Following the December 2017 passage of the 2017 Tax Act, some in the gift planning community raised the question of whether the 2017 Tax Act’s elimination of miscellaneous itemized deductions extended to the deduction for unrecovered investment in contract (UIC) at the death of the last annuitant of a charitable gift annuity, as that deduction had appeared under the heading “Other Miscellaneous Deductions” on Form 1040 Schedule A. But the 2017 Tax Act only eliminated the miscellaneous deductions subject to the 2% floor, which the UIC deduction was not subject to. The UIC deduction remains available, as is confirmed in the tax forms, instructions, and publications the IRS has issued to reflect the 2017 Tax Act changes for 2018. This deduction equals the total of all tax-free portions of the annuity that have not yet been distributed as of the death of the last annuitant and is taken on the deceased’s final income tax return.
Testamentary gifts (gifts made at death) are the most common type of planned gift, estimated to be 80% or more of planned gifts received by charities. Donors typically have to confront complicated family and financial issues in the estate planning process. Ask any gift officer who has been involved in planned gift fundraising. They can tell of donors sharing compelling stories of family addictions, marriage instability, costly medical conditions, and financial mismanagement. Donors anguish over leaving a potentially large inheritance to a family member who may lack the skills to prudently manage the inheritance. To complicate matters further, the donor is conflicted about making a final gift to a favorite charity from their estate that will divert assets away from a family member in need of financial support. A testamentary life income gift that will pay steady income to their family member for life, with the remainder going to charity when the life income gift terminates, may be the answer for such a donor. The role of the gift officer is to educate the donor about the possibilities, and if the donor has interest, to encourage a collaborative discussion with the donor’s financial and estate planning advisors.
A special needs trust is a type of irrevocable legal arrangement established for the benefit of an individual with physical or mental disabilities while at the same time allowing the beneficiary to receive essential needs-based governmental assistance. A parent, grandparent, guardian or a court typically creates a special needs trust, also known as a Third Party trust. Some special needs trusts are set up with assets that the person with disabilities already owns, such as an inheritance or a legal settlement, and are called self-settled trusts, or First Party trusts.
A much-talked-about December 2018 blog post by Jon Tidd, the tax attorney and frequent speaker to planned giving groups, asks whether gifts to charitable remainder trusts will now require a qualified appraisal, even if the gift is funded with cash or publicly traded securities.
Many applications today are smarter than they used to be. You probably think I’m talking about the applications themselves, and while it’s true that today’s applications do a myriad of useful and clever things (PG Calc applications among them), I’m referring to the applications’ built-in intelligence around updates.