Category: Charitable Gift Planning
Tags: Gift Tax, Tax, gifts, charitable deductions

Gifting Trends Among Wealthy

Posted on: October 20th, 2014

high net worth gift planning

Charitable gift planning trends show a jump for wealthy donors.

How and why individuals choose to donate to charities are influenced by several factors. Tax incentives for charitable giving are believed to be driving gifting trends, but there are also personal values and family legacies to consider.
Wealthy taxpayers are motivated to give now and are planning donations for the future. Earlier this month Wealth-X and Arton Capital released a study that shows an increase in charitable giving. Forecasts show high-net worth individuals will bequeath more than $85 billion over the next decade. The number is anticipated to grow to more than $300 billion in the next 30 years.
Charitable planning helps direct funds to meet an individual’s values while at the same time minimizing their tax burden. According to the Center on Philanthropy, 95.4% of households practice charitable giving. How are individuals planning their donations?
Some use Charitable Remainder Trusts (CRTs) as vehicles for passing on donations. CRTs allow the donor to receive income from the trust for a set period of time or for life, as well as receive an income tax deduction for the gift to the trust. When the trust ends, the trust assets pass on to the designated charity (or charities) and the donor enjoys an estate tax deduction. When using these trusts, a tax lawyer can explain deduction caps that may apply and how the income tax deduction is calculated.
Of course, cash donations directly to charities may be made, but are often not the most advantageous. Gifts of appreciated securities or real property can provide deductions based on their fair market values, avoiding the capital gains tax that would be due if the assets were sold.
Gifting through a foundation allow donors to select funds that will support specific areas that match the donor’s values. This allows the donation to support multiple charities part of the foundation instead of a single organization.
How much to donate? Reports show on average that the wealthy cross-section of taxpayers donate 10% of their lifetime net worth. The value of the assets you intend to donate should be reviewed with a tax lawyer when creating your charitable giving plan. Making smart charitable giving decisions requires a comprehensive review of one’s estate, financial goals, as well as current and pending legislation.
For example, President Barack Obama included the Buffett Rule in his fiscal 2015 budget proposal, “requiring that millionaires pay no less than 30% of income—after charitable contributions—in taxes, preventing high-income households from using tax preferences to reduce their tax bills to less than what many middle class families pay.” Last year North Carolina passed House Bill 998 into law, which placed a cap of $20,000 on itemized deductions. (The standard deduction method provides a cap of $15,000 for married filers, and $7,500 for single filers.) North Carolina taxpayers still receive federal charitable giving deductions.
Meet with a tax lawyer familiar with state and federal charitable giving tax laws to ensure your charitable planning strategies meet your goals.
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