As Tax Season Closes, Plan Ahead for Next Year - It's Good to Give
by Monica Beck Glover, J.D.

As a charitable estate planner for one of Arkansas’s leading universities, I often hear from individuals who would like to make gifts but also receive some tax benefits in return for their generosity.

This year – as the annual federal tax deadline approached and the state tax deadline loomed – I had a conversation with a business owner that frustrated both of us. This Arkansan had recently sold a business and wondered if there was a way he could donate some of the proceeds to my institution. Regrettably, I had to tell him that it was too late. Arranging a charitable remainder trust – the type of giving instrument that could have benefited him as well as the university – needed to occur before the sale negotiations.

This would-be donor’s loss from not planning was considerable. Assume for example that he intended to sell a business worth $4 million. If he sold the business outright, he could incur as much as 45 percent tax liability, or nearly $2 million! On the other hand, if he established a charitable remainder trust to benefit one or more charitable organizations, he could have substantially reduced his tax liability. This technique involves transferring some of the assets of the business into the trust before the sale. If he transferred assets in the company worth $2.5 million to the trust, his proceeds from the eventual sale could be as much as $200,000 higher than otherwise. At the same time, he could have made a gift of more than $400,000 to charity.

I think the biggest reason charitable donors don’t make more planned gifts is that they don’t have enough information. The more we know about the benefits of planned giving, the more we can give to the causes that inspire us. I wish more people knew that they can, for example, avoid capital gains tax, accumulate tax-free income for retirement, produce income streams to help pay for the needs of elderly parents, increase current income, receive income tax deductions, or avoid estate taxes – while also helping their favorite charities.

Some people may be more willing to make planned gifts if they realize just how financially advantageous and simple some planned gifts are. For example, the charitable gift annuity can enable you to reduce your current tax bill, support your favorite charity, increase your income now or in retirement, and reduce the taxes your estate will pay after your death. The charitable gift annuity is an agreement between you and your favorite charity. You exchange a gift of cash, securities, or property for a guaranteed, fixed income each year for the rest of your life.

Society encourages charitable giving through tax advantages for these and other kinds of donations. In this way, we all support the nonprofit organizations that teach, heal, and feed the less fortunate. But it requires planning. Yet many charitable Americans, while they gladly write checks for cash donations to their favorite charities, do not take advantage of the state and federal laws that encourage larger gifts.

While many of Arkansas’s universities, hospitals, and other charities receive direct public support, they also depend upon the charity of individuals. For example, many people are surprised to learn that where I work, at the University of Arkansas for Medical Sciences (UAMS), state support is only about 14 percent of our annual revenue. Charitable gifts are another important source of revenue. The patient care that extends and saves lives, the research to find new cures, the training for new generations of health care professionals, the service around the state … our work goes on in good times and bad thanks to the generosity of thousands of individuals who have made donations to UAMS. 

Giving is the greatest act we can perform. Yet most of us cannot give as much as we would like because of our responsibilities to our own families. Charitable estate planning makes it possible for many to realize their charitable dreams while also securing the future for their families.

So think of your favorite charity before the next tax deadline comes around and consult with a trained tax planning professional.

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For High Res Photo, click on above image. Cutline: Monica Beck Glover, J.D., is director of charitable estate planning for the University of Arkansas for Medical Sciences (www.uams.edu).

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PR Contact:    
Mike H. Mottler, Director
University Relations                              
Phone:  501-686-6270  
Fax:      501-686-5067 
E-mail:  mottlermikeh@uams.edu      

Content Contact: 
Monica Beck Glover
Phone: 501-686-5674

03/30/07