Articles Posted in CHARITABLE GIVING

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The new tax relief act signed by President Obama in December (Tax Relief, Umemployment Insurance Reauthorization, and Job Creation Act of 2010) restores a provision that expired in 2009 which allows donors who are at least 70 ½ years old to make a tax free gift to charities from their IRAs. Before this provision was restored, money transferred from a traditional IRA to a charity would be included in the donor’s taxable income for the year. Here is how it works:

1. You must be at least 70 1/2 years old.

2. Your gifts must be made outright from a traditional IRA or a Roth IRA.

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It is estimated that 70% of Americans make charitable donations in some form. It could be yearly donations to their favorite charities or it could be in the form of making a charity the beneficiary of their trust. American Association of Retired Persons (AARP) has some tips for donating to charities:

1. Avoid scams. If you are called on the phone by a charity, ask that they send you printed material so you can authenticate their organization. Be cautious about email solicitations and be aware of names that may sound like charities but in fact are not. If you want a gift to be tax deductible, make sure the entity is a qualified charity you can claim as a tax deduction. Never provide a credit card over the phone unless you have initiated the call. Checks are preferable rather than a credit card and dont use cash.

2. You can get information about a charity such as how much of your donation will go to administrative and marketing costs and how much to the charity’s purpose. In general reputable charities spend less than 35% on administrative costs. Two websites that review charities are Guide Star and Charity Navigator. Charity Navigator evaluates the financial health of over 5500 charities according to organization efficiency and organizational capacity as well as listing their annual revenue and what they spend their donations on.

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Donating used cars has become an extremely popular way to reduce your taxes and benefit a charity. There is a lot of competition among charities to receive your donation of vehicles. Here are some tips to donating your car to charity:

First make sure the charity you are considering is a recognized non-profit charity, also known as a 501 (c)(3) organization. Some charities ask for donations of cars but do not have the 501 (c)(3)status which means your donation will not be tax deductible. You can find out if an organization is a qualified charity by looking on the IRS website.

Next make sure that the charity has a program to handle donation of vehicles. To maximize the amount of benefit to the charity, the charity should be able to handle the transaction without a “middle man.” If there is a “middle man” or intermediary, then find out what percentage of the donation the charity will receive.

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Several years ago researchers felt that by mid century there would be a big inheritance boom, somewhere between 41 trillion and 136 trillion dollars handed down from parents to children. Now things are different and not solely because of the economy. Here are some reasons why you may receive a smaller than expected inheritance:

1. Your parents are spending it all. Not intentionally maybe, but with the high cost of living, medical care, and long term care, their nest eggs may not be what they used to be. Nursing home costs can run as high as $60,000 a year or higher in some areas and long term health care may be too expensive.

2. Seniors are living longer. The National Center for Health Statistics said in 2004 that males who are 65 could live to be 82, females to 85. As seniors live longer, they consume more of their wealth.

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If you have substantial assets, you may want to consider making a gift before the end of the year. The annual gift exclusion does not carry over into the next year, so you will lose your annual exclusion if you don’t use it before the end of 2008.

In 2008 you can make gifts up to $12,000 per person to as many people as you want with no gift tax. A single person could make a $12,000 gift to as many individuals as he or she wants. A married couple together could give $24,000 to any one individual. So for example, a married couple could each give gifts of $12,000 to their 3 children ($72,000 in total) or to their 2 grandchildren ($48,000 total), etc. You can give cash, stocks, bonds, real property, partnership interests; just make sure the gift is of a “present interest”, i.e. one they can use now as opposed to sometime in the future.

In addition to the annual gift tax exclusion, you can make tax-free gifts by paying the tuition and medical expenses for relatives or even friends. Gifts such as these have no monetary limitation. Send the money for tuition directly to the school. Payments for books or room and board do not qualify nor does giving the money directly to the student to pass on to the school.

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