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News and perspectives from Covia.

Happy National Estate Planning Awareness Week! Estate planning is an often overlooked but important part of maintaining financial wellness. The financial aspects of estate planning include assessing your personal situation, creating a will and possibly a trust, planning for disposition of accounts (like life insurance or retirement accounts), naming a power of attorney, gift planning, and much more. It’s important to regularly review your plan and keep it updated so that it relates to your current life situation.

In honor of this week, we’re sharing some gift giving tips from the Covia Foundation that directly relate to estate planning. Check out these tips, consult your advisors, and remember to regularly review your personal estate plan to make sure it is accurate and up to date.

Make a Gift Through Your Will

When people think about estate planning, writing a will is what often comes to mind. A will is an important tool to make sure your wishes are carried out after your death – including gifts to your favorite charitable organizations.

One of the most common gifts in a will is a gift of a specific dollar amount. Another common approach is to leave a percentage of the balance of your estate that is left after specific gifts are made to family members (this is generally called a residuary gift). Every gift, no matter how small or large, can make a difference.

A will can be easily amended with language (referred to as a codicil) to include a gift to a charitable organization.

Individual Retirement Account Gifts

If you leave your Individual Retirement Account to a child or loved one, you also leave them with the obligation to pay taxes on the money that is distributed from the IRA. You, too, must pay taxes on the money you are required to withdraw for your IRA each year—but recent tax policy changes mean you can make charitable gifts today with those funds and they won’t increase your taxable income.

Once you are over the age of 70.5, you are required to make minimum distributions from your IRA. Instead of taking the funds directly, you can direct your IRA trustee instead to make a payment to a charity (or charities) directly from your IRA account. These qualified charitable distributions (up to the $100,000 maximum per year) are not added to your gross income, so they are not taxable to you.

Even if you do not itemize deductions on your 1040 personal income tax return, you’ll come out ahead making charitable gifts this way. Just be sure you complete these qualified charitable donations from your IRA before the end of the calendar year.

Beneficiary Designations

You can leave a gift to charity from an IRA, 401(k), or other qualified retirement plan using a ‘beneficiary designation.’ Generally, you fill out a simple form with your plan administrator naming the charitable organization as a beneficiary of a death benefit payable under the retirement plan.

The designated portion will be paid directly to the organization, not to your estate, and is not designated by a will. Paying these benefits directly to charity means that neither the estate nor any beneficiary of the estate are subject to income tax attributable to the retirement plan.

Charitable Gift Annuity: The Gift that Gives Back

What if you want to make a charitable gift in your will but don’t know how much you might be able to commit? A Charitable Gift Annuity (CGA) can be a tax-smart way to benefit both you and your community. This gift plan allows you to make a charitable gift today that provides you with regular fixed income. After your death, this gift goes to the cause you care about. Because the payment rate is fixed based on your age, your income will never change and a portion of your payment could be tax free. (As an example, the rate for someone aged 81 is 7.5%)

A Charitable Gift Annuity offers other tax planning benefits. The gift annuity provides you an immediate income tax deduction in the year it is established and you can bypass capital gains tax if you fund the gift with appreciated stocks. Plus, you get the joy of planning your legacy today. With the Covia Foundation, you can choose to have your gift used where it is most needed, to support your retirement community, or to help a program you care about.

More Information

It is always best to consult with your legal, tax, and/or financial advisors before making any significant change to your will or estate plan. If you are interested in learning more about estate planning, have any questions, or are considering a gift to the Covia Foundation, please contact Katharine Miller, Covia Foundation Executive Director, at 925-956-7414 or kmiller@covia.org.

Planning to make end of year donations to support the causes you care about? This year’s tax law changes will make a difference in the way those charitable gifts are treated, with an implication for your 2018 taxes and for the year to come. As you do make your final donations of the year, it’s also a good time to consider your plans for next year’s charitable giving.

While the primary motivation for most charitable gifts is a desire to make a difference, not simply tax breaks, good financial planning leaves more for charitable gifts. Donors are paying attention to the impact of the new tax law – and making plans to maximize the difference their gifts can make.  The Covia Foundation offered several workshops this year on maximizing your charitable contribution and offers the following strategies you can use for your own planning purposes.

The new tax law that went into effect for 2018 nearly doubles the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly. That means fewer Americans will itemize deductions on their tax returns – including charitable gifts.

Using tax-smart giving strategies can allow some donors to give more and enable others to grow their initial contributions tax-free until funds are disbursed to designated organizations:

APPRECIATED STOCK:

One strategy is to donate appreciated assets such as stocks or real estate directly to a charity. Donors receive the fair-market value of the asset at the time of the gift as a charitable deduction – without incurring the capital gains tax they would face if selling an appreciated asset outright. The charity then liquidates the asset and puts the funds to work to make a difference.

IRA CHARITABLE ROLLOVER:

Taxpayers over the age of 70 ½ can plan a Qualified Charitable Distribution from their Individual Retirement Accounts (IRA). Diverting some or all of the required minimum distribution from an IRA can provide financial benefits. While the distribution doesn’t count as a charitable deduction, it also doesn’t add to the donor’s adjusted gross income – which can reduce income taxes (and possibly Medicare premiums). Up to $100,000 annually may be requested as a Qualified Charitable Distribution.

DONOR ADVISED FUNDS:

Donors can make several years’ worth of charitable gifts in cash or appreciated assets to a donor-advised fund. This strategy can provide an immediate tax deduction on the amount contributed and allows the donor to direct gifts from the fund each year to the charities he or she supports.

Charities are able to continue their work in good part because of the support of people who care about making a difference. Planning ahead gives you the opportunity to make an even bigger impact with your charitable dollars. Generosity combined with knowledge can make all the difference in the world.

If you would like to attend a future charitable giving forum, please contact Michelle Haines, Covia Foundation Development Associate, at mhaines@covia.org. And to join our effort to provide life-changing support for seniors, please visit our secure online donation page.