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TO GIVE IS DIVINE AND OH, SO TAX-DEDUCTIBLE.

December is the busiest time of the year for Colorado's charities, as the Spirit of Giving annually teams up with Uncle Sam to prompt deductible donations.

It is also the time of year when Ben Franklin's observation that there is nothing certain in life but death and taxes is most apt.

"When you die, 55% of your assets above a certain minimum are lost to the U.S. government," said Mark Brown, certified financial planner and partner at Denver-based investment firm Brown & Tedstrom Inc. Estate taxes are simply an uncontrolled form of philanthropy--to the federal government--Brown noted. "What's motivating is, instead of not having any influence (as to how donations are spent), you can be philanthropic and have a lot of influence," he said.

Spirit tends to be in the driver's seat on serious gifts to charity--Uncle Sam merely chips in.

"There really needs to be a charitable desire," noted Bob Thul, a Colorado Springs-based CPA. "If you make a contribution, the resulting (tax savings) is equal to your tax bracket times that contribution," not the full amount of the gift. The most an individual can deduct from charitable gifts, he continued, is 50% of their adjusted gross income for a given year. If contributions tally more than 50% of his or her adjusted gross income, the excess can be carried over and deducted the following year.

Donors want to get their money's worth. So, two questions:

Q: How can you ensure that the money really is helping the cause you are giving to?

Susan Steele, executive director of the Cherry Hills Village-based Buell Foundation, a $97 million private foundation for children in need, explained that grant-making is in many ways a business decision.

"The kind of things we look for (are) organizations that have been around for a while," with a strong track record, she said. Steele noted that the "really passionate, humanitarian people" driving philanthropy do not always have the strongest business savvy. (See sidebar.)

Q: How can you maximize your tax benefit?

A: "The maximum deduction you can get is from donating appreciated assets" such as stock, said Thul. "You get a deduction on the fair market value on the stock, but you don't have to pay tax on the gain."

Individuals who receive a sudden influx of money in a given year, from a home or business sale, booming stock options, or inheritance, may want to consider establishing a trust, advised Daniel Day of the Boulder-based Daniel M. Day & Associates estate planning firm. A common device for handling significant capital gains in a given year, he said, is the charitable remainder trust.

"A donor places property into a charitable remainder trust, retaining a specified income for a number of years," explained Day. "The property remaining in the trust (at the end of its term) passes to a charity of the donor's choice. The charitable remainder trust is a huge opportunity to shelter low-cost basis assets from huge capital gains (taxes) and remove those assets from estate tax analysis."

If implemented properly, such trusts are "mutually beneficial" for the donors and their charities of choice, he added.

"Another concept that I think is overlooked is the charitable lead trust," noted John Brown of Minor & Brown PC, a Denver-based law firm. (John Brown is no relation to Mark Brown.) Essentially the reverse of a charitable remainder trust, these pay the annual revenue stream to a charitable organization and, at term's end, the remainder reverts back to the donor's estate. Usually implemented at the time of death, the charitable lead trust is only a fit for wealthy, philanthropic people with financially secure children. However, it offers the donor the benefit of "minimal estate taxes or no estate taxes," he said.

Mark Brown and John Brown, as well as Bob Thul, offered a consensus on maintaining control over donations: either by giving to a donor-advised fund at a community foundation or establishing a family foundation.

"The community foundations are a great way to make a contribution, stay involved, and not have the headaches or expanse of a private foundation," noted Thul. "They do all of the hard work to keep everything legal and in compliance."

In private foundations' favor, Mark Brown said, "Mom and dad and the kids have a reason to come together and get more involved in the local community." Family foundations have "become less expensive and cumbersome" to establish and administer in recent years, he added.

While many people leave money to the Denver Foundation when they die, the foundation spokeswoman Marlene Casini said her group is seeing "more people wanting to be involved with their philanthropy during their lifetime."

The need for philanthropy remains strong. Tax issues aside, morality drives giving. "Clients give money to charity because they think it's the right thing to do," John Brown said.

DON'T GIVE 'TIL IT HURTS

"In these last eight to 10 weeks of the year, American charities do almost half of their fund-raising," noted Denver/Boulder Better Business Bureau spokeswoman Susan Liehe. "Knowing that there's spike of activity, a scam artist steps into the fray," she warned. Experts estimate that 1% to 5% of all donations are solicited by fraudulent organizations -- $2 billion to $10 billion annually in the United States.

Which is why the best overall indicator of a good charity is the percentage of income directed at the charitable cause. The National Charities Information Bureau and American Institute of Philanthropy deem any organization that spends less than 60% of income on programs inefficient.

For some "quasi-fraudulent" charities, only 2% of the donations end up funding programs, Liehe said. On the opposite side of the spectrum, Colorado-based charities Mi Casa Resource Center for Women and Volunteers for Outdoor Colorado funded programs with 77.4% and 84.5% of their income, respectively.

DRACULA VS. SANTA

With so many vampires among the Santas, it is important to take a good long look at where your money is going. There are several groups that help check up on charities, including:

* Philanthropic Advisory Service (PAS) (703) 276-0100 www.bbb.org

* National Charities Information Bureau (NCIB) (212) 929-6300 www.give.org

* American Institute of Philanthropy (AIP) 4579 Laclede Ave., Suite 136, St. Louis, MO 63108, (314) 454-3040

* The Colorado Attorney General's Office (303) 866-5189

See also two handy, effective online databases, www.guidestar.org and www.nonprofits.org. Each offers great quantitative information and limited qualitative opinion, said the Denver/Boulder Better Business Bureau's Susan Liehe.
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Title Annotation:managing charitable donations
Author:PETERSON, ERIC
Publication:ColoradoBiz
Article Type:Brief Article
Geographic Code:1USA
Date:Dec 1, 1999
Words:1074
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