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Kimberly Wisneski - Wednesday, November 12, 2014

As we express our gratitude, we must never forget that the highest appreciation is not to utter words but to live by them  -   John Fitzgerald Kennedy

As is true of so many of the words JFK spoke, Americans take the lesson to heart. According to Charity Navigator’s “Giving USA 2014, the Annual Report on Philanthropy” total giving in the United States in 2013 climbed to $335.17 billion, which is a 4.4% increase from 2012. The bulk of charitable giving comes from individuals and it is the giving from those individuals that largely accounts for the overall annual increase. With the big money involved in charities and non-profits, many opportunities exist for planning your charitable gifts both during your lifetime and after your death, creating a convergence between altruism and financial advantage.

After the death of the iconic Jacqueline Kennedy Onassis, the New York Times and other newspapers published the terms of her will that laid out her plans for what is known as a charitable lead trust. Bound to be legendary even in esoteric circles, there was much talk about Jackie O’s charitable lead trust, which would reportedly save millions. The will set up the trust to last for a period of 24 years, making annual distributions to charity, with the remainder passing to her heirs. The advantage is that the trust is subject to a discount rate tied to the US Treasury rates. A lower discount rate means the annual payments to the charity can be lower and the assets can be invested at a higher return rate, resulting in more money being left over for the heirs at the end. A charitable lead trust can also be created during the lifetime of the donor, in which case the donor would claim an immediate federal income tax deduction instead of an estate tax deduction.

Charitable trusts are not a tool reserved for the wealthy and famous. They can be a beneficial part of any estate plan. A charitable remainder trust is another popular method of giving for the charitably inclined. There are two versions of this trust, depending on your objectives. Under the unitrust version, the donor makes an irrevocable gift to the trust and the trust pays the donor an annual income based on a percentage of the value of the trust’s property as determined on an annual basis. Under the annuity version, the income payments are based on a percentage of the initial value of the trust property. In both cases, the remainder of the trust passes to the named charity at the death of the donor. Depending on the particular circumstances, a donor may be able to avoid capital gains tax, save with a current income tax deduction and remove assets from a taxable estate.

There are also ways of involving your family in charitable giving. Donor advised funds function in a similar way to a foundation. An account can be created during the life of the donor or after the death of the donor. The donor makes a gift to the account either directly or through a provision in the donor’s will and chooses advisors. The donor and/or the advisors can direct gifts from time to time to be made from the account to charities of their choosing. By selecting children as advisors, a donor can truly make giving a family experience!

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