About Your Stuff…
Two weeks ago, I wrote about our kids not wanting our stuff when we’re gone. Boy, did I strike a nerve! In eight-plus years of writing this column, I have never had such reactions. As promised, today I will discuss one option for your “stuff” – a charitable giving trust.
There are myriad ways to give charitably during our lives, of course, and also upon our deaths. I will only scratch the surface with this discussion, but I hope to provide enough information to get you thinking. I will be specifically talking about a program of Franklin Templeton Investments, and many of the words I will use – for clarity – will come from the Franklin brochure entitled Franklin Charitable Giving Program (FCGP). The FCGP is administered through an organization called Renaissance Charitable Foundation, Inc. (RCF), which is a registered 501(c)(3) charitable organization.
Now… The simple way to describe this is that I could, today, set up an account through the FCGP and fund it with as little as $5,000. This goes into Franklin Templeton donor-advised mutual funds (C shares). I can choose to immediately begin charitable distributions to qualified nonprofits, or I can delay that until some time in the future, even until after my death. Regardless, I would get the full tax deduction for the contribution now. If I’m not eligible for the full deduction now, I can carry over the deduction for up to five years. (My gift is irrevocable and cannot benefit me or a family member personally, which is what helps it to be tax deductible.) This ability to add funds quickly, while delaying distributions, helps to eliminate the pressure to select and donate to a charity by year’s end.
In my last piece, I spoke about non-cash items. Guess what? Those can be put into the trust, as well. The RCF takes care of valuing and liquidating items, with agreement of the donor, and that fair market value is, like cash, immediately tax deductible. This can include real estate, se
curities, collectibles or art. (Remember that coin collection I spoke about?)
Once the account is established, FCGP provides consolidated reporting and recordkeeping. You
receive quarterly account statements from Franklin Templeton, and gift receipts and tax reporting information from RCF. You and your financial professional can manage the investments together or leave it to Franklin Templeton.
You may also choose to make charitable grants anonymously, keeping your name and personal
information confidential. And to help establish a legacy of giving far beyond your own life, you’re able to name account advisors who have the ability to recommend grants from your account, and select successors who can also recommend grants to continue your charitable legacy beyond your lifetime.
Here’s an example provided in the FCGP brochure. (I’m being super careful with my words here, so not to misspeak. Please do note that this is only an example. Neither Franklin Templeton nor I provide legal or tax advice.) Phillip Smith invested $10,000 in an initial public offering several years ago. Today the shares are worth $100,000. Phillip would like to use the shares to establish a scholarship program at his alma mater to give less fortunate students the chance to earn an education. He has two options: Phillip can sell all his stock and donate the cash proceeds to the university or he can contribute the securities to a FCGP account.
If he sells the stock, his contribution would be reduced by $13,500 (assuming a maximum tax rate of 15%) because his long-term capital gain is $90,000. In losing $13,500 to capital gains tax, Phillip’s total contribution to the university would be $86,500, not $100,000.
On the other hand, if Phillip were to contribute the securities to FCGP, the earnings on his appreciated stock would not be subject to U.S. federal capital gains tax—so he could give the full $100,000 to the university. Phillip’s contribution would also have the potential to grow tax-free, making it possible for him to potentially give more over time.
This idea has so very many moving parts that it’s not easy to discuss in seven hundred or so words. I hope I have given you enough to get you thinking, however. I have written information at my office and am happy to share; drop by, or call me and I can email it to you.
I listen to a Bible podcast by Fr. Mike Schmitz and in it he recently paraphrased a saying that struck me to my very core. “In this life, we die twice; once when our body stops breathing, and once when our name is spoken for the very last time.” Establishing a legacy of giving through a charitable giving trust can help ensure that we never die that second death. That’s powerful.