Dear Friends of the Christian Brothers,

If you are reading this it is probably because you care about the Christian Brothers and support them. More than likely, you also support one or more of our schools and possibly several other charities.

In this series, we will mention some common questions, misconceptions, and tips about giving. Some of these you may look at and say, “Well, of course!” Maybe others will make you say, “I didn’t think of that.”

If you have questions or would like to discuss any of these ideas further, please feel free to contact me, Patrick Donahue, at (732) 380-7926, ext. 112, or at donahue@fscdena.org.

*Please know that these tips are not intended to be legal advice. Before you finalize any charitable gift plan, please consult your financial and/or tax advisors to make sure it is right for your specific circumstance.

Is there a way I can make a special gift today, but guarantee I have income as I grow old?
Yes, there are several. The easiest and most common is the Charitable Gift Annuity. It is a simple one or two page contract that essentially says that the donor (single or couple) will gift the charity a certain amount and receive a percentage based on your age and a standard rate set by the government, paid back annually for the rest of their life. Upon your death, the balance remaining becomes a gift to the Christian Brothers.

Are there other benefits?
Yes. You get a partial tax deduction when you make the gift and probably pay a lower tax rate on the income you receive back each year. Also, the amount of the gift is no longer included in calculations of your net worth. (This is helpful as many senior benefits are scaled based on net worth.)

Are there restrictions?
Yes. You must be at least 55 years old when you begin receiving payments and your gift must be at least $20,000.

For more information contact Patrick Donahue at (732) 380-7926 or at donahue@fscdena.org.

This article provides general information only. We suggest that you always consult your own advisors before making financial decisions. Brothers of the Christian Schools, DENA is not engaged in the practice of Law.

For the past few decades, many Americans who believe in helping others have established Family Foundations. These are legal charitable entities into which an individual or family can make charitable contributions. While the money in the Foundation no longer belongs to them, they can manage the investments and the distribution of gifts to charities. They must abide by the same regulations as other Charitable Foundations, such as the 5 percent minimum annual disbursement.

In recent years, Donor-Advised Funds (DAFs) have allowed many more individuals and families to participate in this form of philanthropy. In fact, the number of Americans who own Donor-Advised Fund accounts has quadrupled in the past five years. Today there are nearly one million DAFs. Grants to charities from Donor-Advised Funds in 2018 totaled $23.4 billion.

Let me be clear, Family Foundations and Donor-Advised Funds are both wonderful giving vehicles that give you the tax incentive when depositing, and let you make gifts as you are ready. There are distinct differences that make each right for different people. A Foundation takes longer to create, requires a much larger initial investment, pays higher taxes and fees, and usually demands much more personal time invested into its operation. However, it allows the donors (or the Trustees they appoint) to have control over the investment and distribution of funds, and makes it easier to have the entire family involved and to continue to be run by heirs after the death of the initial donor.

On the other hand, a Donor-Advised Fund is relatively easy to open. It usually requires an initial gift to the account of somewhere between $5,000 and $25,000, depending on the Sponsor (the organization holding and managing the account). In most cases they receive better tax deductions. And, they do not face the same regulations as a Foundation. In order to gain these advantages, the owners sacrifice some of the control, independence, and flexibility of a Foundation. Once the account is established, the donor can instruct the Sponsor to make a gift to a charity at any time.

Both of these vehicles have helped encourage charitable giving, and have been a huge blessing to those of us working to better the world who depend on the kindness and charitable support of others. If you have questions or would like to talk further about this, please call me, Patrick Donahue, at (732) 380-7926, ext. 112.

First Things First:  Before I begin, I have to ask, “Have you made your will?” A nation-wide study last year found that nearly 50% of Americans who are at least 55 years old DO NOT have a will. Please do not assume that the government will distribute your assets the way you would have wanted, or that they will not take a nice cut for their efforts. Even if you are not a millionaire, spending a bit of time and money to create a will can greatly increase the amount that actually gets to your heirs, and that it will go where you want it to go.

Before You Begin:  Also consider that some financial products (Retirement Accounts, Life Insurance policies, Investment Accounts, etc.) may offer the option of listing a beneficiary directly on the account. Designating these often saves the time and expense of going through probate.

Types of Bequest Wording:  There are various ways to designate who gets what in your will. You can make gifts of specific property (e.g. I leave my house to John), or specific dollar amounts. You can leave a percentage to each heir and charity. Also, you can leave a residuary bequest (e.g. once these are all paid, I bequeath the remainder to the Brothers of the Christian Schools, DENA.)

Highly Taxed Accounts:  Individual Retirement Accounts (IRA) are often the most heavily taxed items in your estate. Therefore, if you are leaving gifts to both loved ones and to charity, use the IRA for the charity, since they will be tax exempt. Your family could then end up with a larger gift. There is also wording you can place in your will instructing that the highly taxes products be the first items used for your charitable gifts.

I have included many of these thoughts in more detail in a brief white paper on creating wills. If you would like a copy, or would like to discuss anything on this topic, please contact me, Patrick Donahue, at (732) 380-7926, ext. 112, or at donahue@fscdena.org. Please know that my hints here are not intended to be legal advice. I always suggest that before you finalize any charitable gift plan, you should consult your advisors to make sure it is right for your specific circumstance.

As it became more evident this spring that the coronavirus was a true pandemic, and was not going away any time soon, Congress enacted the CARES Act on March 27th. Along with the most heavily talked about aspects—direct financial relief, enhanced unemployment benefits, and relief for small businesses—it also contained some charitable giving incentives.

For Non-Itemizers
Since the new tax laws of 2017, many more of us do not itemize. However, for this year, the CARES Act gives everyone an above-the-line deduction of $300 for charitable contributions to your favorite charities (well, actually to most charities, but I didn’t think you would want to give to the ones you don’t like). Please note that this does not include gifts to Donor Advised Funds.

Larger Gifts of Cash
This year, the law also greatly increases the percentage of adjusted gross income (AGI) limitation up to 100% for cash gifts from individual taxpayers. Generally, a deduction of up to 30% is allowed for appreciated assets, but can be added to your cash gifts to total 100%. There are also increased AGI limitations for corporate gifts and food inventory gifts.

Charitable IRA Distributions
Even though the required minimum distributions from IRAs for those 70½ or older has been suspended through the end of the year, giving directly from your IRA still remains a wonderful way to make tax free qualified charitable distributions to charity.

Please Be Careful
Unfortunately, during any crisis, the number of scams trying to get your money or your personal information jumps dramatically, trying to prey on your good nature or your fear. Please always be careful. Continue to support the charities you know, and do not be afraid to check out any new solicitations before giving. Remember, do not give (or give information) if it does not feel right, just because you are being pressured.

Let’s talk about IRAs (Individual Retirement Accounts).
For most of us, retirement accounts have either replaced or supplemented traditional pension plans. They allow you to make before-tax deposits and pay no taxes until you withdraw. This is a great deal, but sometimes paying taxes upon withdrawal can affect your income level for the IRS, Medicare, etc. Remember, the IRS says you must begin annual withdrawals at age 70½, even if you do not need the income. In considering your own personal charitable giving, there are two questions to consider about your IRA.

Is making a charitable gift from my annual IRA withdrawal right for me?
Last year, Congress finally passed a permanent law allowing you to make charitable gifts (totaling up to $100,000) directly from your traditional IRA. The gift goes directly to the charity without even entering your income stream, therefore not affecting your income level. This can be a very nice advantage, especially for those who do not itemize, or who have concerns about not increasing their household income. More and more donors are now using this option, so most account providers are now making it very easy to gift all or any portion of your annual payment to a charity or charities. (Reminder: certain types of accounts, such as a SEP-IRA for example, are not eligible for this benefit.)

Should I leave my IRA to my heirs—keeping it with loved ones, and bequeath cash, stocks, or other property to charity?
The simple answer is “NO!” As a matter of fact, your heirs will probably be much better off if you reverse that asset distribution. Retirement funds are often the most highly-taxed portion of an individual’s estate. Often being subject to income and, in many cases, estate and other taxes as well. Your heirs will usually come out much further ahead if you pass retirement funds to charity tax-free, and reserve other less highly-taxed assets for them.

I have been told many times, “I would like to make a special gift, but I am worried about having income in my later years.” An annuity can be a simple answer. The Brothers of this District (DENA) now have the ability to offer Gift Annuities. A gift annuity is a simple one or two page contract that basically says that the donor (single or couple) will gift the charity a certain amount, and receive a percentage paid back annually for the rest of their life. It is usually a generous percentage, based on your age and a standard rate set by the government.

It is quite common for a donor, even a business-savvy one, to make a generous gift by writing a check, without considering whether a stock gift would be more beneficial for his or her tax purposes. If you have greatly appreciated stock (worth much more now than you paid for it), you can transfer the stock to a charity. You will pay no capital gains, and can take a write-off for the full current value of the gift. (Hint: If you think the stock will continue to grow, you can re-purchase the same amount. Now your cost-basis will be at today’s value.)