2014 was a record year for philanthropy in the United States, according to the Giving USA 2015 Annual Report. There was a 7.1% increase in giving dollars over 2013 (5.4% adjusted for inflation). These numbers signal the return of pre-recession giving patterns. Some experts had predicted it would take 10 years for charitable giving to rise back to pre-recession levels, so the increases are heartening.
The question of why charities need the donor’s cost basis for long-term appreciated stocks funding charitable gift annuities (CGAs) comes up frequently in our client support calls. If the donor doesn’t provide the information up front, do they really need to pursue it? What if the donor says he doesn’t have the cost basis information? Can the charity simply assume zero for the cost basis and call it a day? What difference does it make anyway? Why it matters PG Calc’s Planned Giving Manager prompts the user to supply the dollar amount the donor paid for the stock when it was originally acquired – or, in the case of inherited stocks, the official value of the stock on the date of death of the previous owner (AKA the “stepped-up” cost basis).* This information is relevant and necessary because charitable gift annuities are split-interest gift arrangements. In each CGA, there is a benefit for the charity (the remainder or residuum), and a benefit for the annuitant (the value of the stream of annuity payments over time).
Looking ahead to 2013, there are a few tax increases on the horizon that will affect gift planning. In particular, the Bush tax cuts are scheduled to expire at the same time new tax increases are scheduled to take effect.
Last month I presented a Webinar on taxation basics for gift planners. Somewhat to my own surprise, when I was preparing the accompanying paper, I found myself covering the topic of income in respect of a decedent (IRD) in the same section as the topic of estate taxes. It’s now several weeks later, and I remain convinced I made the right choice.
The American Council on Gift Annuities (ACGA) issued a statement to the United States Senate Finance Committee in defense of tax incentives that support charitable giving.