This article was written pro bono by Jonathan A. Mintz, J.D., of Partner Evergreen Legacy Planning, LLP. Mr. Mintz is a supporter of World Bicycle Relief.
Through your generous support of World Bicycle Relief, you are changing the world and empowering lives one bicycle at a time.
Your cash contributions are essential to making a lasting impact. But you may be surprised to know that there are other creative ways you can give to sustain our programs and mission in the United States. Some of your options can benefit World Bicycle Relief during your lifetime, while others can make an enduring gift long after you’re gone.
While your gifts provide valuable tax benefits to you, some of your giving options may provide a bigger advantage and make a bigger impact than you realize. This brief, informational article is intended to introduce a few giving options of which you may not yet be aware. You should discuss any giving strategy with your tax advisor, attorney or accountant to make sure it’s right for you. The information below is not intended to give you financial advice.
Consider a Charitable Contribution from your IRA
If you have a tax-deferred retirement account like an IRA, when you start taking distributions from the account, the withdrawals are taxed at your ordinary income rate. If you have a large account and are in a high-income tax bracket, IRA distributions may cause income tax liability you don’t want.
If you’re over the age of 70.5, you can make a direct transfer from your retirement account to a qualifying charity such as World Bicycle Relief to make a gift of up to $100,000 without paying income taxes on that amount. A distribution you direct to a qualifying charity reduces – and may even eliminate – the amount you would otherwise have to take out of your IRA each year. If you take the distribution, you pay income taxes on it; if you direct the distribution to World Bicycle Relief, you don’t. Everybody wins.
Consider Giving Appreciated Securities
In addition to making a gift by cash or check, consider making a gift of appreciated marketable securities. If you sell appreciated stock and then make a gift of the sale proceeds, you first have to pay capital gains tax on the increased value of the stock. Even if you give the sale proceeds to World Bicycle Relief, it’s not a tax-efficient way to make contribution.
If you give that appreciated stock directly to World Bicycle Relief, you not only avoid the capital gains tax, but you also get an income tax deduction on the fair market value of the stock when you give it away. Because World Bicycle Relief is a public charity, we can sell the stock tax-free, making efficient use of your gift.
Consider a Capital Gains Deferral Trust
Rather than giving appreciated securities outright to World Bicycle Relief, consider putting them in a special type of charitable trust. The trust can then sell the securities and not pay capital gains tax, allowing the full value of the securities to be invested.
The trust then pays a fixed percentage, typically to you and/or your spouse for the rest of your lives based upon the value of the amount put into the trust. At the end of your life, the remaining balance goes to World Bicycle Relief. You receive an income tax deduction for the present value of the amount going to charity, the assets are protected from your creditors, and the value of the securities are outside of your estate for tax purposes.
For example, suppose you own stock worth $1 million with a tax basis of $0. If you sold the stock today, you would pay $200,000 in federal capital gains tax (20%) and $46,300 in Colorado capital gains tax (4.63%), netting you $753,700.
If instead you transferred the stock to this special trust, the trust could sell the stock without paying any capital gains tax, and then have $1 million to invest. The trust would pay you (and possibly your spouse) a fixed percentage of the value of the trust for the rest of your lives. Assuming a 5% payout to you, you would receive $50,000 per year for the rest of your life. In the end, World Bicycle Relief gets what’s left.
Consider an “Annuity-to-Charity” Trust
Yet another option involves a different type of charitable trust: one that pays an annuity to World Bicycle Relief for a specified number of years, and then transfers the remaining trust balance to your heirs. Your heirs receive their gift in a way that’s protected from their creditors and free of any gift or estate tax.
This type of trust is perfect to establish a long-term charitable giving strategy – for example, to give a specific amount of money to World Bicycle Relief for the next 20 years. Under certain circumstances, this trust can even provide you with an upfront income tax deduction for the present value of the annuities paid to charity. Again, transferring assets to this type of trust protects those assets from potential creditors of you and your heirs.
As these examples demonstrate, there are many ways to make a lasting impact for World Bicycle Relief. Many of these strategies can work together to make a powerful, integrated giving strategy that lasts for many years to come. Talk with your tax advisor about giving strategies that best meet your goals and objectives.
If you have any questions about your giving options or how your gift will be used, please connect with Major Donor Development Director Tricia Puskar at tpuskar[at]worldbicyclerelief.org.
Thank you for your ongoing support of World Bicycle Relief.
ABOUT THE WRITER
JONATHAN A. MINTZ
Jonathan A. Mintz is a founding partner of Evergreen Legacy Planning, LLP, a law firm focused on estate planning, asset protection, business law, and international taxation. Evergreen Legacy Planning, LLP has offices in Evergreen, Colorado and Newport Beach, California, and serves clients around the world. Jonathan may be reached at JAM@EvergreenLegacyPlanning.com.