Test your knowledge with this quiz on planned giving
1. T / FA CRUT is a charitable trust that provides a donor or other person with a fixed amount of income each year for the duration of the charitable trust.
2. T / FA Charitable Gift Annuity is a charitable trust that provides a variable amount of income for one or more lives and the remainder of the trust goes to one or more charities.
3. T / F The maximum that a donor can transfer to their spouse upon death without incurring inheritance tax on the transfer is five million dollars.
4. T / F If deductions are itemized by a donor, the donor can claim a charitable income tax deduction for the full amount of a direct cash donation to a charity, as long as the deduction does not exceed the donor’s taxable income. for that year.
Did you answer “true” to any of the questions? If so, read on:
1. False. A CRUT (Charitable Remainder Unitrust) is a charitable trust that provides a variable amount of income over one or more lives (or a specific number of years) and the remainder of the trust goes to one or more charities.
2. False. A charitable donation annuity is an annuity that involves an agreement between a charity and one or two people, which requires the charity to provide a specific amount each year to the “beneficiary (s)” for life.
3. False. The “unlimited marriage deduction” allows any US citizen the ability to transfer an unlimited amount to their US citizen spouse, during life and upon death. For example, a wife could give her husband a billion dollars and still not owe a gift or inheritance tax. However, under this same scenario, if neither spouse implemented other planning, there could be a huge estate tax problem for the second spouse to pass away. Careful planning while both spouses are alive is the best way to address potential future tax consequences.
4. False. Assuming a donor itemizes deductions, the donor can only claim an income tax deduction for cash donations to a qualified charity up to 50 percent of the donor’s adjusted gross income (AGI). For donations of appreciated property, the maximum deduction is reduced to 30 percent of the donor’s adjusted gross income. However, if the donor is unable to use all of his charitable deduction in the donation year (either cash or appreciated assets), the donor can carry over the deduction for an additional five years.
This article is for informational purposes only. Readers should consult with a qualified professional advisor for assistance.