Giving options for your consideration

From John Shehane, ATH Senior Consultant:  While After the Harvest is dependent upon the charitable gifts of its donor-friends to be able to achieve its mission and future plans, we also want to gratefully acknowledge all the gifts we receive and to provide information about the different ways gifts can be made as a service to benefit our donors and their families. 

In addition to feeling good because of their generosity in making gifts to a non-profit such as After the Harvest, these donations can essentially benefit donors in two significant ways – saving taxes and exchanging a gift for income. Let’s examine some of the simplest ways that a donor can provide support for After the Harvest

GIFTS OF CASH:  The most common form of giving to support After the Harvest.

  1. Gifts may be in the form of realized pledges paid as part of the Monthly Gifts Program or on an annual basis as part of a specific campaign.
  2. Paid outright as a stand alone one-time gift.

IN-KIND SUPPORT:  Donors who provide materials needed for specific purposes may also be entitled to a charitable deduction of the value of the material and/or (if available) community service state tax credits in Missouri. Gifts of service are not deductible.

GIFTS OF APPRECIATED SECURITIES:  Often the wisest choice in that the donor may claim an income tax deduction for the fair market value of the security and avoid the obligation to pay capital gains taxes on the appreciated value of the security.

BEQUEST:  Simply naming After the Harvest as a beneficiary in one’s will, testamentary designation form with a bank or testamentary trust is a most thoughtful and generous means of continuing one’s support beyond life.  There are three forms in which this can be done:

*Specific bequest – Identifies the property value of the amount to be given.

* Residuary bequest – Identifies a percentage of the estate remaining, after all other bequests and obligations are met.

* Contingent bequest – Identifies property to be given, providing certain other conditions are met.

Bequests and other forms of legacy gifts can often be used in combination with gifts of cash and/or in-kind support to reach a higher total commitment.

CHANGING OF WILL – CODICIL:  A will can be changed with a simple and notarized form. 

LIFE INSURANCE:  A gift of “paid-up” life insurance usually creates an income tax deduction depending on the circumstances. A donor may also give life insurance on which premiums are still being paid, deducting a tax basis value and the value of the premiums the donor continues to pay.

GIFTS OF REAL ESTATE:  Donors may give a residence or farm, or a portion of a farm and deduct the value of the property as determined by a Qualified Appraisal at the time of the gift. A donor might also establish a LIFE ESTATE by giving the property while continuing to use it as a residence and still claim a current income tax deduction. A partial gift (REMAINDER INTEREST) may be designated by a donor so long as it is in its entirety.

GIFTS FROM RETIREMENT AND PENSION PLANS:  Sometimes donors may find themselves obligated for taxes due to over-funded retirement plans. Gifts to charity can provide helpful assistance. Donors may also find that giving an IRA may be of greater tax advantage than giving from other personal resources. If donors don’t have an IRA, but rolling a 401(k) or 403(b) to an IRA to make a gift may be wise.

DONOR-ADVISED FUND:  This form of giving to nonprofits is currently the single most popular way of supporting a charity. The creation of a DAF or additions to existing funds is immediately eligible for a tax deduction. The sponsoring organization, generally a community foundation of a bank offering such options, manages the investment of the fund and tax filing for a fee. The donor is subsequently allowed to suggest gifts from “their” fund to other nonprofits.  

CHARITABLE GIFT ANNUITY:  CGAs are the same as commercial annuities in that they are a contract returning income to the donor for life. At the time of death, the principal remaining from that used to establish the annuity becomes the property of the charity. The donor must pay income taxes on annual payments from the annuity, but they are reduced as some of the income is considered to be a return of principal. There is also an immediate income tax deduction based on the future interest projected to be received by the charity. The higher the rate of return selected by the donor, the smaller the deduction.

DEFERRED PAYMENT CHARITABLE GIFT ANNUITY:  Under this form of annuity, the donor defers receipt of the income from the annuity until some future date. The immediate income tax deduction is therefore greater.

“POD OR TOD” DESIGNATION THROUGH A BANK ACCOUNT:  Bank accounts can be paid directly to a beneficiary (Payment on Death) or moved to a beneficiaries account (Transfer on Death).

Special notes:  While many of the forms of giving have positive tax consequences and estate planning advantages for the donor, the primary reason that these methods have been approved and sanctioned by Congress is their benefit to charity. All gifts cost money and their purpose should be to support worthy causes, such as After the Harvest.

While counsel and some volunteer leadership have a basic knowledge of the different forms of giving and can discuss these options in general terms, After the Harvest recommends that donors considering the more complex giving methods to fund a gift consult their own tax advisors about the specific results of making such gifts.