LET'S JUST GIVE IT ALL AWAY

Recent studies show that Americans are making charitable donations in record amounts. The recent natural disasters, coupled with some new tax incentives, have caused people in this country to open up their checkbooks like never before. Last month we looked at how to make gifts to individuals. Now we will have a look at charitable giving. This subject can range from small gifts, like pocket change in the Salvation Army Kettle or buying Girl Scout Cookies, up to the establishment of a charitable foundation backed by thousands, or even millions of dollars.

Giving away things of value, such as antique furniture, artwork, cars or boats, can be one way to accomplish your goal. Many charities welcome such gifts and have mechanisms in place to convert them to cash. If this is your chosen method, make sure that you get a receipt on the letterhead of the organization that shows the value of the gift. It is also helpful to discern that value yourself before the gift is made by obtaining an appraisal. Having a formal, written appraisal and a receipt from the charity that have matching values can allow you to take your income tax deduction with confidence, knowing that it would withstand the scrutiny of the IRS.

Gifting money to charity is pretty simple. You can give cash, a check or even use a credit card. I know that when my schools call for money, they are more than willing to ring up my donation over the phone. That leaves you no time to change your mind or forget to mail the check. It also gives you a clear paper trail, and it provides you with a reminder next winter when you are gathering your income tax information together.

Gifting stock can be a very efficient way to make a donation. Perhaps you want to donate $1,000 to your favorite organization. You can sell $1,000 worth of stock, pay your capital gains tax, and donate the difference. Or you can simply transfer the stock to the charity and they can sell it, thus avoiding the tax issue entirely. That is Uncle Sam’s way of encouraging gifts to charity.

One of your duties as a donor is to make sure that the money that you donate goes to the cause. You need to investigate the legal status of the organization and whether it has IRS approval. You want to make sure the entity is legitimate so that your contributions are tax-deductible. And you will want to ask how much of each dollar raised actually gets to the charitable purpose. For instance, if the charity is spending 40%-50% of the money it raises raising the money, then there is something amiss.

There are several ways that you can accomplish this detective work. You can go online to the charity’s web site and review it for clues. Then you can ask them to verify this information in writing. You can also go to the Better Business Bureau’s web site and look up your charity to see if it has submitted to the BBB approval process. Not all charities go through that, but you can rest assured that for the ones that do, the investigation is thorough. And finally, the Pennsylvania Attorney General’s Office oversees all of the charitable organizations operating in the Commonwealth, and they also have a web site and an office that you can call. A word to the wise, however, is to do this research before you send the check or give out your credit card number. You can never get money back from a bad charity, so the best defense is not to give it to them in the first place.

For the larger donors, there is the private foundation approach. You may have heard of some of these, which are usually named after business moguls who have made more money that they can ever spend or give away. The idea of disposing of a multi-million dollar or billion dollar fortune can make your head swim. So the idea of spending tens of thousands of dollars to establish one of these is mind-boggling, too. For the rest of us, we can use an organization like The Pittsburgh Foundation to give us the shelter of a full-fledged foundation without all the start-up or administration fees. There is a minimum donation of $10,000 required, but if you are going to be giving away goodly sums of money during your life or after your death, this is an easy and inexpensive alternative.

While there are numerous types of trust documents that will accomplish similar goals for you, they are too complex for this space, and you would be well-advised to discuss them with your estate planning attorney. One other item worthy of your consideration is the charitable annuity, which requires you to donate a lump sum of money to the charity. In return, it pays you a stream of income for the rest of your life. When you pass away, the charity keeps whatever money is left. They accomplish two goals. First, they generate a tax deduction for you when you fund them. And second, they will provide you with some cash flow when you need it the most.

For more details on these types of annuities, contact your intended charity and have them give you a quote. Then take that to your estate planning attorney for a review. Between them, they can help you through this and find what is right for you.

Christopher M. Abernethy has been practicing law in Hampton Township since 1976. He focuses on elder law, which includes wills, trusts, powers of attorney, living wills and probate matters. He also is proficient in all aspects of real estate law and business law. He is a member of the National Association of Elder Law Attorney and the AARP Legal Services Network. He can be reached at 412-486-6624 or by email at cabernethy@aaylaw.com.