Kansas & Missouri Estate Planning

Giving Your IRA For Good In Overland Park, KS

Not having enough retirement income from the old IRA can be a pretty serious problem. On the other hand, having too much retirement income outside of the IRA can be a bit of a problem, too.

Have you heard of the Charitable IRA Rollover?

A Charitable IRA Rollover lets you give to your favorite charities in Overland Park and elsewhere while avoiding taxes on IRA distributions. Consequently, this is a very popular win-win strategy for taxpayers who would rather be “voluntary philanthropists” as opposed to “involuntary philanthropists.”

A recent Kiplinger article titled “Who Can Transfer IRA Funds to Charity?” explains the ins and outs of Charitable IRA Rollovers. Essentially, not everyone has the option to transfer their IRA distributions directly to charity. For starters you must be older than age 70 1/2 (i.e., the same age upon which you are required to take Required Minimum Distributions from your IRA). And not by coincidence.

Read the original article for a better perspective on the politics behind the planning. Suffice it to say Congress has elected to give you a choice between taxation and charitable giving. The Charitable IRA Rollover gives you this option.

Beware! All of this must be done according to Hoyle or you may get caught in a tax trap. Nevertheless, this alternative is well worth considering as part of your overall retirement, estate and charitable planning.

Remember: When making your financial, tax and estate plans, don't go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Reference: Kiplinger (April 30, 2013) “Who Can Transfer IRA Funds to Charity?”

Family Foundations – Doing Well By Doing Good

Ensuring continuity of both your family harmony and your family business is as much an art as it is a science. There are a lot of things that can keep a family together, just as there are many ways to keep a business together. But, then again, there are just as many ways to drive the family or the business apart.

For a family with means, and perhaps also as a model for a family with fewer resources, a family foundation may offer just a unifying bond.

A family foundation represents a way of doing good as a family and even making those foundation goals the goals of the family itself. This kind of unifying goal was explored by CNBC in an article titled "Family Foundations Prepare for the Next Generation."

If you are the family member who established the family foundation, the goal should expressly be to include and to establish a succession for your family foundation. In point of fact, a family foundation is like a family business and shares many of the same concerns, anxieties, and goals.

Now, even a family of modest means can see the value in the family foundation model. If for no other reason, your family foundation can be a means of doing good as a family and letting everyone in the family work together to accomplish that good end.

Is there some goal around which your family can come together ... that is bigger than your family itself?

Reference: CNBC (February 9, 2013) "Family Foundations Prepare for the Next Generation"

Will Your Deduction Count? Gift Valuations Matter!

Qualifying for the charitable tax deduction is not simply a matter of giving, then claiming the deduction. No, there are a few steps to take and items of proof to gather if you want your generosity to count at tax time.

Fundamentally, you need to prove the value of what you have given, but that can get complicated when you are giving in the form of things. You need an appraisal of any thing you give (e.g., art, a house, an easement, or a service) and you need that appraisal to answer all the taxman’s questions even before he asks them. In short, appraisals can get tricky.

For example, if you give art you need an art appraiser, and if you give real estate your need a real estate professional. However, what if you give interest or stock in a company? Then the appraisal becomes even trickier.

When you are giving less than obviously valued interest, then you might want to consider the advice given in a recent Forbes article titled "It's Hard To Satisfy The Qualified Appraisal Requirement For A Charitable Contribution If You Appraise The Wrong Property." The problem with interest or stock in a company is that the interest or stock is different than the things the company owns. So, 10% of the stock in a company with $5 million in assets is not (necessarily) equivalent to 10% of $5 million. Such is the case, even when the sole purpose of the company is to hold well-documented and appraised assets worth $5 million.

In a "simple case," the IRS likely will provide leniency and determine that such and such an appraisal was "substantially compliant" if not fully so. Nevertheless, the greater the business complexity, the greater the risk of misstep and an attending (and costly) determination of insubstantial compliance.

An appraisal is a very necessary step when recognizing the tax implications of any transfer of property that is more than simply money itself. In the end, when giving to charity or to loved ones it just stings all the more when your attempted good deed is punished.

Reference: Forbes (February 5, 2013) "It's Hard To Satisfy The Qualified Appraisal Requirement For A Charitable Contribution If You Appraise The Wrong Property"

When Charitable Giving Goes Global

International borders aren't even lines in the sand, in most instances. When it comes to crossing borders for charitable endeavors, one would think processes and protocols would help ease the effort.

Unfortunately, the globalization of individual charitable giving, just like the globalization of the economy, has brought with it more complexity and attending legal challenges.

This is an increasing trend, too.

According to the 2012 Giving USA Study of charitable giving, international giving has been increasing for the past several years. This increase has come despite the struggling economy and overall challenges to domestic giving. In fact, international giving has experienced a 15.2% growth from 2009 to 2011, with the data yet to come for 2012.

To gain an appreciation of the challenges that have come with this unprecedented rate of growth, it's worth reading a recent article by WealthManagement.com titled, "Giving Without Borders."

In practical reality, giving without borders often requires analyzing all relevant "borders" to determine how each side of the border with account for the gifts. Indeed, "gift" can be something of a misnomer with the rise of "impact investments." All the same, when an individual decides to transcend borders with generosity, the laws of each nation and a tangle of international law may come into play.

Accordingly, if you are inclined to make your charitable mark outside of the United States, then be forewarned and forearmed when it comes to the potential tangle of laws you will need to navigate.

Reference: WealthManagement (January 14, 2013) "Giving Without Borders"

Fiscal Cliff Falls On The Charitable “Rich”

There may have been fewer casualties than expected in the fiscal cliff deal. In fact, some areas of the tax law became better, or at least safer, because the laws are now more predictable.

Nonetheless, there were certain casualties and, according to a great many writers, charitable giving and donors themselves were cut a raw deal.

The fiscal cliff deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled "Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks." Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those "stealth taxes" working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners.

For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is "the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year."

Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have a increase in your AGI.

So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days.

Reference:

Forbes (January 9, 2013) "Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks"

When Charitable Gifts Become A Burden

It’s an awkward thing to give away or sell a gift made to you. However, it can be even more awkward when you can't hold onto a gift. No, this is not a post-Christmas catastrophe, rather it's the very real problem so many museums face every year.

One museum currently on the hook is the Brooklyn Museum in New York. The New York Times recently reported on its plight regarding a gifted collection in an article titled "Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned."

It seems that in 1932, Colonel Michael Friedsam gave a massive collection to the then fledgling museum. Nevertheless, since then the museum has grown and has too much to put on its walls, no longer displays items like historic battle axes, and half the Colonel’s collection turned out to be fakes or "not of museum quality."

Bottom line: the museum wants to give or sell the artworks and stop paying the exorbitant storage and restoration fees.

Now, it's not that the museum is unappreciative. No, it's more complicated even than that. Unfortunately, the Colonel's will legally excludes any option the Colonel's estate executor hasn't signed off on. Problem: the last executor died in 1962.

The lesson for those with artworks worth preserving for future generations is to include alternatives permitting like-minded individuals (executors) to further your objectives for your gifts in the future. In short, your estate plans should contain some flexibility in this regard.

The Colonel and his estate planners couldn't have foreseen the next 90 years, but therein lies the challenge. Predicting the future can be a very tricky thing and, certainly, a very inexact science.

So, how are your gifts structured?

Reference: The New York Times (January 15, 2012) "Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned"

Charitable Giving Slows For Überwealthy

Well, in the wake of confetti and political rancor brought on by the Fiscal Cliff confrontations on New Year's Eve and New Year's Day, respectively, the numbers are starting to come in on the state of charitable giving for 2012.

Unfortunately, and according to a summary post by the Chronicle of Philanthropy entitled "America’s Wealthiest Donors Slow Their Giving," 2012 was not a good year for charities or a big year for donors.  In fact, America's billionaires gave less in 2012 than in 2011, a new Chronicle tally shows.

In fairness, 2012 will first and foremost go down as a year of great indecisiveness, whether it was the presidential election or the deal that brought us over the fiscal cliff. But political indecisiveness gives rise to a tricky environment for charitable intentions. That said, the largest gifts by American philanthropists totaled a whopping $5.1 billion, except when you account for the fact that Warren Buffet gave away $3 billion of that total.

By comparison, the largest gifts by American philanthropists totaled $2.6 billion in 2011. Without Buffet's gifts, the 2012 total would have been $2 billion, falling under 2011’s totals.

Now, this kind of assessment isn't an entirely fair estimate of the direction of the charitable energies of all donors. In fact, the list only accounts for the top ten public donors, thereby ignoring the many small donors who you may recognize as those not being featured on the cover of Forbes. Nevertheless, it seems to be indicative of an overall mood.

Question: If 2012 was all indecision and waiting, what can we expect in terms of philanthropy for 2013 now that we've got some answers and direction on the tax front?

More importantly, what are your plans and what is important for you as a donor, even if you are not numbered among the Überwealthy ?

Reference: The Chronicle of Philanthropy (January 1, 2013) "America’s Wealthiest Donors Slow Their Giving"

A New "Game" To Assist Charitable Giving

As the end of the year approaches, we all scramble to make those last minute charitable donations. And because we "scramble" many of us may not always donate to organizations that most represent our beliefs.

This method of donating, however, is not the only way. A new game, "Talk About Giving," helps families discuss values and philanthropy throughout the entire year. This in turn leads to families making more meaningful charitable donations at the end of the year.

The game includes a deck of cards with questions such as:

- What is our family's history of helping?

- If you could have changed anything that happened in the world this year, what would you change?

- Should we volunteer even if we don't want to?

- What do you appreciate most about our town?

- How much did tonight's dinner cost?

For additional pointers, take a look at the articles referenced below. If you are interested in making some serious planned gifts in the future, consider one of the archived newsletter articles on my website titled "Charitable Opportunities."

 References: The New York Times (December 7, 2012) "As the Year Draws to a Close, Deciding How to Slice Your Charitable Pie"

The New York Times (December 10, 2012) "Playing the ‘Talk About Giving’ Game With Your Family"

“GiveSmart.com” - Charitable Giving Pointers On The Internet

With the end of year in sight and the holidays fully upon us, this is the season of giving. Unfortunately, it's not always easy to come up with causes worthy of your philanthropy, let alone those you can trust to be good stewards of your contributions.

When in doubt, turn to professionals for advice, right? In this case, who better to consult than the great philanthropists of our day.

Fortunately, you don't have to try to guess, assume, or even seek psychoanalysis from afar to get sage advice from big philanthropists and donors. No, as trumpeted by the Chronicle of Philanthropy (see "The Giveaway") and other sources, there is an interesting new resource available to all in a new website called "GiveSmart."

In essence, this website lets the philanthropists speak for themselves and on whatever topic they wish. If you're interested in charitable giving on any scale and also maybe deciding how to go about doing it, consider consulting some of these important philanthropic voices to motivate you.

Reference: The Chronicle of Philanthropy (November 28, 2012) "The Giveaway"

Charities - Demand Outpacing Donations For 2012

Traditionally, the 4^th quarter of each year is when non-profits bring in the most donations. Here we are in the 4^th quarter of 2012 and charities are feeling the full effect of the economic struggles reverberating through the economy over the few years.

Putting it bluntly, this year is a make-or-break giving season.

Why would this December be an especially trying time for charities?  A recent article in US News and World Report titled "Nonprofits Face Challenging End-of-Year Giving Season" offered a pithy list not too long ago and it's worth a read. In a nutshell, at a time when the services of charities have been needed more than ever (i.e., with hurricanes, droughts, and winter storms all taking their tolls during a sluggish economy) charitable giving has, understandably, been less than "abundant." That noted, the title of a related article published by the Chronicle of Philanthropy says it all: the "Average Gift by the Wealthy Has Declined Since 2009."

As we near the end of the 2012, don't forget your year end giving plans and make appropriate steps to get the ball rolling. You will want to consult with your estate attorney, financial advisor and, certainly, your CPA to ensure you squeeze every penny out of your charitable tax deduction, too.

References: US News and World Report (November 12, 2012) "Nonprofits Face Challenging End-of-Year Giving Season"

The Chronicle of Philanthropy (October 29, 2012) "Average Gift by the Wealthy Has Declined Since 2009"