It’s hard to believe that the end of the year is fast approaching. There are many ways to lower your tax bill and support MSOE’s mission, but year-end decisions that affect your taxes will need to be made fairly quickly.
One of the strongest motivators for initiating activity prior to the end of the year is the certainty of the 2011 tax rules and regulations. The uncertainty that 2012 brings—including a potential end of the charitable deduction as we know it—is a reason to act now. 2012 may bring a whole new set of tax rules and regulations which may result in unfavorable consequences and lost opportunities that might never be recaptured.
Year-end charitable gifting options that could lower your taxes include gifts of cash, gifts of stock, gifts of life insurance, and bequests:
Cash is the easiest way to give. Cash gifts can lower your annual tax bills if the gift is postmarked by Dec. 31, 2011. Call MSOE directly at (414) 277-7151 for more details.
Gifts of stocks and bonds are extremely tax-efficient gifting options. Appreciated securities offer a two-fold tax savings by avoiding capital gains and receiving an income tax deduction for the full fair market value of the stock at the time of the gift.
If you are considering this kind of a gift, please call MSOE’s director of planned giving, Scott Weaver, at (414) 277-7148 or email@example.com well in advance of December 31. It is important to get this ball rolling right away due to the specific rules, regulations and deadlines that are in place.
Gifts of life insurance free of policy loans allow donors who no longer need the policy to take advantage of a charitable tax deduction. For a paid-up policy, the donor benefits from an income tax deduction equal to the replacement value of the policy—or, the tax basis (premiums paid to date of gift)—whichever is less.
If premiums remain to be paid on the policy, the future premiums can be deducted from the donor’s income tax on an annual basis. In this case, MSOE must be named as both policy owner and beneficiary. To obtain a gift or income tax deduction, all incidents of ownership and rights in the policy must be assigned to the charity. Again, if you are interested in this option, or have questions, contact Scott Weaver at firstname.lastname@example.org or (414) 277-7148.
Charitable remainder trusts are popular planned giving vehicles from a tax efficiency perspective. Charitable remainder trusts allow donors to reduce estate taxes, defer capital gains tax and claim an income tax deduction.
Charitable remainder trusts provide distributions of a specified payment to one or more persons. The payment may be structured as an annuity or structured payment. Nonprofits receive the remainder from the trust upon the termination of the trust, either upon the death of the last beneficiary or after a stated period of time.
There are some favorable aspects of this technique that are available for this year and, hopefully, for 2012. As the law is currently structured, these same favorable aspects are scheduled to disappear thereafter and revert to a more restrictive dollar amount in 2013. Your attorney and tax advisor can determine whether these rules will impact you favorably.
In most cases of advanced tax planning and charitable gifting, donors should consult with their tax and financial advisors well in advance of the year-end.
MSOE has a gift acceptance policy that guides us regarding giving assets and donors need to ensure their donation can be properly accepted and accounted for so that the deduction is valid.
Charitable giving is essential in long-term financial planning and as a wealth transfer strategy. Philanthropic intent and tax advantaged gifting go hand in hand. The advantages of philanthropic financial planning are significant for donors, and include tax efficiency, asset diversification, and retention of tax dollars.
An individual’s opportunity relies on their tax bracket and a number of other factors. Additionally, and perhaps equally important, is how the gift will impact the MSOE community. Through your personal philanthropy, you allow others to experience what they might not otherwise be able to because of a number of reasons. Your gift will make an MSOE education a reality for a student who otherwise could not afford it. Let’s face it, we have all had help at some point in our careers. Now is the time to pay that help forward. It is your turn to provide the next rung of the ladder and to help the current generation and those to come.