Advisor Planning Checklist for Challenging Times

In today’s fluctuating tax environment, it can be difficult for a financial advisor to keep up with all the best strategies for managing taxes through charitable giving. To help advisors, we’ve created this checklist of strategies we have found to be quite effective:

Recommend a Giving Fund (donor-advised fund) – Now is the time to help your clients establish a donor-advised fund like a Giving Fund at NCF, if they don’t have one already.

If they are able to pre-fund their giving, they can get tax savings at a 35% rate for their contributions to the fund before 2011, and then recommend grants in later years when their charitable gifts would have only produced a 28% rate tax savings.

Suggest a Charitable Lead Trust (CLT) – A CLT is an ideal option now for transferring wealth to both family and charity because the “hurdle rate” – the rate that the IRS uses for CLT calculations – is at an all-time low (under 3%).

Offer a Charitable Gift Annuity (CGA) – CGAs are good for individuals that need a higher, more stable annual income. CGAs are particularly attractive today due to the volatility in the stock market (primarily spiraling downward), and the very low interest rates on most fixed income investments such as CDs, money markets, and government bonds. Flexible and deferred CGA options offer additional attractive planning strategies.

Use the “Give & Hold” strategy – Many business owners have a heart to give but are hindered by their limited cash flow and the high taxation of their business. But there is a way to help private business owners maximize their giving and tax savings, as well as increase their cash flow.

Through the Give and Hold strategy, your client can donate a non-voting interest in their business to a Giving Fund. Because the Giving Fund (donor-advised fund) is a public charity, they receive a fair market value tax deduction for the gifted interest. Due to the tax savings from their deduction, their cash flow is increased. If their business is growing, they can utilize this strategy every year and only give a portion of the annual appreciation in the business. And because it is a non-voting interest, they maintain control.

Maximize deductions with non-liquid gifts – Tax rules allow donors to deduct up to 50% of their adjusted gross income (AGI) for cash contributions. But an often neglected provision of the law allows for 30% of this total 50% AGI to be given in the form of non-cash assets.

These rules can be leveraged to remarkable effect. For their non-liquid gift portion, they not only get a tax deduction now, they also avoid capital gains tax when the appreciated asset is eventually sold.

Take advantage of the Charitable IRA Rollover – If it is extended, the Charitable IRA Rollover will be especially attractive in 2011 and later years (if deduction benefits are reduced to 28%). A gift of the IRA does not require income to be reported on the giver’s individual income tax return. This will allow your client to keep their taxable IRA distributions out of their income, and could effectively save them 12% on each gift.

Although this opportunity is currently set to expire on January 1, 2011, there is strong support to extend it. There is also pending legislation that would enhance the current rules allowing more taxpayers to benefit, and allowing greater overall flexibility in planning with this asset (including the use of CRTs and CGAs).

Offer solutions for private foundations – Clients who have a private foundation need to know about “greenlining” (see above), and how to avoid its potential negative effects. For those who maintain a balance under $1 million and have no employees, their best alternative might be to close their foundation and use a Giving Fund to accomplish their giving.

They can grant anonymously and avoid public scrutiny, as well as many other administrative hassles and IRS restrictions. Another option is to move the majority of the foundation’s assets to a donor-advised fund and keep a small amount in the foundation, adequate enough to fully distribute each year and qualify as a conduit private foundation (under Internal Revenue Code 170(B)(1)(F).

Whatever you do, it’s wise to engage clients now. Help them plan today in order to preserve tax benefits for gifts made prior to these anticipated tax law changes, and they will be grateful for years to come.

Servant Christian Community Foundation can help you put these strategies to work in your practice. For more information, please contact Brent at (913) 538-7844 or

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