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By Anna Melissa Price Of Jenkins Fenstermaker, PLLC on 02/03/2021
Planning Charitable Giving: Helping Donors with Annual Plans

Planning charitable giving is often suggested as a year-end pursuit, but January can roll around without firm plans in place. Facilitating donors in new year planning for charitable giving can maximize their tax benefits and incorporate planned giving efficiently into an overall financial plan. With the help of knowledgeable gift planning advisors, donors and charitable organizations can both reap the benefits.

The Benefits for Donors of Planning Charitable Giving Early

Charitable giving is, by its very name, a benevolent act. To encourage such generosity, the Internal Revenue Code provides tax benefits for qualifying philanthropic donations. By planning charitable giving early and as part of a comprehensive estate plan, donors can realize significant tax savings in the current year and often in future years, too, and charitable organizations secure the means to pursue their philanthropic goals.

The tax benefits of charitable giving are not carved in stone, so regular review of changes to federal and state tax laws is necessary. Charitable organizations that understand and can educate donors on the relevant tax relief options will help themselves as they help potential donors maximize the benefits of their charitable giving.

First Steps in Any Charitable Giving Plan

First, charitable giving begins with the desire to support a particular cause. Each donor should carefully consider the causes held dearest and how the donor wants to be a part of that mission. Discussion of charitable donations often brings to mind cash gifts, but donations of time are also an invaluable part of a charitable organization’s resources.

Gifts that are tangible or have a marketable value are also welcomed by the vast majority of charitable organizations. These donations fund or facilitate the philanthropy’s mission. For some charitable organizations, cash donations work best, but others also accept in-kind assets such as cars, real estate, or transferable investments such as stocks or bonds. Depending on the donor’s available estate and the charitable organization’s fundraising practices, certain assets may be better utilized for charitable purposes than others.

Factors to Consider in Charitable Gift Planning

A good charitable giving plan should be part of an overall estate plan, especially your estate tax plan. Donors often aspire to leave an ongoing legacy to family and friends but are not clear about how to achieve that. Organizations can help current and potential donors understand the mutual benefits of charitable giving and how the source and timing of those gifts can affect the potential impact of their donations.

Nonprofits should stress to prospective donors how charitable gift planning should be part of the donor’s overall estate plan. Identifying the beneficiary to receive different assets or asset types in the donor’s estate requires an in-depth understanding of current tax laws and, as much as possible, anticipated changes to those laws.

The tax consequences of a charitable gift may change from year to year if new legislation is passed or with the termination date of a sunset law. For example, legislation establishing the unified tax credit, which raised the tax exemption for lifetime gifts and after-death transfers and combines the two, expires after 2025 unless new legislation is passed extending that date. For donors seeking to take advantage of the exemption, their overall estate plan and charitable giving plan may need to be adjusted after that date.

A donor’s overall estate plan is often guided by particular goals. These goals can also guide strategies when planning charitable giving by considering items like these:

  • The timing of charitable giving to avoid taxable growth;
  • The type of assets donated to avoid tax on appreciation in value; and
  • The type of assets donated when a step up in basis would not be significant.

By working with financial advisors and/or a charitable giving lawyer, donors can determine how best to allocate their assets to meet their charitable giving goals. When organizations facilitate charitable gift planning by equipping donors with resources and assistance, they help their benefactors and actively advocate for the charitable mission.

How Professionals Help with a Charitable Giving Plan

Whether a donor is new to planning charitable giving or is updating a charitable gift plan, the donor should include experienced giving professionals to help determine the best ways to achieve charitable giving goals. Larger philanthropies may have these professionals on staff. The donor’s financial advisor, tax professional, and estate planning attorney are also key parts of the team. Together they can help the donor establish a charitable giving plan that makes the most of current tax relief provisions to maximize the donor’s legacy.

For help planning charitable giving or advising potential donors in West Virginia (WV), Kentucky (KY), or Ohio (OH), call charitable giving attorney Anna M. Price at Jenkins Fenstermaker, PLLC. An experienced estate planning attorney, Anna helps clients establish and maintain comprehensive estate plans in ways that make optimum use of assets and take full advantage of existing tax relief laws. For a consultation, call Anna at (304) 523-2100 or complete this online contact form.