Thinking About Your Legacy
For us Finns in America, charitable giving is a way to leave our legacy and make a difference for generations to come. Even small donations matter a great deal to the Finnish organizations in this country.
Through charitable gifting, millions of people make a difference each year. Giving to charity is not just for the ultra-wealthy; to paraphrase a Finnish proverb: “many small brooks make a big stream.” In addition, due to US tax law, everyone can reap substantial benefits from donating to a worthy cause. This article describes two common life situations:
You own highly appreciated stock and would like to turn this asset into income, but fear selling because of the tax consequences.
Your main asset is your home. You would like to give to charity but do not want to change your lifestyle at this point.
Turn an Appreciated Asset into Income
Erkki and his wife Anna are retired and living comfortably from their pensions, qualified plans and investments. While they are content with their retirement lifestyle, there is one part of their investment portfolio that is a concern for the couple. Many years ago, Erkki received 50,000 shares of stock in a company he worked for as additional compensation. The stock has appreciated and if Erkki sold it now, he would pay a long-term capital gains tax on the proceeds. The couple has planned on leaving the stock to their son Paul.
A gifting opportunity:
Transfer the appreciated stock to a trust and receive a federal income tax deduction for the amount that will be going to charity. The stock will be sold within the trust, and Erkki and Anna will start receiving income from this asset. A portion of the income will be used to purchase life insurance on the couple, the beneficiary being Paul. Upon death, Paul will receive cash instead of the highly appreciated stock.
Supplement retirement income without immediate tax consequences.
Preserve wealth for your heirs.
Provide a charitable gift.
Give your home and enjoy use for life
“Heli Ranta, 71, is retired and owns her own home. She is interested in gifting but wants to continue living in her personal residence for her lifetime. She also wants to retain all the rights to rent her house or make improvements. Ultimately, however, Heli would like a charity to receive the property.”
A gifting opportunity:
Transfer your home into a trust that assigns your home to a charity after death. By deeding her property now Heli will get an immediate tax deduction without giving up anything at this point.
Receive an income tax deduction for your gift now without making any tangible changes to your lifestyle.
Use the savings from the income tax deduction to make repairs to the home.
Retain the rights and responsibilities of ownership, other than disposing the property after your death.
Be able to leave a legacy by making a sizable donation to your charity.
Helpful Tax Tips
Charitable giving has many potentially substantial tax consequences. Here is some information that may be helpful as you consider how to best utilize gifting this year:
Making gifts in the form of stock, bonds, artwork, and other property that has risen in value since you have owned it can make good sense. If you have owned the property for more than one year, you are entitled to an income tax deduction based on the current value, not the amount you paid initially for the property.
The higher your tax bracket, the more your tax deductions are worth. Many people move up the tax bracket ladder from one year to another, so check whether this applies to you.
Many U.S. residents have retirement accounts from which you are required to start taking distributions the year after you turn 70-½. In many cases, retirees don’t need to take this required distribution. If you find yourself in this situation, it makes great tax sense to donate the required distribution amount to charity.
If you are looking to provide for your heirs and make a gift to charity, it may be more beneficial to make the gift from your retirement plan instead of your other assets.
Kiitos Circle: Remembering Finland Center in Your Will
The Kiitos Circle has been established for those who have pledged to leave a portion of their estate to Finland Center Foundation (FCF). Kiitos Circle members will be invited to a couple of special events each year, have lifetime membership with no more annual fees, and will have free admission to all FCF performances.
Although a simple will is easy to make, professional help is recommended for more complicated situations such as family in the US/family in Finland/assets in two countries, etc. If you need a financial advisor, accountant or estate planning attorney, we’ll be happy to provide you with a referral.
All you need to do to start the process is contact us:
Finland Center Foundation
601 West 26thSt, suite 325-102
New York, NY 10001
Tel. No.: 1-646-704-8000
Finland Center Foundation is a 501(c)3 charitable organization under the US tax code.