COLORADO HORSE RESCUE CHRONICLE

Fall 1996          Page 17          CHRONICLE

CHARITABLE CONTRIBUTIONS

By Law Offices of Linda Sommers Green, LLC

Your estate plan can help support charitable causes such as Colorado Horse Rescue, either during your lifetime or upon your death, and at the same time allow you to take advantage of tax laws designed to encourage private philanthropy. The simplest type of charitable gift is an outright cash contribution. But other kinds of gifts to charities can also produce large tax savings and may accomplish the same charitable objectives.

One way to donate to a charity is by donating appreciated assets (stocks, bonds, real estate) rather than cash. When an asset has appreciated in value over the years and you donate the asset to a charity, your estate won't have to pay the taxes on the increased value of the stock, and you can deduct the full market value of the asset as a charitable contribution. There is a deduction limit, which is generally 30% of your adjusted gross income. However, charitable gifts of appreciated property may trigger the alternative minimum tax. However, there are other tax consequences to this method, and you should discuss all ramifications with your tax advisor.

You can also set forth in your Will a clause, which provides that, all or a part of your estate goes to your favorite charity in the event that neither your spouse nor any issue (children, grandchildren, etc) survive you. Additionally, a document that is attached to your Will is called a Statement Disposing of Tangible Personal Property (also known as a Memorandum). This Statement can provide for a gift of a specific item to a charity. The use of this Statement cannot apply to the disposition of money, documents of title, interest in real property, securities, or property used in a trade or business. Common examples of property that may be disposed of by the use of the Statement are: personal effects, jewelry, furniture, horse supplies and tack, antiques, art works, books, household items, automobiles, and the like.

Another means of giving to your favorite charity is through a charitable remainder trust. This mechanism is typically used by people who have sizable estates, which include appreciated assets, such as real estate or securities. You donate the asset to the trust, live off the income from the asset for the rest of your life, and then the trust principal goes to the charity you choose on your death (or on the death of your spouse if it's set up in both names and your spouse dies last). You avoid estate taxes and capital gains taxes while at the same time helping a charitable cause.

Another way of making a charitable contribution is through givers of life insurance. However, the mere naming of a charity as the beneficiary of a policy on your life will not provide you with an income tax deduction.

It is important to review any of the options discussed in this article with your tax advisor and/or attorney who can advise you as to the best options for your specific circumstances.