Planned Giving Insights and Information

BDQ #4: Why Is There a Charitable Deduction and How Does It Work?

The income tax charitable deduction has been around since 1917, just four years after the 16th Amendment created the modern Federal Income Tax. But why are charitable contributions deductible? And, can a donor actually save money by making a charitable contribution? First, let’s review the history of the income tax, then we’ll explore how the charitable deduction works in practice. The Federal Income Tax The Constitution limited the ability of Congress to impose taxes by requiring that “direct taxes” be levied in proportion to each State’s population. Direct taxes are those, such as the income tax, that apply directly to persons or property. However, there was no limitation on indirect taxes, those that apply to an event including duties and tariffs. As a result, during our nation’s first century, tariffs were the largest source of Federal revenue.

Surely No One Dies on Schedule: Split-Interest Gifts and Mortality Tables

Much of our work in planned giving – in particular, with split-interest gift arrangements – involves the use of mortality tables and the related estimates of life expectancy. When calculating the charitable income tax deduction for a split-interest gift, for example, we are required to use specific mortality tables dictated by the IRS. If we wish to estimate the remaining liability for a life-income gift, we must use some type of mortality data. And should we attempt to estimate the ultimate charitable remainder value for a life-income gift, the use of mortality data is critical. But what are the different mortality tables, and when do we choose to use a specific one?

BDQ #3: The Assignment Revocation Rigmarole: A Gift Annuity Pushmi-Pullyu

The BDQ (Big Dumb Question) We’ve all been there: at some point during a presentation someone says, “This may be a dumb question, but…” and the presenter (hopefully in a gracious tone of voice) says, “There’s no such thing as a dumb question,” before providing the obvious answer. But sometimes, just to yourself, you have to admit you were wondering about the same thing. That’s the idea behind this occasional series we’re calling “The Big Dumb Question” (or BDQ). Our aim is to provide easy to understand answers to basic gift planning questions – the kinds of questions you may be reluctant to ask. We’ve got a list of topics in mind (see below). The Assignment Revocation Rigmarole: A Gift Annuity Pushmi-Pullyu The provisions of the “IRA Legacy Act” provide a limited opportunity for donors to make a qualified distribution in exchange for a charitable gift annuity. This new option comes with several constraints, including a requirement that the gift annuity contract cannot be...

IRS Updates Rules for Computing Planned Gift Deductions

On June 1, 2023, the IRS made public Treasury Decision 9974 (TD 9974). TD 9974 contains final regulations relating to the use of actuarial tables in valuing annuities, interests for life or a term of years in property, and remainder or reversionary interests in property. A change of immediate importance to gift planners, TD 9974 requires use of the 2010CM mortality table when computing the deduction for a gift annuity, charitable remainder trust, or other split-interest gift made on or after June 2, 2023.