Charitable Giving Gowing Ncely
October 24th, 2018
The nonprofit sector did very well in 2017, according to the June 2018 report issued by Giving USA. Total gifts to charity exceeded $400 billion for the first time, reaching $410.02 billion. Gifts from individuals are the largest component, and were $14 billion ahead of the 2016 pace. All giving sectors grew, as shown in the table below:
|Gift Source||2017 Total |
|Share of total|
Source: Giving USA 2018
Some charities are concerned that 2018 may not see similar growth in giving, because tax incentives for charitable giving have been reduced. The doubling of the standard deduction means that far fewer taxpayers will be itemizing, and nonitemizers see no tax benefit from their gifts to charity. The doubling of the amount exempt from the federal estate tax might mean that fewer Americans employ charitable trusts to control their estate tax exposure. It will be years before such behavioral changes can be identified with confidence, however.
Nearly a third of charitable gifts go to religious organizations, and educational institutions come in second at 14%. The table below breaks down the categories.
|Category||Share of total charitable gifts|
|Arts, Culture, and Humanities||5%|
Source: Giving USA 2018
Split-interest charitable trusts
There are trust-based strategies that allow an individual to create public and private beneficiaries and reap attractive tax benefits. These include:
- Charitable remainder annuity trust. A private beneficiary (or multiple beneficiaries) receives a specific dollar amount from a trust for life or a number of years. When the trust terminates, a charity receives the remaining trust assets. Income, gift, and estate tax deductions are available to the trust creator.
- Charitable remainder unitrust. Similar to the annuity trust, with this approach the income distribution for private beneficiaries is calculated each year as a percentage of the trust assets, rather than as a set dollar figure. This allows beneficiaries to share in the appreciation in the value of trust assets, while preserving all the rest of the tax benefits.
- Charitable lead trust. This trust approach involves a role reversal, in that the charity receives the trust income distributions and the assets remain in private hands at the end of the trust term.
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