How to Contribute
Charitable Giving – The Cash Contribution
- You are allowed to gift up to $11,000 per year (up from $10,000 in 2001) to as many people and non-profit organizations that you want to.
- This is pure charity, transferring wealth out of your pocket to someone else. You do it when you tithe to your place of worship, buy Scout popcorn and cookies, put change in the Fireman's boot at the street corner, purchase a table at the gala, get your car washed by the pep squad, buy a raffle ticket, or drop a few coins in the kettle.
- It gives you limited tax deductions and is the least tax efficient way to participate in philanthropic giving. It's a one-time gift that must be renewed often.
Business Giving – A Number of Ways To Give
- Every business can give up to 10% of its adjusted gross income (AGI) each year to a non-profit(s) for which they have a passion. Those business AGI dollars are deducted from the company's taxable income.
- That gives the business tax reductions.
- Those reductions are not dollar-for-dollar for the business, though.
- But, AGI dollars given to the non-profit do entitle the business to a substantial tax reduction; more than an ad in the newsletter or sign in the outfield.
- Referrals. Many of your non-profit members are retired. Most have monthly or quarterly retiree luncheons and alumni meetings at their former employers site or off-site location. They may be in a position to give.
- Referrals. Ask for referrals to other businesses you associate with – suppliers, customers, trade associates, competitors, and your company's board of directors.
- If the business is going to be sold. Consider selling the business inside an entrepreneurial trust.
- By doing so, the capital gains taxes owed on the sale can be given to the AAF Dallas Foundation.
Charitable Lead (Pay AAFDF Now) Trust (CLT)
- Do you have any highly appreciated, non-retirement account assets you don't need for your day-to-day living expenses?
- Loan them to the AAFDF for at least 5 but no more than 20 years?
- This type of structured assets (CLT) distributes tax-free operating income to the AAF Dallas Foundation now and for a number of years specified by you.
- The years are set usually for 5 years but no more than 20 years.
- It is an irrevocable loan of the appreciated assets to the AAF Dallas Foundation.
- The cash value of your assets ($100,000, $250,000, $1,000,000, $10,000,000) must be given back to you at the end of the specified number of years.
- You get a tax deduction every year the CLT is in effect; even deductions to your heirs if you or your surviving spouse dies before the specified number of years lapse.
- The highly appreciated assets are put into the CLT for the benefit of AAF Dallas. Those assets are immediately sold and converted to cash. The cash is reinvested in a municipal bond portfolio that distributes tax-free income to AAF Dallas for the number of years you specified. On $1,000,000 that's usually $35,000 – $60,000 annually, depending on municipal bond rates. At the end of the specified number of years, the municipal bond portfolio in the CLT is liquidated and the cash is distributed to you or your heirs tax-free.
- Your philanthropy is rewarded by a living legacy to the AAF Dallas Foundation with tax-free income fund, and effectively a tax free transfer of highly appreciated non-retirement account assets to your heirs.
- Highly appreciated, non-retirement account assets include: concentrated stock positions with low cost basis, stock portfolios, corporate bonds, certificates of deposit; real estate that is not your personal/primary residence, ranches, farms, rental properties, apartment complexes, office buildings, strip malls, and inheritances. It does not include 401(k) rollovers, IRAs, stock options, and pensions.
Pay AAFDF Later Trust - A Charitable Remainder Trust (CRT)
- This type of structured asset has a longer “incubation” because AAF Dallas receives funds after the passing of the second Spouse.
- As a CRT giver, you get annual income and tax deductions during your life. The value of assets placed into the CLT can be replaced to the giver's heirs by second-to-die insurance.
- The premiums on this insurance policy can be partially or wholly paid for by taxes otherwise owed annually, depending on the age and insurability of the giver(s).
- At the passing of the second Spouse, the remaining assets in the CRT (not consumed by the giver and spouse in their lifetimes) are transferred to the AAF Dallas Foundation non-profit account and the near-original cash equivalent value of those assets are replaced to the giver's family or heirs by the insurance purchased partially or wholly by the taxes owed annually.
- It's a win-win-win for the giver, your non-profit and your heirs.
- You may be aware of billionaire individuals giving $1,000,000 checks to September 11th (2001) Relief Funds. If you could persuade those individuals to structure their assets in a philanthropic way, that individual effectively could give 1500 $1,000,000 checks in their lifetime to a host of non-profits - and still pass their $billions to their family and heirs.
- NIMCRUT - A branch and sequel to the CRT is the NIMCRUT or “retirement unitrust”. A NIMCRUT is ideal for working people who want to save more for retirement than their 401(k) and IRA allow.
- This is for the person who is still working and has said: “I'll think about philanthropic giving when I retire.”
“Private Foundations Lite” – A Donor Advised Fund (DAF)
- These are low cost/no cost “family foundations” that can be set up without an attorney and inside a brokerage account held at the National Philanthropic Trust (NPT), a non-profit organization for non-profits.
- The minimal initial gift is usually $25,000 in assets like stocks (even restricted), bonds, mutual funds, cash, land, rental property, and other appreciated assets.
- The Donor and their successors determine which non-profits, hopefully including the AAFDF, receive the annual distributions from the Donor Advised Funds.
- A Donor Advised Fund gives the philanthropist more control than the other forms of philanthropy outlined in these plans.
- It allows them to do multi-generation philanthropic giving. For example, the Kennedy Foundation allowed Matriarch Rose Kennedy to tie her heir's receipt of foundation monies to her heir's active participation in the mental health and mental retardation awareness and Special Olympics non-profits that were her passion.
- Generally, rule-of-thumb is that 5% of the assets are given annually to a non-profit(s). The AAFDF could be set up to receive all or part of that distribution.
“On the House” - Remainder Interest in a personal residence
- A Remainder Interest is sometimes a good way to achieve a living legacy. Middle age children give up inheriting the home in exchange for you, their parent(s), getting tax deductions for your life estate interest in your home.
- For many Super Seniors the home is their largest asset and testament to a lifetime's work. Most Super Seniors (75 years old and older) did not have 401(k's), stock options and IRAs in their working lives. What they do have are Social Security payments, small pension payments and their paid-for home. You may be, or at some time may be, in that situation.
The Rationale – Why “On The House” makes sense:
There is an estimated $12 trillion being transferred from the Greatest Generation (WWII) to the Korean War era generation. Half of their accumulated lifetime success may go to taxes. Many 50 to 60 year old children of the Greatest Generation can support their parent(s) giving of a paid-for primary residence to a non-profit their parents have a passion for. In this way, they can support their wishes to create a living legacy. Certainly ancestral homes and historic sites are not what we are talking about here, but because many of their children live all over the USA or have their own homes, this is a way to provide a living legacy.
- The following matrix outlines estimated tax deductions by age and value of the primary residence. The five-year carry-forward of tax deductions allows Super Seniors to get living legacies from their heroic, freedom preserving lives.
- Given the large number of Super Seniors we lose daily, we must ask them soon. A less than $200 addition to their will gives the remainder interest in their primary residence a non-profit.
- They get to continue to live in and upkeep their home. There are provisions in the event of incapacitation, assisted living or skilled care wherein the non-profit receives the home, sells it and pays the Super Senior(s) a monthly annuity for assisted living expenses for life. The nonprofit eventually receives less than the original home's value, but the Super Senior gets assured care and philanthropic giving to a non-profit they have a passion for. A scholarship, grant can be named in their honor. A living legacy that can be enjoyed.
If only 1 out of 100 persons you know give the remainder interest in personal residences, a 2000-person non-profit could raise $1,000,000+ in ten (10) years as Super Seniors pass. Please review this matrix: