“Whoever is generous to the poor lends to the Lord, and He will repay him for his deed.”
So I’m having breakfast with a Jesuit priest, who was also one of my teachers in high school. He asked me what I think of the new Pope – who is also a Jesuit priest. I said he is a remarkable pope, unlike any we’ve seen in my lifetime. I also said he is an unremarkable Jesuit priest; meaning any Jesuit would act in much the same way. They are typically humble in spirit and dedicated to serving others. My teacher just smiled.
So the Pope is here this week and millions will be watching this man who has washed the feet of prisoners and forsaken pomp for group living in a plain apartment.
Perhaps he is a teacher and we can honor him by following his example. Here are some thoughts on how the tax laws may help:
- Charitable contributions
The federal tax law allows us to make gifts to tax exempt entities and deduct those gifts on our tax returns. Depending upon our income we can reduce our taxes by as much as 40% by making such gifts.
We don’t have to give cash. We can also give assets such as cars, stocks & bonds, real estate, jewelry, equipment, etc. All of it can be deductible, but we need to be careful how we document these gifts as the tax law can require significant proof of value. Sometimes appraisals are required—depending upon the type of gift, who receives it, and how much it is worth. If you intend to make a gift with an asset that has substantial value, consult with your tax advisor as the proof of the value of the gift must be obtained when the gift is made and not later on.
- Charitable trusts
This is one of the most interesting and most complex areas of charitable giving. I love it.
Let me start by saying that the IRS readily accepts that we can make large gifts to trusts we set up to help a charity. The IRS even has sample trust documents that we can use for that purpose. Preapproved. It is a well-known tax device and well accepted method of giving. Also, you don’t have to gift all of it away completely. You can give income producing real estate or stock in a profitable business. You can keep some or all of the income from the gift for yourself and/or for your children. That’s right, you can set up a private charitable trust, make a gift of property to it, keep control of the property by being the trustee yourself, and even keep the income it produces, and still deduct much of it on your tax return! Later on the trust could even sell the property free of income tax and most estate taxes.
- Community Foundations
If you don’t want to stay so closely involved in the tax mechanics of all this, you can set up an account with a community foundation that will do all of this work for you, help with investments, and allow some influence over what charities get distributions.
Folks, the Pope will be here this week. Some of us will see him on TV and the lucky ones will see him in person. Perhaps all of us will benefit from his example of a humble spirit of service to others and amend our lives accordingly.