Whether it is referred to as planned giving, gift planning or legacy giving, it is a method that allows people to make larger philanthropic gifts than they could make from ordinary income.
Planned giving can be defined as any major gift made in lifetime or at death as part of a donor’s financial and estate planning.
The tax and financial benefits of planned giving can make charitable giving attractive to the charity and donor.
“While some planned gifts provide a life-long income to the donor, others use estate and tax planning techniques to provide for charity and other heirs in ways that maximize the gift and/or minimize its impact on the donor’s estate,” according to PlannedGiving.Com.
PlannedGiving.Com lists three types of planned giving:
1. Outright gifts that use appreciated assets as a substitute for cash.
2. Gifts that return income or other financial benefits to the donor in return for the contribution.
3. Gifts payable on the donor’s death.
Here are the benefits of planned giving, according to PlannedGiving.Com:
1. Donors can contribute appreciated property, like securities or real estate, receive a charitable deduction for the full market value of the asset, and pay no capital gains tax on the transfer.
2. Donors who establish a life-income gift receive a tax deduction for the full, fair market value of the assets contributed, minus the present value of the income interest retained; if they fund their gift with appreciated property they pay no upfront capital gains tax on the transfer.
3. Gifts payable to charity upon the donor’s death, like a bequest or a beneficiary designation in a life insurance policy or retirement account, do not generate a lifetime income tax deduction for the donor, but they are exempt from estate tax.