Charitable giving can be an integral part of your client’s financial plan. But are they ready to give? Here are some good indicators that your client is in a great position to give charitably to causes they care about:
- Your client has appreciated property.
If your client is forced to sell some appreciated property, they can avoid recognizing capital gains by donating the property before the sale. TFEC Properties, Inc. can assist with all of the logistics to maximize this charitable option.
- Your client owns closely-held stock.
Suppose your client would like to take their closely-held company public. In that case, if that stock is donated to charity before an initial public offering, any capital gain can be captured for charitable purposes and will not be taxable to the donor upon sale. TFEC can be that charity and the donor can specify the charitable causes they want to support.
- Your client is selling highly appreciated securities.
Suppose your client already has several charitable bequests in their will and they would like to sell some low-dividend, highly appreciated securities. In this case, they can earn a larger, personal, income stream by donating the securities to establish a charitable remainder trust. Any tax payable on realized capital gains would spread over several years. The donor is also adding to their legacy by supporting their favorite charities at the same time. TFEC currently administers more than 45 of these charitable trusts.
- Your client is making a monetary gift to individuals.
If your clients wants to provide monetary gifts to individuals, they could establish a charitable remainder trust to benefit a third party. Some gift tax consequences may result, but they will receive the added benefits of an income tax deduction, possible deferment of capital gains tax, and the knowledge that their gift benefits a person and one or more charities they cared about during their lifetime.
- Your client recently received a bonus.
If your client has recently received a large bonus, they could elect to set aside a portion of that bonus to make a charitable gift to establish a donor-advised fund. This would allow them to offset taxable income with a charitable deduction, and they would retain the right to suggest grants to their chosen charities over many years.
- Your client wants to avoid capital gains.
Suppose your retired client complains to you because of the low-yielding, appreciated securities they want to sell but cannot because they do not want to pay the capital gains tax, and wants to earn an income stream. In that case, they might establish a charitable remainder trust, thus spreading the gain over many years and reaping the income based on the stock’s full fair market value as well as supporting their favorite charities. If their goal is diversification, they can establish a donor-advised fund that will allow them to suggest grants over several years with no capital gains tax liability for the donated stock.
- Your client is planning their estate with no heirs.
If your client is a single person or a couple without children working on their estate plan, they might wish to leave a legacy to the community and their favorite nonprofits rather than distant relatives, friends, or the government. TFEC can provide simple estate planning language to assist.
- Your client holds retirement funds and IRA assets.
If your client discovers they have a large retirement fund of which heirs will only receive $0.25 to $0.30 on the dollar and has charitable intent, charitable gifts of IRA assets are ideal because TFEC is tax-exempt and will have no income or capital gains tax effects and would result in income and/or estate tax deductions for the donor, as well as achieve their charitable goals.
- Your client is transferring a family business.
If your client informs you of wanting to transfer the business they founded to members of their family, they can give shares to TFEC and obtain a tax deduction based on the stock’s appraised value. The beneficiaries can then buy back shares at their appraised value, and a charitable fund remains to benefit the community and the clients chosen charitable causes through their fund.
- Your client wants to leave a benefit to their family.
If your client wants to benefit their family members through their estate plans, they might establish a testamentary charitable remainder trust to benefit their family during their lifetime. At their death, their charitable legacy will succeed them as they created it during their life.
We understand that you are a trusted partner of your clients. Our goal is to enhance that relationship and allow you to expand your offering. If you have questions or want more information on how we partner with professional advisors, visit www.tfec.org/professional-advisors, or contact Janice Black, President & CEO, or Jennifer Doyle, Vice President of Community Investment & Philanthropy.
