Like you, WNE is adjusting in response to the COVID-19 pandemic and the attendant economic fallout. WNE is grateful for the generous support of our donors and we are exploring ways to adapt and expand opportunities for donors to engage in our work.
We understand that our donors, and your clients, have important priorities for their families and loved ones, and we know that they come first. We also believe that a carefully planned charitable contribution is a tangible way to make a positive difference in our society. Charitable contributions strengthen our community, something our society needs in these times more than ever.
Clients think about their charitable giving differently than they think about their financial plans. Each of us has experienced the joy we feel when we see the results of our charitable contributions. One of the results of helping others is that we help ourselves. Helping others can diminish our anxiety and build self-confidence because focusing on the needs of others helps regain perspective on our own circumstances and gives us a sense of control over our future.
Preserving Flexibility
In these times, clients are likely to be interested in ways of giving that preserve flexibility in case their circumstances change. They will be more concerned about their financial security, and reluctant to make a charitable contribution until they are sure of their own financial concerns.
For those contemplating a testamentary charitable contribution, there are several ways clients might preserve some additional flexibility in order to ensure the needs of their heirs are met:
- Contingent charitable bequest – A contingent provision in a will or other testamentary instrument preserves maximum flexibility for your client, assuring them that their charitable contribution will be paid only if other bequests are ineffective.
- Remainder charitable bequest – Similarly, a remainder provision assures your client that the charitable contribution will be made only if all other beneficiaries of the will are satisfied first.
- Beneficiary designation – Bank accounts and many other financial accounts can be distributed via a pay on death (POD) or transfer on death (TOD) designation. Working with the financial institution, your client may be able to specify a percentage or a maximum amount.
- Qualified Retirement Plans – A testamentary distribution to charity from an IRA or other qualified retirement plan remains a very tax efficient way of giving because these distributions avoid the income tax that the estate or the heirs would have paid on funds left in the retirement account.
Gifts that Provide Income
For clients who are concerned about income, either a charitable remainder trust or a charitable gift annuity can be an attractive option. Although there are significant differences, both provide the opportunity for your client to make a charitable contribution now and reserve an income or stream of payments. Depending upon the plan, the amount of income can be fixed or variable and can last for one or more lifetimes or a term of years. Your client can receive an income tax deduction for the value of the contribution and avoid or postpone capital gains tax if appreciated property funds the life income plan. Our gift planners would be happy to discuss the possibilities with you.
Outright Gifts
For those clients who are in a position to make an outright contribution, it is worth reminding them of the advantages of a gift of appreciated property, especially in light of the fact that many are finding that they can no longer itemize their deductions. A gift of long-term capital gain property completely avoids the capital gains tax that would have been due upon sale.
For those clients age 70½ or older, a qualified charitable distribution from an IRA account transferred directly to charity avoids the income tax that would have been due on a withdrawal.
Conclusion
Cooperation is an alternative to hardship. It is easy to discount this simple truism, and sometimes difficult to live it in practice. Yet during these times it is more important than ever to remember that by helping others we can help ourselves.
Our gift planners can discuss these as well as other tax-smart ways to help your clients adapt their charitable giving to accommodate changing financial circumstances. Please call us at 413-796-2210 for more information.