When it comes to charitable giving, there are those who are purely philanthropic and would donate as much as they can afford regardless of the tax consequences. the other side of the spectrum is the purely tax-driven contribution.

The reality for us as practitioners is that charitable giving is dominated by the high-income and high-net-worth crowd, and with that audience the trends and tax consequences always matter.

A new trend that I see is the suddenness of what is known as flash giving. This is giving that generally follows an unplanned local or international disaster. Whether it is washed-out roads in Vermont or tsunamis in Japan, these types of sudden, unanticipated events mobilize billions in unplanned contributions from U. S. taxpayers. These events have definitely redirected millions in traditional gifting for many of your clients.

Of course, world tragedies are not new, but the rapid mobilization of disaster funds and larger charities is a fairly recent trend. If you have clients who always seem to go for spontaneous giving, perhaps another big trend can also be helpful - the use of charitable gift trusts.

A charitable gift trust is basically a not-for-profit holding tank. Sponsored by mutual fund companies and other asset management or custodial platforms, charitable gift trusts allow your clients to make deductible contributions today, and have the money sit in an account where the client or their advisor actually gets to control or manage the holdings in the account. These accounts can be very effective for the client who frequently contributes spontaneously and those who may be unaware of the AMT or other tax consequences of their actions.

Gift trust accounts are also helpful for clients who may have a windfall. The windfall earner can make a large contribution to the gift trust, then dole the funds out of the gift trust in the manner and frequency that they want to continue in future years.

In the early years, contributions were often funded with cash.

According to a report from Financial-Planning.com in June 2011, there appears to be a large increase in the percentage of contributions that are coming from what are known as complex assets. Complex assets may be those with low basis or even significant liquidity issues, such as a closely held business or real estate. With the long-anticipated possibility of higher income and capital gains tax rates, contributions of complex assets could become even more popular.

FOUNDATIONS VS. TRUSTS

Gift trust accounts started as a way to get private foundation-like flexibility for less-than-ultra-wealthy charitable contributors. Now, large firms market their gift trust accounts as a supplement to a private foundation strategy. And while it does give you the same force and effect from both the gifting and the tax portion of the gift, there are some things that wealthy clients can do with foundations that you cannot do with a charitable gift trust.

• 1
• |
• 2
• |
• 3
• |
• 4
• |
• next