Gifts That Give Back

There’s a phrase that says, “The holiday season is the perfect time to reflect on our blessings and seek out ways to make life better for those around us.” While it’s easy to get caught up in what we want as presents and what we need to buy, the holiday season is, indeed, a time of giving. Each type of financial gift you can give comes with its advantages and disadvantages, so it’s important to weigh your options when deciding which gift strategy to choose.

Gifts That Give Back

Outright Gift: These are gifts in the form of cash or other assets.

• Advantages:  Deductible for income taxes.
• Disadvantages: No retained interest.

Charitable Lead Trust: Your gift is placed in a trust, and the recipient draws income from the trust.

• Advantages: A current gift to charity; Current income tax deduction; the ability to pass assets to future heirs.
• Disadvantages: The transfer of assets is irrevocable; if a current income tax deduction is, future income is taxable to the donor; the donor gives up the use of income for the life of the trust.

Charitable Remainder Trust: You receive the income generated by your gift, and the recipient receives the principal upon your death.

• Advantages: Offers a current tax deduction; avoids capital gains tax on appreciated property; reduces future estate taxes.
• Disadvantages: The transfer of assets is irrevocable; generally requires a qualified appraisal; involves complex administration and setup; the distributions to non-charitable beneficiaries are usually subject to income tax.

Gifts of Insurance: You purchase a life insurance policy and name a charitable organization as the owner and beneficiary of the policy.

• Advantages: Offers possible current tax deductions; enables a donor to make a large future gift at a small cost in the future.
• Disadvantages: May require annual premiums; the death benefit could be part of the donor’s taxable estate.

At American Investment Planners LLC, we make it a priority to help you prepare for the best financial future possible. From devising gifting strategies to 529 savings plans, we’re here to help with anything you may need. To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.