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Sharing your ‘bounty’ can be rewarding

Posted November 27, 2013 in Advice Column, Beaverdale

Thanksgiving! If you provide a comfortable life for your family, be thankful. If you can afford to share your “bounty” with charities, be as generous as possible — your gifts may allow you to both give and receive.

By donating cash or stocks to a qualified charity (either a religious group or a group that has received 501(c)(3) status from the IRS), you help benefit the organization — and you receive tax benefits.

To illustrate: If you give $100 to a qualified charity, and you’re in the 25 percent tax bracket, you deduct $100, with a tax benefit of $25, when you file your 2013 taxes. Therefore, the real “cost” of your donation is just $75 ($100 minus the $25 tax savings).

If you donate certain types of non-cash assets, you may receive additional tax benefits. Suppose you give $1,000 worth of stock to charity. If you’re in the 25 percent bracket, you’ll deduct $250 when you file your taxes. By donating the stock, you avoid paying capital gains taxes due when you sold the stock.

To claim a charitable deduction, you have to itemize. Charitable gifting can get more complex if you integrate your giving with your estate plans to reduce your taxable estate. The estate tax is consistently debated in Congress, and the exemption level fluctuates, so it’s not easy to predict if you could subject heirs to these taxes. Work with your tax and legal advisors now to take steps to reduce estate tax burden.

One such step might involve establishing a charitable remainder trust. You’d place assets in a trust, which could then use these assets to pay you a lifetime income stream. When you establish the trust, you may receive a tax deduction based on the charitable group’s “remainder interest” — the amount the charity is likely to ultimately receive. (determined by an IRS formula.) Upon your death, the trust would relinquish the remaining assets to the charity you’ve named. Keep in mind that this type of trust can be complex. To establish one, work with your tax and legal advisors.

Of course, you can also provide your loved ones with monetary gifts while you’re still alive. You can give up to $14,000 per year, per individual, to as many people as you choose without incurring the gift tax. For example, if you have three children, you could give them a cumulative $42,000 in a single year — and so could your spouse.

Thanksgiving is a fine time to show your generosity. Being generous can be rewarding — for your recipients and yourself.

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Information from Edward Jones, provided by Jim Talley, financial advisor at Edward Jones, 2703 Beaver Ave., 279-4179.

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