1. (BETTER) WAYS TO MAKE
CHARITABLE GIFTS
© 2016 James Dossey
Created by: Jim Dossey, MS, MBA, JD
Dossey & Jones, PLLC
281-362-9909, jim@dossey.com

2. CHARITABLE GIVING IN THE USA
• The average annual household
contribution is $2,974.
• In 2015, the majority of charitable
dollars went to religion (32%),
education (15%), human services
(12%), grant making foundations
(11%), and health (8%).
• Charitable giving accounted for 2.1%
of gross domestic product in 2015.
• 98.4% of high net worth households
give to charity

3. INCOME TAX AND ESTATE TAX AND
CHARITABLE GIFTS
Income Tax
• Assessed on your annual income
• Charitable gifts are itemized
deductions
• Limited to 20-50% of your adjusted
gross income
Estate Tax
• Tax assessed on the value of your
estate in excess of the estate tax
exemption (currently $5.45M per
person)
• Deduction comes “off the top”
Changes in tax laws since 2012 have shifted most of the estate tax planning to income tax
planning.

4. FACTORS IMPACTING CHARITABLE
GIVING STRATEGIES
• Goals of the person
• Charitable intentions
• Tax avoidance
• Having a steady stream of income
in retirement
• Passing wealth to future
generations
• Establishing a legacy
• Expected future life events
• Financial needs for an upcoming
retirement
• Changing income levels
• Impending sale of business or IPO
• Type of assets the person has
• Are they growing (“appreciating”)
• Do they have built-in gain
• Are they easily marketable
• Are they easily converted to cash
(liquidity)

5. FACTORS IMPACTING CHARITABLE
GIVING STRATEGIES
• Lifespan of the person
• Actual vs.
• Actuarial tables (what the gov.
says it is)
• Financial return on the asset
• Actual return vs.
• 7520 rate (what the gov. says it
should be)
• Present Value – The further
out in time a financial
transaction occurs, the less
value it is in present day terms
• Inflationary environment
• Percentage limitations on
charitable deduction

6. CHARITABLE GIVING OPTIONS
• Simple
• Outright gift
• Testamentary gift
• More complex
• Donor advised fund
• Foundations
• Charitable gift annuity
• Very complex
• Charitable trusts (CRATs CRUTs, CLATs, CLUTs)
• Gifts of business interests

7. SIMPLE GIFTS
• Outright lifetime gift
• Deductions limited to 30-50% of adjusted gross income
• Itemized deduction
• Testamentary gift
• No limitation on deduction, but present value of the deduction is reduced the
longer the person lives

8. DONOR ADVISED FUNDS (AKA “GIVING
FUND”)
• What they are
• Similar to foundations, except
• The donor can only give recommendations on where the fund invests its assets
• DAFs are not subject to reduced income tax deduction limitations applicable to
Foundations
• Much lower start-up and maintenance costs compared to foundations
• From a practical standpoint, the fund follows the donor’s recommendation
• Advantages
• Provides liquidity for charitable giving from gifts of non-liquid assets
• As with any charitable gift, works well for highly appreciated assets because it
avoids capital gains
• The charity does not need to manage the assets

9. CHARITABLE GIFT ANNUITY
• General operation
• Donor gives property or money to charity
• Charity promises to pay donor or another non-charitable beneficiary a fixed
amount per year
• Tax impacts
• Donor receives immediate tax deduction for the gift (FMV of property less
present value of the annuity)
• Donor must recognize income from annuity payments when received
• When to use it
• Donor wants to receive current year tax deduction and defer income to later
years (perhaps when they are in a lower tax bracket)

10. CHARITABLE REMAINDER TRUSTS
(CRATS AND CRUTS)
• General operation
• Donor gives property to trust
• Specified sum or percentage is to be paid annually to one or more
non-charitable income beneficiaries
• Payments continue for a maximum of 20 years or until the
beneficiary dies
• Remainder interest passes to charity
• Tax impacts
• Donor receives immediate income tax deduction of the present
value of the remainder interest passing to charity (based on 7520
rate)
• Income beneficiaries receive income each year from the CRAT and
must pay tax on that income
• When to use it
• Donor contributes highly appreciated assets to the trust, avoiding
capital gains on the sale of the asset while obtaining a steady
stream of income
• Do not use for appreciating assets
Charitable Remainder Trust
Grantor
Non-Charitable
Beneficiary
CharityTrust
Phase
Trust Assets
Trust Assets
Remaining Trust
Assets
Payment Payment Payment Payment Payment

11. CHARITABLE LEAD TRUSTS
(CLATS AND CLUTS)
• General operation
• Donor gives property to trust
• Specified sum or percentage is to be paid annually to charity
• Remainder interest passes to non-charitable beneficiary
• Tax impacts
• Grantor Trust- Grantor receives immediate income tax deduction
in current year for the entire charitable income interest. Grantor
recognizes trust income in the year earned by trust
• Non-grantor Trust- Grantor does not get a income tax deduction,
but also does not recognize income from the trust
• In either case, grantor does receive a gift and estate tax deduction
for the present value of the charitable annuity interest
• When to use it
• Grantor trust  appealing to taxpayers who have particularly high
income in a single year
• Grantor does not need use of the asset for a number of years
• Non-grantor trust  In a low interest rate environment, great way
to transfer highly appreciating assets to heirs tax free and at the
same time benefit a charity
Charitable Lead Trust
GrantorCharity
Non-Charitable
Beneficiary
Trust
Phase
Trust Assets
Trust Assets
Remaining Trust
Assets
Payment Payment Payment Payment Payment

12. COMMON TAX SAVING STRATEGIES
USING CHARITABLE GIFTS
• “Skip Year” strategy
• Fund gifts with appreciated marketable securities
• Contribute to a donor advised fund
• Fund gifts with IRA withdrawals  reduces “top line” income vs. itemized deduction
• More complicated
• Charitable trusts
• Complex assets (i.e. private company stock, restricted stock, real estate, etc.) with low basis

13. REPORTING REQUIREMENTS
• Donors must have a bank record or written communication from a
charity
• Donors must have a written acknowledgement from a charity for any
single contribution of $250 or more.
• Qualified appraisal for contributions over $5000 (non-cash, non-
marketable securities)

14. THANKS!