Financial Planning’s recent article, “Charitable giving: It’s not just about taxes,” says that charitable giving is frequently considered a matter of tax planning. That includes pinpointing highly-appreciated assets to donate and perhaps creating a charitable remainder trust or a charitable lead trust. However, the issue of the estate tax has become less important for many, since the federal estate tax exemption has increased ($5.49 million per individual in 2017). President Trump also spoke of repealing the estate tax, and only 18 states and DC still have an estate tax. Therefore, even state estate tax savings are less relevant for most donors.
For many years, planning a major gift would be based in no small part on maximizing the income and estate tax benefits of the donation. However, donors may now want to consider the effect of a major gift on their future financial security.
This change in focus should mean more comprehensive financial forecasting to help you in structuring large donations, and more complex gift structures may be required.
A donor may want to commit certain dollars now and in the future, but might want to make other commitments that are contingent on his or her future financial condition. He or she may pay some of a charitable pledge now, some at a later date, and the remainder based upon a future event. This gives the donor added financial security.
In some instances, a donor planning a large charitable gift, will want to consider his or her long-term care needs into the plan, and long-term care insurance can be purchased as part of the charitable planning to give the donor a safety net.
Some retiring baby boomers believe that charity is about making a difference—and often they want to be actively involved in that process. Talk with your attorney about the many ways you can tailor a donation to meet a wide range of personal objectives. This can also entail writing an agreement with the charity that specifies the way in which the donation will be used. You can also add milestones when more donations will be made, like when the charity attains specific program goals.
As you age, you might want to involve a care manager with your planning to sketch out future medical costs and to be certain the financial model supports the gift.