What the Future Holds for Charitable Gift Planning

As we gaze into our ever prescient crystal ball—what future do we foresee for charitable gift planning?  Answer: a VERY bright one! (Well, what did you expect me to say?)

Let’s ignore the conjecture so often offered in light of congressional and presidential proposals, oil price fluctuations, and world events and consider where we are, today, rather than the myriad of possibilities out there…in The Twilight Zone.

We anticipate three notable trends to impact charitable giving in 2015: 

1) Economic  recovery and low interest rates

Many people are enjoying the fruits of a post-Great Recession economic expansion.  U.S. stock markets hover at or near record highs, while inflation and interest rates linger near record lows.  Historically, charitable giving has lagged behind economic recoveries—when people simply need time to “feel wealthy” again following a recession—and that bodes well for charities in 2015.  Low interest rates make it a great time for donors to consider charitable gifts such as charitable lead trusts, donation of real estate with a retained life estate, or an income interest in an existing charitable remainder trust or gift annuity.

2) Taxes as an incentive to make planned gifts

Tax rates are higher than they have been in recent years, but still lower than they were for most of the 1980s and 1990s.  During the past two years, we have seen federal income tax rates rise from a high of 35% to 39.6%, to an effective rate as high as 43.4% for many taxpayers (when factoring in the 3.8% Medicare tax).  State and local income taxes also apply to many taxpayers.  Capital gains tax rates have gone from 15% to 20%, to an effective rate of 23.8% for many taxpayers.  The sale of tangible personal property such as art or collectibles (e.g. cars) is subject to a capital gains tax rate of 28% and an effective rate of 31.8% (so please call me before you sell that Rembrandt or the ’66 Ferrari!).

So, how does all of this impact charitable giving? 

Simply put, the out of pocket cost to make a charitable gift is lower than it has been in years.  A gift of highly appreciated stocks, bonds, or mutual funds may cost less than 40 cents to give $1.  What’s more, a gift of art or collectibles can cost less than 30 cents on the $1!  This lower value means you can provide even more support to the charitable organization(s) you care about (like Duke!).   

Appreciated IRAs now account for half or more of the bequest gifts that will come to many charities.  IRAs also represent the biggest single asset owned by most Americans. While other appreciated assets may receive an increased cost basis at their owner’s death, IRAs do not and a tax exempt charity can receive 100% of the IRA, tax-free, at the owner’s death.

Read our recent blog post about the benefits of making a gift from your retirement account: 4 reasons to make a charitable gift through your retirement account.

3) The coming age of the Baby Boomers (like me!)

There are chapters within every person’s life—a time to sow and a time to reap, a time to save and a time to give.  This has been true for centuries.  Current data shows that individuals age 65 or older give more to charity and the eldest baby boomers will be 69 years old this year.  Descriptive terms like “empty nester,” “single or double income no kids,” and “jumped with a golden parachute” all touch on the point that there are times in life when earnings and savings reach a level sufficient to launch someone into the “charitable giving comfort zone.”

A life income gift, such as a charitable remainder unitrust or charitable gift annuity, can provide significant tax savings and will allow you to support programs and areas at Duke you are passionate about.  If you own appreciated securities that you think may be near their peak, but you abhor the thought of paying all those taxes, be sure to read my previous blog post, Stock markets are at record highs, and contact me about cashing in those chips.  If you call, I can even explain the historic context of the old investment advice “pigs get fat and hogs get slaughtered.” (As with all services we offer, the insight is free).

For further reading, you may want to take a look at these related articles:

A Generational Gap: Giving to Charity, The Wall Street Journal
Nonprofits Find Much to Like in Obama Tax Plan, The Chronicle of Philanthropy

TAGS: legacy charitable remainder unitrust low interest rates stock market retirement

About the author

Gift Planning


Duke University’s Office of Gift Planning specializes in charitable gift planning for estates, charitable trusts and annuities, and other complex current and future gift plans.

For more information, please contact the Duke University Office of Gift Planning at 919-681-0464 or giftplanning@duke.edu.