Tips for planning year-end gifts

Saturday, November 15, 2003

Part 1 of a 2-part series

By Trudy Lee

director of planned giving

Southeast Missouri University Foundation

As the end of the year approaches, the giving pace picks up. This is true for the nonprofit world in general. Many people simply wait for the closing of the tax year - and the barrage of financial appeals - to make their major gifts.

If you fall into this category, you may want to consider the following suggestions. In this first of this two-part series from Leave a Legacy of the Heartland, we explore a few ideas to implement now that may help you successfully plan for your year-end giving.

Tax-wise giving

The opposite of a tax-wise gift is a tax-weak gift. The latter is a gift that fails to use our tax code to maximize our charitable giving. For example, let's say you have $10,000 in long-term appreciated stock and you want to make a year-end gift of $10,000 to charity. You could either give the stock or sell it and give the cash. If you sold the stock, you'd have to pay tax on the gain, thus leaving less money to give to charity.

On the other hand, you could make a tax-wise gift and transfer the stock directly to your chosen charity, thus avoiding any tax on the appreciation of the stock. The charitable organization can then sell the stock without incurring tax on the capital gains.

Real estate that has increased in value can often provide the same type of benefit. A collection, such as a coin or stamp collection, can also be a tax-wise gift. When considering these types of non-cash gifts, be sure to work with the charity to make sure it can use the property. And confirm that the organization to which you are giving is a qualified charitable organization.

Another type of tax-wise gift arrangement is a life-income plan. These types of planned gifts, such as charitable trusts and gift annuities, allow you to establish a gift now, obtain current tax benefits, create a stream of lifetime income and provide a future gift to charity. They are especially attractive to donors who wish to make a gift to charity but cannot afford to give up current income. Sometimes these gifts may even result in an increased income stream.

Act now to avoid hurried decisions

With the hectic lives many of us lead, we may tend to put off our giving until "we have the time." Before we know it, however, the calendar runs out. We find ourselves staring at Dec. 31 and must rush to complete our year-end gifts. In our haste, we can make serious mistakes - creating a tax-weak gift rather than a tax-wise gift.

A planned gift, by definition, requires planning. Gifts of non-cash assets and life income plan arrangements should be made carefully and in consideration of overall estate plans. Also, these types of gifts usually take more time to complete - often several days or possibly weeks.

So, if you expect to make a planned gift before the end of the year, allow plenty of time. Avoid the rush. Start now to contact the charity or charities you have in mind for their assistance. Also, be sure to call your attorney and financial advisor to make sure your proposed gift is advisable and to prepare any necessary paperwork. Getting appointments and handling the paperwork takes time. So, start early.

Make planned gifts, not impulse gifts

Beware of knee-jerk gift decisions. With all the crisis-related appeals we receive at year-end, it's easy to get caught up in the emotion of the moment and respond with a generous gift. Were we to back off a bit and think through such a decision, we might do something entirely different. We might give less, or more, or maybe not at all. But at least we would have considered our decision carefully, including the organization crying for our support.

As stewards of our resources, we do well to temper our emotions with prudence and plan our giving in a way that accomplishes the greatest good for all concerned. Impulse giving may be okay for pocket change, but not for major assets that comprise our estates.

As we approach the end of the year, the charities in your community want your gifts to be fully satisfying to you, both in what you give and how you give it.

Next month, we'll look at a few other tips for giving as 2003 draws to a close.

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