For those who haven’t wrapped up their charitable giving for 2020, Atlanta Jewish Foundation has put together some year-end charitable giving tips and considerations to help you navigate your year-end charitable giving strategy.
Establish a Charitable Lead Trust
Now is the time to establish a Charitable Lead Trust. A Charitable Lead Trust allows you to donate generously to the charities of your choice, while providing a tax break for yourself and your heirs. Depending on how the trust is structured, the donor enjoys a current income, gift, or estate tax deduction on the donated assets. Because of low interest rates, these tax benefits are at the most they have been for many years. A Charitable Lead Trust is a wonderful option for those who wish to transfer assets that have the potential to appreciate over the terms of the trust. For the most flexibility have the charitable beneficiary be your donor-advised fund at the Atlanta Jewish Foundation.
Set up a Charitable Remainder Trust
If you need a steady stream of income, a Charitable Remainder Trust can provide that income along with a charitable income tax deduction. The charitable beneficiary at the end of the trust can be a donor-advised fund at the Atlanta Jewish Foundation or other types of funds.
Finalize and implement estate plans
Finalizing and implementing estate plans now can help minimize any impact seen by lowering of the estate tax exemption. Atlanta Jewish Foundation can help by being the charitable beneficiary in your estate plan (wills, trusts, IRAs, 401(k)s, and other assets). This simplifies the process – only one charity in the plan and you can make changes at any time with Atlanta Jewish Foundation – no need to make changes to your will or beneficiary designation. We will ensure that your charitable wishes are followed.
Put the Jewish Future Pledge into action
In your estate plan, indicate that your Jewish Future Pledge will go into a Legacy Fund at the Atlanta Jewish Foundation. We will ensure that any distributions from this enhanced donor-advised fund are in line with the pledge.
Income Tax Year-End Considerations
Many are looking to accelerate income and deductions into 2020. It may be beneficial to make a large charitable contribution this year to take advantage of the known charitable deduction that can offset an acceleration of income.
Donate highly appreciated stock to a donor-advised fund
Use the bunching technique to maximize the use of itemized and standard deductions. Donate a large amount of highly appreciated stock to a donor-advised fund this year, itemizing and taking the charitable deduction (usually the fair market value of the stock). In subsequent years, do not make any charitable contributions but rather use the assets in your donor-advised fund and take the standard deduction.
Harvest capital gains
Harvest capital gains including sales of businesses and other business interests from privately held corporations, S corps, LLCs, or private equity LPs. By incorporating charitable giving into the sale plan (pre-sale), you can minimize the impact of the capital gains tax and create a substantial charitable fund. The Atlanta Jewish Foundation is uniquely positioned to accept these types of assets in a timely and efficient manner.
Regardless of the election results, there are several things you should consider before the end of the year. These are time-sensitive items that were passed as part of the CARES Act for 2020.
- Consider making a charitable contribution of cash as there is a 100 percent charitable deduction. (This is usually limited to 60 percent of your adjusted gross income (AGI).)
- The AGI limit for cash contributions was also increased for corporate donors. Corporations can now deduct up to 25 percent (increased from 10 percent) of taxable income.
- Both of these new incentives apply only to cash contributions to public charities and do not apply to contributions to donor-advised funds, supporting organizations, or private foundations. However, there have been no changes to existing deductions for contributions made into a donor-advised fund. You are still able to deduct up to 60 percent AGI in cash and up to 30 percent AGI in appreciated assets contributed to a donor-advised fund.
- Existing carry-over rules still apply, so if your donations in 2020 exceed your AGI deduction limits, you may carry forward excess deductions for up to five subsequent tax years. As always, donors should consult with their tax and legal advisors when considering their charitable giving.
- The CARES Act allows for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. If you are not itemizing on your 2020 taxes, you can claim this new deduction.
- The CARES Act did not change the rules for the QCD or IRA Charitable Rollover. While Congress provided rules requiring minimum distributions from a retirement plan or IRA to be suspended for this year 2020, you can still make a qualified charitable contribution of up to $100,000 from your IRA if you are 70 1/2 or older (even though you are not usually required to take an RMD until age 72). Because IRAs can be taxed at death to beneficiaries, it’s a great way to make a charitable gift. This contribution cannot be used for a donor-advised fund, supporting organization, or a private foundation; however, this would be an ideal way to establish an endowment fund for an organization or a field of interest fund to help a cause you are passionate about.
- Under the CARES Act an individual can elect to deduct 100 percent of their AGI for cash charitable contributions. This effectively affords individuals over 59 ½ years old the benefits similar to a QCD; they can take a cash distribution from their IRA, contribute the cash to charity, and may completely offset tax attributable to the distribution by taking a charitable deduction in an amount up to 100 percent of their AGI for the tax year.
- If you’re planning a large donation in 2020, this may be a smart strategy as long as you are between the ages of 59 ½ and 70 ½ and are not dependent on existing retirement funds.
Year-End Resources and Deadlines
The Atlanta Jewish Foundation wants you to experience the joy of giving. To make your year-end charitable planning a smooth process, charitable contributions to funds must be received no later than midnight December 31, 2020.
Below are some helpful resources as well as key deadlines to ensure the accurate and timely processing of contributions and grants in 2020.