Giving in A Down Economy

Instead of cutting charitable gifts, here are four reasons you may want to increase them ...

 

1. Charitable remainder trusts can diversify portfolios and improve cash flow.

Many long-term investors are seeking ways to convert highly appreciated, low-yielding assets to better income producers.  By donating these assets to charitable remainder trusts, they sidestep capital gains, earn an immediate tax deduction and draw an income that typically exceeds bonds or money market fund payouts.  Some are taking the extra step of buying insurance naming their children as beneficiaries.  Insurance costs are offset by the tax savings derived from the charitable trusts. 

 

2. Charitable tax deductions are worth more.

Since charitable deductions are worth more at higher tax rates, some donors are "giving ahead" by establishing donor-advised funds at the Foundation.  A donor who anticipates $100,000 in charitable gifts during the next five years, for example, could earn more in tax deductions by establishing a donor-advised fund in that amount now.  Grants from the fund can then be made annually upon the donor's recommendations.  Using appreciated assets to establish the fund negates capital gains taxes and earns tax deductions based on current market value.

 

3.  Donations of appreciated stock still earn great deductions.

Despite recent setbacks, the Dow Jones Industrial Average has more than doubled in the past decade.  Many donors still hold highly appreciated stock, and donating it still earns big tax write-offs and avoids capital gains. If donors want to weed losers out of their portfolio, however, they should sell the stock and write off the loss against gains.  They then contribute the sale proceeds to their favorite charitable cause—gaining an income tax deduction and the satisfaction that their bad investment is finally doing something good. 

 

4. Help is needed more when times are harder. 

The best reason to give in a down economy is because that's when it does the most good.  The same slump that makes it harder for some to keep up their charitable giving makes it harder for others to put food on the table and hope in their lives.  Hard times strain families at every seam.  Charitable giving helps keep them from coming apart.