Advising Your Clients on Philanthropy:
Year-End Charitable Gift Planning in a Transitional Year
By Stephen C. Lande, Director The Foundation of the Greater Miami Jewish Federation
The end of the year is often an opportune time to consider financial and tax planning strategies, and this year it is especially true. We are all aware that Congress is considering what may be the most sweeping changes to the tax law in 30 years. Many of the proposed changes will affect your clients as individuals, their families and businesses. They may also affect the charitable organizations we all support and rely upon to improve the quality of life in our community.
The modern income tax law is about 100 years old and the charitable income tax deduction has long been one of its mainstays. The theory is that through their good works, public charities shoulder a portion of the responsibility to take care of our neediest citizens that would otherwise fall to the government. We know changes in the tax law can affect both charities’ ability to attract contributions and the support they receive from government. There is every indication we can expect to see some big changes for 2018. The details of the legislation are evolving, but these are the proposed changes that may most affect your favorite charities as of now:
- While most itemized deductions may be eliminated, the deduction for charitable contributions survives.
- The standard deduction may increase significantly, perhaps doubling to $24,000. This will have the impact of reducing the number of people that itemize deductions on their tax returns and are thus able to benefit from the charitable income tax deduction and other deductions.
- The estate tax may be eliminated or its exemption levels increased over time.
Your clients still have time to take action that could reduce their income tax liability for 2017. I suggest that, this year especially, you urge them to consider the benefits of year-end giving, both personal and for those causes in the community that are important to them. There will continue to be some uncertainty as to the content of the legislation and its timing, but the Greater Miami Jewish Federation is encouraging its donors to speak with you, their professional advisors, and then:
Shift income and deductions where possible. Deferring receipt of income to 2018 or accelerating deductions into 2017 by prepaying a deductible expense can lower this year’s bill. Accelerating the payments or increasing charitable contributions at year-end is an effective planning strategy to reduce your clients’ tax liability and get needed financial support to their favorite charities sooner.
Utilize appreciated securities for your charitable giving. Charitable contributions of long-term appreciated securities (those held for more than one year) remain one of the most tax-efficient ways to give. The investment markets have had a good run and are hovering at or near all-time highs. Many of your clients hold investments that have increased significantly in value, so it’s a good time for them to review their investment portfolios. These capital gains present an opportunity for your clients to take advantage of tax laws that encourage the contribution of appreciated assets to charity. Gifting appreciated securities directly to charity (rather than selling the assets and donating the cash proceeds) can significantly increase the amount of money your clients have available for charitable giving while providing a larger tax benefit.
Charitable contributions of appreciated securities, including stocks, bonds and mutual fund shares are also one of the most tax-efficient ways underwrite your clients’ future philanthropy. Donating appreciated securities to create or add to a donor advised fund entitles your clients to a tax deduction for the full fair market value of such gifts, and no capital gains is paid tax on any appreciation.
The IRA Charitable Rollover is permanent.The rising investment markets have surely affected your clients’ retirement assets as well, so I should mention the IRA Charitable Rollover, which allows individuals over age 70 ½ to make tax-free gifts totaling up to $100,000 from a traditional IRA account directly to qualified charities. This is a very smart way to give if a client or a client’s family member meets the age requirement. Their plan administrator can make this happen.
Other charitable gift planning strategies that can reduce your clients’ tax liability:
- Create a life income plan such as a Charitable Gift Annuity or a Charitable Remainder Trust. In addition to a current charitable deduction, the Charitable Gift Annuity or Charitable Remainder Trust can provide your client an income stream with favorable tax treatment.
- A Charitable Lead Trust pays income to charity for a period of years and then transfers the trust property to others, including family members. It can provide a current charitable income tax deduction as well as reduce federal transfer tax.
The resources of The Foundation of the Greater Miami Jewish Federation are available to you and your clients, in complete confidence and without obligation, as you consider this and other issues related to charitable gift planning.
The changing tax law will no doubt influence your clients as they seek to fulfill their charitable objectives in a tax-advantaged manner, inspire and engage the next generation of their families and create a lasting legacy. For more information, please contact Foundation Director Steve Lande at slande@gmjf.org, or at 786-866-8623, or consult JewishMiami.org.
Best wishes to you and your family for a happy holiday season.
Steve Lande is director of The Foundation of the Greater Miami Jewish Federation and serves as the Greater Miami Jewish Federation’s Authorized House Counsel. Before joining the Greater Miami Jewish Federation, he directed the Jewish Federation of Greater Pittsburgh’s endowment program for 18 years. A native of Iowa, Steve earned a law degree from Drake University and practiced law in Des Moines before joining the professional staff of the Jewish Federation of Greater Pittsburgh.