Are you interested in simplifying your charitable giving? Or, perhaps you want to reduce your tax liability in a high income year. Do you have high-value, low-basis stock that you intend to give to charities over a number of years? If so, a charitable gift fund may be the perfect tool to help you accomplish these and other goals. Here’s what you need to know to get started.
Q: How does a charitable gift fund work?
A: A charitable gift fund is an account to which you can contribute cash or appreciated securities. The investments can be maintained in the account or sold, and the proceeds reinvested. At your request, the administrator will send a check from your charitable gift fund to qualified charities. Once your charitable gift account is established, you can distribute funds from the account during the initial year or any future year—as long as there are funds in the account.
Q: What is the tax benefit?
A: You will receive a charitable deduction on Schedule A of your federal tax return each year you make a contribution to your charitable gift account. In addition, you will not have to pay any capital gain tax on appreciated securities sold in the charitable gift account. However, since you receive a charitable deduction in the year you contribute cash or securities to the charitable gift account, you will not receive a charitable deduction when funds are distributed to charities.
Q: What are the minimum amounts?
A: While requirements may differ, the minimum initial contribution to a charitable gift fund is generally $5,000. Once the fund is established, subsequent contributions can be for any amount. All contributions are irrevocable. In most cases, each gift that you direct to qualified charities must be $50 or more. A typical annual maintenance fee for a charitable gift fund is 0.65% of the fund’s market value or $100, whichever is greater.
Q: I’m 70.5 or older. Can I contribute a qualified charitable distribution from my IRA to my gift fund?
A: No. All qualified charitable distributions from your IRA must be sent directly to the charitable organization.
Q: How can a charitable gift fund simplify my charitable giving?
A: If you make multiple charitable gifts each year, you are required to enter information on Schedule A for each contribution. By establishing a charitable gift fund, you make one contribution to the fund and then distribute gifts to multiple charities from the gift fund. In this situation, only your contribution to your charitable gift fund is recorded on your Schedule A.
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