Posted on March 1, 2010 by Deirdre Wheatley-Liss

Charitable Remainder Trust - Give your tax dollars to charity instead

Jensen Law Offices has a great post summarizing the mechanics and usefulness of a Charitable Remainder Trust or CRT.  A CRT is one of those great tax techniques where you get to have your cake and eat it too.  

A CRT is a split gift between a charity and your family.  For example - you leave a portfolio in a trust where your children get 7% a year for their lives, and when the child dies, the charity gets the balance of the portfolio.  Your estate is entitled to a tax deduction (since NJ still has an estate tax, this is relevant in 2010 as well as 2011 and beyond when the federal estate tax reappears).  Your children get an income stream for live, and the charity has the reminder upon their deaths.

Note that when you have a taxable estate charitable giving at its most basic is taking dollars that your family would not have gotten anyway (because they had to go to taxes) and directing them to charity. With a CRT you are compounding this by getting the tax benefits and giving the family a stream of dollars.

 

Image: Salvatore Vuono / FreeDigitalPhotos.net

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Posted on December 10, 2009 by Deirdre Wheatley-Liss

Charitable Deduction from an Estate?

A great answer to a frequently asked question when handling a loved ones estate was recently posted by taxgirl.com.

Here is the situation - Grandma wanted to give $10,000 to the ASPCA.  She told everyone in the family, but didn't put it in her Will. Can the deduction for a charitable contribution still be made?

Like all good questions - the answer is yes and no (isn't the law great?).  Taxgirl summarizes the issues nicely:

Here’s the unhappy rule: if a charitable donation is not specifically authorized in a will or trust, the estate may not properly take a deduction for the donation. <snip>

However, there is some light at the end of the tunnel. Individuals may properly donate items which pass to them from an estate and claim a charitable deduction on their personal return. 

So what to do.  Well, you could take $10,000 from your share of the estate and donate it to charity. Grandma's wishes would be honored, and you would be able to take the deduction on your personal tax return. If there are 4 beneficiaries, each could donate $2500 in her honor.

What if the item to be donated isn't cash, but stuff?  For example, donating all of Grandma's furniture and household items to charity? In that case the best idea is to value the property (have a personal property appraiser come in), distribute the property to the beneficiaries, and then the beneficiaries can take the charitable deduction on their tax returns.  Note that there is not a requirement that the beneficiaries physically take ownership of the property - the property could be transferred to the beneficiaries via an assignment and then all the personal property picked up by the charity at the house.

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Posted on August 11, 2009 by Deirdre Wheatley-Liss

Charities as Victims of Cash for Clunkers?

Are Charities going to be Victims of Cash for Clunkers asks Kay Bell of Don't Mess With Taxes.

The Cash for Clunkers program (officially CARS for  Car Allowance Rebate System ) has been hugely popular. Old gas guzzlers are being traded in for new cars that have a $4500 rebate.  An additional $2 billion was added to the program last week.

Quick Aside - $2 billion is the same as $2,000,000,000.00 - ALWAYS write out the zeros when talking about how the government is spending YOUR dollars - looks quite a bit larger now, doesn't it?  At $4500 a car, that is 44,444 additional new cars being purchased.

The program requires that the "Clunkers" are junked by having liquid silicate poured into the engine, so that it is irreparably destroyed.  These cars will then be sold for scrap (and I won't go into the pros and cons of the environmental effects of that).

The problem?  Many charities rely on donations of old cars as an ongoing revenue source.  For example, Bell says:

Animal Services of Thurston County, Wash., depends on up to $20,000 in donations each year from Northwest Charity Donation Service. The service, in turn, relies on donated cars.

But since the Cash for Clunkers program began this summer, the nonprofit's source of funding is drying up, reports King 5 News in Seattle.

These are the same charities that have already lost scores of other funding sources as a result of individuals reducing contribution due to the stock market drop, corporations redlining excesses in the budgets due to the recession, and foundations staggering under market and Madoff type unanticipated losses.  So, score 1 for the car industry, and another negative for the charities that are using private dollars to address some of the staggering needs of the less fortunate.

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