9 Ways to Reduce Taxes and Make a Gift

by William J. Moran, J.D., M.S.Ed.

Here are 9 ways to reduce taxes and make a gift.  This language is great for planned giving brochures.

1.  GIFTS OF CASH:
If you itemize on your tax return, cash gifts can be deducted, up to 50%. If your adjusted gross income. On a $100,000 cash gift in a 35% bracket, you may save $35,000 in taxes. (Organization name) invites cash pledges payable over a period of years.

2. APPRECIATED STOCK:
Appreciated stock (held more than one year) makes an excellent gift. You avoid all capital gain taxes (generally 15% of the appreciation) and will receive a charitable tax deduction for the stock’s market value at the time of transfer.

3. BEQUEST THROUGH WILL OR TRUST:
One of the most simple and popular ways to make a gift that will live after you is to give through your will or trust. You can make a bequest to sustain (organization name) by providing a dollar amount, specific property, a percentage of your estate, or what is left (remainder) to (organization name). Such a designation can reduce your estate taxes (In 2011 and 2012 for estates over $5 million). In many cases a simple codicil to the will can add (organization name) and does not require rewriting your most recent will.

4. RETIREMENT ACCOUNTS AND PENSION PLANS:
Retirement account funds (IRA’s or company plans) beyond the comfortable support of yourself or loved ones may be given to (organization name) by proper beneficiary designation. Large pension plan assets can be subject to double or triple taxation (federal income tax, state income tax, and federal estate taxes, if applicable). These taxes can substantially eliminate the benefit to heirs if tax-wise alternative planning is not arranged.

5. CD’s, SAVINGS ACCOUNTS, BROKERAGE ACCOUNTS, CHECKING ACCOUNTS WITH P.O.D. PROVISIONS: P.O.D. stands for “Payable on Death”. You retain full ownership and full control during your life. At your death, the account balance is paid to your named beneficiary, (organization name) , immediately and without probate.

6. CHARITABLE REMAINDER TRUSTS (ANNUITY AND UNITRUSTS):
Donors and spouses can benefit from life-long payments from such a trust. The donor selects the rate of return from these income arrangements and also chooses a fixed or fluctuating annual payment to be made to the designated parties as long as they live. Estate and capital gain taxes may be completely bypassed and you will receive a current income tax deduction based on the age of the income recipient and the rate of return chosen.

7. GIFT ANNUITY:
In exchange for a gift of cash, stock or securities, (organization name) will pay you, you and your survivor, or another person you name, a guaranteed income for life. In addition, you receive a substantial income tax deduction in the year of the gift and part of the annual payment is non-taxable. Upon your death, or the second to die if so selected, the gift remainder supports (organization name). Call us for information on the payout rate for your age.

8. GIFT OF LIFE INSURANCE:
Insurance is another simple way to make a substantial future gift at a level that might not be possible with a cash gift. Name (organization name) as the owner and beneficiary to receive the proceeds of an existing life insurance policy. You will receive a tax deduction for approximately the cash surrender value, thereby reducing your tax liability in the year of the gift.   An alternative is to simply add (organization name) as a revocable beneficiary. You retain the right to change this designation, but in this instance, you receive no income tax deduction.

9. GIFT OF REAL ESTATE:
For some individuals a gift of land, a house, or vacation home is a preferred way to make a gift. You will receive a tax deduction for the full market value, avoid all capital gain taxes and remove this asset from future estate taxes. One option is to give real estate retaining a life tenancy. This provides a substantial income tax deduction by giving (deeding) your property to (organization name) now. You continue to live there, maintain the property as usual, and even receive any income it generates. At your death, the property will be sold and the proceeds used to support (organization name) .

Want more articles like this delivered directly to your inbox? Sign up for our E-Newsletter.

© 2008 The Moran Company, “We find great nonprofit executives.” We specialize in searches for nonprofit executive directors, directors of development/fundraising staff, and other top nonprofit leadership. www.morancompany.com