Smith College: The Future of Smith




	PHILANTHROPY - A "WIN-WIN" OPPORTUNITY FOR PRUDENT INVESTORS Harriet Madoff '77 Financial Advisor, Private Client Group Merrill Lynch Philanthropy takes many forms—from the sharing of your precious time and talents to the establishment of sophisticated charitable trusts. When supporting Smith College and other worthy non-profits financially, please consider the following: Contributions of Cash The most common charitable gifts are made via check. These are very useful gifts for the charities, but may not be the most strategic for the donors. Obviously, cash you give away is cash that's no longer available to you for investing and spending! Although cash gifts are fully deductible for your personal income tax purposes, the deduction is limited to 50% of adjusted gross income (AGI) in a given year (however, any charitable deduction in excess of that amount in one calendar year may be carried forward for the next five years). Contributions of Appreciated Stocks or Property Gifts of highly appreciated stocks or mutual fund shares may be a more practical way to support your favorite charities without depleting your cash reserves. Such gifts allow you to reduce your exposure to stocks that have become over-weighted in your portfolio—without incurring capital-gains taxes. Stocks owned one year or longer provide a tax deduction to you that is based upon the stock's value at the time of the gift. Your deduction in this case is limited to 30% of your AGI, but any unused portion of the deduction may also be carried forward for five years. For stocks owned less than one year, the deduction is based upon the original cost of your stock. We encourage clients who have both cash and stock available to give away the appreciated stock and use the cash to purchase new securities with a higher cost basis. Gifts of art, manuscripts and tangible personal property are subject to special rules. In general, if you are considering making a charitable gift of a valuable object, your charitable tax deduction will be based on the object's relevance to the charity's mission. For example, donating an antique suit of armor to Smith College, knowing that the College will sell it to realize the cash value, will result in the donor's tax deduction being limited to his or her cost basis. However, donating the suit of armor to a museum of medieval history would likely entitle the donor to a charitable tax deduction at full fair market value. Please consider that a charitable gift of a valuable object can be an effective estate planning technique. Removing a $500,000 grandfather clock from your estate may help bring your overall estate value below the taxable threshold, thereby maximizing your family members' inheritance. Please consult your tax advisor and a representative of the charity before moving forward with a gift of tangible personal property. Charitable Trusts and other Life Income Gifts To retain a stream of income from a gift, charitable gift annuities, pooled income funds and charitable trusts are a tax-advantaged manner in which to achieve mutual benefits for you and your charities. Because life income gifts are governed by complex tax rules, carefully review all tax and financial implications with your advisors. Donors who establish life income gifts: receive an income tax deduction based on the present value of the future interest charities will receive; avoid or delay capital-gains taxes when gifted low-basis assets are sold within a trust or by the charity as part of a life income gift arrangement; generate a custom-tailored income stream from the sale of the donated assets; reduce the size of their taxable estate; and are supporting the future of Smith College and other worthy causes! There are other more advanced strategies available to benefit both your family and your charities. Charitable gift planning officers at Smith and other non-profits can help you learn more about them, as can professional financial, estate planning and tax advisors. Harriet Madoff Oswald is a Financial Advisor with Merrill Lynch in Stamford, CT. She specializes in comprehensive wealth management including long-range planning, discretionary asset management, retirement planning, tax-advantaged gifting strategies, and transition planning. For more information please call Harriet at (800) 234-6381 ext. 8692 or contact her via e-mail at hmadoffoswa@pclient.ml.com, Smith College would like to hear your comments on this article. Please send them to planned_giving@smith.edu.