Remember when planned giving called the Qualified Charitable Distribution (QCD) the charitable IRA rollover? Remember when we didn’t know if we could ask donors to make such gifts until the last minute each year? The Internal Revenue Code defined the concept of a charitable IRA rollover as a QCD when the legislation passed all the way back to 2006. The QCD was part of a package of tax extenders that expired every December 31 unless reinstated by Congress. There were years of waiting and waiting for reinstatement of the extenders package. IRA administrators weren’t sure what to do with the QCD and planned givers kept referring to this as the charitable IRA rollover. All that changed in 2015 with the passage of the PATH Act. That legislation made the QCD permanent law and while the expression “charitable IRA rollover” still remains in some marketing materials as a synonym, it is used less often to avoid confusion.
The IRS Discount Rate (also known as the “7520 rate”) has fallen from 3.6% in December of 2018 to 1.8% in October of 2019. This dramatic decline over a relatively short period of time has significant implications for split-interest gift arrangements. The charitable deductions for gift annuities and charitable remainder trusts go down when the discount rate goes down, but the deductions for charitable lead trusts and retained life estates go in the opposite direction. (The calculations for Pooled Income Funds are unaffected, as they do not use the discount rate.) The following paragraphs illustrate the impact of declining rates on various gift types.
A gift of art to charity can be a mutually rewarding gift for the charity and the donor. However, there are numerous IRS rules that must be closely followed by the donor to protect and maximize his tax benefits. While the gift planning office should always counsel the donor to obtain his own advisor in such situations, an understanding of the basic IRS rules for gifts of art can assist in the process.
The popularity of donor advised funds (DAFs) has resulted in a national movement in charitable giving. In 2017 assets in these funds reached a record $110.0 billion according to a report from the National Philanthropic Trust. This explosive growth presents a tremendous opportunity for public charities to benefit from this pool of assets. However, unlike private foundations, there are no requirements for annual distributions from DAFs. Charities expecting to maximize DAF gifts cannot sit passively by waiting for DAF grants to arrive in the mail. Those charities that implement a proactive strategy to acquire DAF gifts will develop another stream of income likely to increase over time.
No doubt about it, Planned Giving is a fascinating area to work in. it’s right at the confluence of fundraising and estate planning, incorporating knowledge about investments and sensitivity to the life cycle stages that are part of the human experience. We’re helping organizations to raise money for causes we believe in, and we’re helping individuals to make the most efficient allocations of their income and wealth. One of the central and more difficult aspects of planned giving, however, is the dependence upon a variety of tax laws that affect every type of planned gift. Today’s gift planning professionals need to know more about the American tax system than ever before.