There are other ways that you can support Sara’s Garden beyond simply donating money. Here are some tips for giving wisely:
Many employers match gifts made by their employees or make grants to organizations recommended by employees. Be sure to ask your company if it can help your gift to stretch even further.
Don’t overlook the benefits you can receive from bequests, charitable gift annuities, gifts in kind, endowments and many other creative forms of giving. Ask your tax advisor or attorney to help create the best plan for you and your family. Our staff is happy to meet with you and your advisor to discuss alternatives.
Below are some additional ways for you to take maximum advantage of today’s tax laws:
Appreciated Securities
Appreciated Assets
Bequests/Retirement
Life Insurance
Appreciated Securities
Use appreciated securities to enhance your giving
The IRS still allows a notable tax break for individuals considering a charitable gift: Donors may deduct the full, fair market value of long-term appreciated assets given to Sara’s Garden, with no recognition of capital gains. That means that donors can leverage a large donation and charitable deduction using an asset with a small cost basis.
How it works:
A supporter holds publicly traded long-term appreciated stock with a fair market value of $10,000, which they bought for $5,000. If they contribute the stock to Sara’s Garden, they will be able to claim a charitable income tax deduction for the full $10,000. In addition, they will not be liable for tax on the $5,000 capital gains upon the transfer of the stock. By using stock instead of cash, they have delivered $10,000 to Sara’s Garden and secured a tax deduction in the same amount, at a cost to them of only $5,000.
Important Note:
Don’t sell the stock first and then give us the proceeds! Even though you intend to make a charitable gift, the IRS will impose capital gains tax on your sale, wiping out the benefits of this arrangement.
Here’s how to transfer securities: Have your broker contact Sara’s Garden to arrange the transfer to our account. Your charitable deduction will be valued as of the date the securities reach our account. If you hold the shares yourself, mail them, and, in a separate envelope, stock powers in blank, to:
Sara’s Garden
P.O. Box 150
Wauseon, OH 43567
Your charitable deduction will be valued as of the postmark date on your envelope transmitting the securities.
Donors may deduct gifts of appreciated assets up to 30 percent of their adjusted gross income (the total of their taxable income). Thus, a donor whose adjusted gross income will be $100,000 this year will be able to deduct up to $30,000 in gifts of stock. A gift in excess of the 30 percent amount is not wasted, however, because the IRS allows donors to carry forward excess deductions through the five tax years following the year of the gift.
Note that the IRS allows donors of cash gifts to deduct them up to 50 percent of their adjusted gross income, so the deduction for a very large gift of appreciated assets could take longer to use up than if the gift had been made in cash. But if the assets have a very small cost basis, however, they could still be more tax-efficient to use than cash.
If you have any questions, please feel free to call (419) 335-SARA, 9 a.m. to 5 p.m., Monday through Friday.
Appreciated Assets
Use appreciated assets to enhance your giving.
Stocks and bonds are not the only forms of appreciated property that receive favorable tax treatment when they are donated to Sara’s Garden. The IRS also allows donors of appreciated real estate and artwork to contribute them and receive a deduction for their full fair market value. These gifts do raise more tax and policy issues than contributions of stocks and bonds, and we ask any of our friends who may be considering such a gift to contact our office first.
Gifts of real estate
Sara’s Garden is happy to consider gifts of both commercial and residential real estate. We gratefully review each offer to evaluate the condition and marketability of the property. Real estate may be transferred through several means.
- Outright Gifts: The donor may contribute the property outright to Sara’s Garden.
- Life Estates: With residential real estate you may contribute property to Sara’s Garden and retain the right to live there for your lifetime.
- Trust: You may contribute the property and receive lifetime income from Sara’s Garden in return (see “Gifts that Return Income” below). In each case, proceeds from the property would be directed to the Sara’s Garden programs of the donor’s choosing.
Gifts of real estate to Sara’s Garden are deductible at their fair market value. The donor is responsible for securing an appraisal to substantiate his or her deduction.
Gifts of partnership interest
Gifts of transferable partnership or business interests can benefit both you and Sara’s Garden.
Partnership interests can be used to fund outright gifts or, in certain cases, life-income arrangements such as Charitable Remainder Trusts. They can be given during your lifetime or at your death through your estate. Gifts of partnership interests qualify for a charitable deduction based on (but not necessarily equal to) the difference between your share of the fair market value of the partnership’s assets and your share of the partnership’s liabilities. Sara’s Garden accepts gifts of general and limited partnership interests in real estate and limited partnership interests only in other kinds of property and businesses. (i.e., real estate partnerships, oil and gas partnerships, general business partnerships, and Limited Liability Company interests). Gifts of partnership interests involve issues of valuation, suitability of Sara’s Garden as partner, transfer restrictions, unrelated business income, and tax consequences to the donor.
Sara’s Garden can also facilitate gifts of business interests – C-Corp or S-Corp transactions – as part of an outright gift or estate plan strategy.
Gifts of books and artwork
Sara’s Garden is receptive to gifts of books, artwork and collectibles that meet these requirements:
- The donated pieces must be related to Sara’s Garden’s mission, and:
- The donor must secure an appraisal of the pieces, conducted by an independent appraiser who was not originally involved in selling the pieces to the donor.
Sara’s Garden can assist the donor in following the IRS-required procedures for this appraisal.
If you have any questions, please feel free to call (419) 335-SARA, 9 a.m. to 5 p.m., Monday through Friday.
Bequests/Retirement
Include Sara’s Garden in your estate plan.
When you write your will (or revocable trust), you acknowledge the people and institutions that mean the most to you. A gift to Sara’s Garden proclaims your confidence that we will continue to pursue our mission and make a difference in the world long into the future.
Bequests
A bequest is easy to arrange (see sample text below). It is not payable until death, so it does not affect the donor’s assets or cash flow during lifetime. It is private – a will need not be filed or made public until death. And, it is revocable – individuals can change the provisions in their wills at any time until death.
A bequest can deliver a specific gift (“I bequeath the sum of Five Thousand Dollars to Sara’s Garden for its general purposes”), or a percentage of the balance remaining in the donor’s estate after taxes, expenses and specific bequests have been paid – what’s known as the residue of the estate (“I bequeath Ten Percent of the residue of my estate to Sara’s Garden for its general purposes”). Generally, giving a percent of the residue allows for more flexibility in long term planning.
A charitable bequest or trust distribution reduces the taxable value of an estate for federal estate purposes, and is exempt from state inheritance taxes.
Since a bequest will likely not be received by Sara’s Garden until far into the future, its terms should be as general as possible – we want to avoid a gift benefiting a project that Sara’s Garden no longer pursues, or with terms that will be difficult to meet. Please consult us if you are considering a bequest for a specific purpose.
Suggested Text for a Bequest: I bequeath Ten Percent (10%) of the residue of my estate to Sara’s Garden, a non-profit corporation located in Wauseon, OH, to be used for its general purposes. Sara’s Garden’s Federal Tax ID Number is 42-1630116.
Retirement Account Gifts
Qualified Retirement Plan assets are among the most tax-burdened assets you own. If you die before you have taken most of your distributions from your IRA, 401(k), Keogh, SEP, or other qualified retirement plan, the balance remaining in your plan can be subject to confiscatory taxes that can claim 75% or more of its value.
During your lifetime, the law requires that certain minimum distributions be taken from your retirement accounts after you reach age 70-1/2. These distributions are subject to federal income tax at your current tax bracket. Failure to take the required amount results in a 50% penalty tax on the undistributed amount.
At your death, you can roll over your qualified retirement plan without incurring estate tax to your surviving spouse who can continue to receive distributions. When your spouse dies, however, any remaining plan assets are treated as Income in Respect to a Decedent (IRD) and become subject to multiple levels of taxation.
Here are several charitable strategies which may minimize taxes:
The easiest way is to name Sara’s Garden as the beneficiary of your plan. Simply fill out a “Change of Beneficiary Form” provided by your plan administrator. If your spouse is living, state law may require that he or she sign a “Spousal Waiver of Benefits.” Since such gift intentions are technically revocable, no immediate charitable deduction is allowed, but your estate will receive a deduction at your death.
Take structured withdrawals from your plan beginning at age 59-1/2 or age 70-1/2 and make outright or life income gifts to Sara’s Garden that generate an offsetting charitable deduction.
Set up a Testamentary Charitable Remainder Trust in your will into which you transfer any residual in your retirement plan at your death, naming your surviving spouse or children as income beneficiaries for life or a term of years and Sara’s Garden as the charitable remainderman. This approach will avoid all IRS income tax liability and generate a partial estate tax deduction.
If you have any questions, please feel free to call (419) 335-SARA, 9 a.m. to 5 p.m., Monday through Friday.
Life Insurance
Do you carry more life insurance than your family obligations currently require?
Donors are often surprised to learn that their surplus, paid-up life insurance policies can be used to fund a significant gift to Sara’s Garden. Their charitable deduction is the lesser of the fair market value of the policy or their cost basis, which is the total of their net premium payments.
Alternately, our younger donors may be interested in taking out a new insurance policy as a gift, thus securing a large benefit for Sara’s Garden out of income rather than capital. The donor will then make annual gifts to Sara’s Garden in the amount of the premium payments; we will, in turn, pay the premiums to the insurer. It is important that Sara’s Garden be named the irrevocable owner of a new policy, because the IRS does not allow deductions for premiums if the donor has retained ownership of the policy.
Note: If the donor has borrowed against an insurance policy, a gift of the policy will create taxable income for the donor, in the amount of the difference between the loan balance and the total of the premium payments.
Please consult our office if you are considering such a gift. If you have any questions, please feel free to call (419) 335-SARA, 9 a.m. to 5 p.m., Monday through Friday.