Perspective

Law Professor shares strategies for charitable gifts at the Heckerling Institute conference

NCF returned this year as an exhibitor to the Heckerling Institute on Estate Planning conference. We brought some of our legal experts and hosted a dinner for Christian estate planners. Read on for some helpful strategies presented there for making charitable gifts that save on income taxes too.

In his inimitable, humorous fashion, Chris Hoyt, professor of law at the University of Missouri-Kansas City School of Law, explained that the increased minimum standard deduction has been a problem for many taxpayers, because it means many can no longer itemize. However, donors can still get tax savings from charitable gifts, even when they are not able to itemize deductions.

As a result of the Tax Cuts and Jobs Act of 2017, he noted, the estimated number of itemizers has dropped from 37 million to 16 million, largely due to the $10,000 cap on the state and local tax deductions and the increased minimum standard deduction. But charitable givers should not lose heart. There are still ways to maximize tax benefits.


Charitable IRA rollover

This is a very helpful lifetime strategy for older philanthropic donors. With an IRA charitable rollover, the donor does not have a charitable deduction but does not include the amount of the charitable distribution in income, effectively the same result as a deduction.

There are seven requirements for a successful IRA charitable distribution:

  • The donor must be over age 70½
  • Annual charitable distributions cannot exceed $100,000, regardless of the required minimum distribution, and would be a taxable distribution if not paid to charity
  • The distribution can only be from an IRA (including an inherited IRA), not from other pension vehicles
  • The distribution must go directly to the qualified charity (including by use of an IRA checkbook issued by a brokerage house)
  • The donor cannot receive any benefit from the charity, such as attendance at a gala
  • The distribution must be to a public charity, private operating foundation or certain conduit foundations, but not a private nonoperating foundation, donor advised fund or supporting organization
  • The donor must receive a contemporaneous acknowledgment from the charity for gifts of $250 or more

Who benefits:

  • Donors not able to deduct charitable gifts from federal income tax
  • Donors seeking to reduce adjusted gross income; for example, to remain below the $200,000 ($250,000 for married) threshold for the 3.8 percent surtax on net investment income or to reduce Medicare B premiums
  • Donors in states that don’t provide income tax charitable deductions
  • Donors who have made gifts exceeding the 60 percent adjusted gross income limitation
  • Donor’s family, who can inherit assets with a stepped-up basis, rather than IRA assets subject to income tax
Read the full story at Wealth Management. 
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