provide a legacy

Some donors wish to leave an ongoing philanthropic legacy, something that generally cannot be done with standard checkbook giving.

The options for making planned gifts are many. They include bequests made through wills, charitable remainder trusts, charitable lead trusts, private and community foundations, charitable annuities, and donor-advised funds, to name only a few. Each option presents advantages and disadvantages, so you will want to review those options with the Community Hospital Health Foundation or other charitable expert to see which ones best fit your values and personal financial situation.

The act of giving a gift, whether we're alive or deceased, helps us continue a particular cause or interest after we're gone.

People give for a variety of reasons ranging from deeply personal to highly practical. The result also may range from a tax deduction to a sense of deep satisfaction.

IRS definition of charitable giving

For tax purposes, the Internal Revenue Service defines charitable gifts as complete and irrevocable transfers of money, property or other assets to IRS-recognized charities.

Remember, in order to receive tax-saving benefits from giving to charitable causes, your gift must be given completely (generally no strings attached) and irrevocably (generally cannot be changed or withdrawn) to an IRS-recognized charity.

There are some financial incentives involved in giving to charitable causes. If you give to charities recognized by the Internal Revenue Service, you can:

Give gifts without paying any gift taxes on the gifts.
Receive a federal income tax deduction for your charitable lifetime gift, if you itemize charitable deductions on your tax return and keep receipts.
You can receive a federal estate tax deduction after death if you've made charitable gifts to IRS recognized charities through your will, trust or beneficiary designations.
The sale of some of your assets may result in significant capital gains tax. It is possible to reduce or eliminate capital gains tax on assets gifted to IRS recognized charities. This is a very popular incentive for people who face significant capital gains taxation on the sale of their assets.

Reasons to act now

There are several important reasons why you should not delay documenting your intentions concerning charitable giving, including:

Health. Charitable gift planning involves time and careful consideration. To create or update a will or trust bequest requires sound mental health. Applying for a life insurance contract to create an insurance gift or to replace assets given to a charity for your heirs requires insurable physical health. The longer you postpone the charitable gift planning process the greater is your risk of becoming incapable of using some very desirable options.

Death. No one can escape it. You can wait too long to pursue your charitable giving desires. Charitable giving after your death usually will not be accomplished by your heirs if you have not clearly communicated your intentions while living.

Tax law changes. The laws today may change tomorrow. Desirable charitable giving options available today may seemingly disappear over night. The old saying, "Never put off till tomorrow what you can do today," can be very true as it applies to charitable gift planning.

How to get started

To help you begin your look into charitable giving, first examine your entire financial picture. The extent of your net worth - and the impact you can have on charities and your family - may be much greater than you think.

That's why it's important to work with Community Hospital Health Foundation along with a competent attorney and tax adviser as they become part of your team in establishing a charitable giving plan. They'll help you determine what gift techniques are best for you.