With the close of 2017 quickly approaching, many San Diego individuals, families and companies are thinking ahead about financial strategies to end their taxable year well. And The San Diego Foundation wants to help.
Our team of philanthropic experts works to maximize the impact of charitable giving. One of the most common questions we’re asked is about how to give. Let’s explore five giving vehicles you can utilize to get the most out of your bottom line in 2017.
- Donor Advised Fund (DAF)
Many of our donor partners already employ a DAF as an alternative to a private foundation. DAFs act like a charitable checkbook, providing a full market value charitable deduction against your income taxes (up to standard AGI limits) when you make a gift into your fund and allowing you the flexibility to determine your nonprofit grantees on your own timeframe. You also benefit from our investment expertise, as your fund is invested in one of our five investment portfolios to grow your balance over time. The minimum to set up a DAF is $25,000.
- Charitable Gift Annuity (CGA)
The name of the game with CGAs is “Give and Get”: You can give a gift and get guaranteed, fixed income for life in return. You receive a partial charitable deduction against your income taxes, and we make payments to you based on your age. Guaranteed rates range from 4.7 percent (age 65) to 9.0 percent (age 90+). Upon your passing, the remainder is preserved in an endowment fund to benefit a nonprofit grantee of your choice. The minimum to set up a CGA is $25,000.
- Charitable Trust
With a charitable trust, you gift property into a trust that then provides income and/or taxation benefits to you or your heirs. You can name a fund at The San Diego Foundation as the charitable beneficiary of such an instrument. Trusts can be somewhat complicated and require an attorney to set up. We can provide professional illustrations showing the financial implications personalized to your circumstances. Generally speaking, charitable trusts are recommended for gifts of at least $100,000 for remainder trusts and more than $1 million for lead trusts.
- Retirement Plan Rollover/Required Minimum Distribution (RMD)
If you are 70½ or older, you probably have a retirement plan that is requiring you to take a minimum distribution each year. Depending on your circumstances, you may not need that money for your living expenses but you will be taxed anyway on any income you receive. Instead, you can gift your RMD to The San Diego Foundation – thereby making a charitable gift and avoiding paying those income taxes. You can make a gift of up to $100,000 directly from your plan administrator (typically, this is done by filling out a simple form). Donor Advised Funds (DAF) are not eligible under current tax law to receive RMDs, but you can make a gift to support any of our impactful programs or nonprofit partner agency endowments. Or, you can receive the RMD as income and then make an equivalent gift to your DAF, thereby producing an offsetting charitable deduction. In many cases, the financial impact is very similar.
- Life Insurance
Many people find themselves the owners of permanent life insurance policies that have outlasted their original purpose – the house is paid off, the kids are well into their own successful careers, and so on. Or, your holdings may be large enough that a life insurance payout could make your estate subject to estate tax. You can make a gift of your life insurance policy by making The San Diego Foundation the owner and beneficiary. Then, your gifts to The San Diego Foundation to cover your premium payments become tax deductible. Upon your passing, the death benefit is paid directly from the plan administrator to your Donor Advised Fund.
Ready to move before time runs out? Take a look at your balance sheet to identify which assets may be prime for making a charitable gift.
The San Diego Foundation can easily and conveniently accept a wide array of assets to create the gift vehicles described above, including:
- Appreciated properties
- Public or privately held stock
- Other securities such as bonds, mutual funds, annuities, etc.
- Real estate
- Retirement and insurance assets
Keep in mind that charitable gifts create a deduction to be used against your income taxes, and gifts of appreciated property additionally bypass capital gains taxes.
Most likely, one or more of these strategies could be helpful in reducing your tax liability in 2017.