Planned Giving

How the New CARES Act May Affect Your Gift Planning

As a result of the global COVID-19 virus, the federal government has recently adopted legislation which may affect your retirement plans, income tax planning, and gift tax filing requirements for the year 2020.

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The CARES Act
The coronavirus-relief bill, called the Coronavirus Aid, Relief and Economic Security Act (or the CARES Act), contained significant provisions to assist small business owners, employees and individuals. Below are key takeaways from an individual and estate planning perspective.

Charitable Donations
The CARES Act permits a $300 “above the line” charitable income tax deduction of cash gifts to public charities for taxpayers who elect to not itemize deductions.

More importantly, donors may elect to apply a 100% of adjusted gross income (AGI) limit to cash gifts to public charities (gifts to donor advised funds, supporting organizations, and private foundations do not qualify). Prior to the CARES Act, an individual’s deduction for cash contributions to public charities was generally limited to 60% of an individual’s AGI. This provision is favorable to donors wishing to make large cash contributions this year, the deductibility of which might been curbed due to percentage limitations. The result is that a taxpayer may actually eliminate any taxable income for this year with large cash contributions to public charities. Any charitable contribution exceeding the limits may be carried forward for subsequent years subject to certain limits.

Retirement Plans
A “qualified individual” can in 2020 take up to $100,000 in “coronavirus-related” distributions from an IRA or qualified retirement plan and: (1) not have to pay the 10% early distribution penalty even if you are under age 59 ½; (2) not have to withhold 20% in federal income taxes; and (3) not have to pay tax on it if repaid within three years, or in the alternative, elect to spread the inclusion of income over three years. A “qualified individual” is someone (including spouse or dependent) who is diagnosed with COVID-19, or has experienced financial hardship as a result of being quarantined, furloughed, laid off, had work hours reduced or been unable to work due to lack of child care.

The CARES Act increased the loan maximum from $50,000 or 50% of your vested balance to $100,000 or 100% of your vested balance from qualified retirement plans (whichever is less). This is for any money borrowed between March 27, 2020 and December 31, 2020. For individuals with existing loans, the due date for the loan repayment is suspended one year. NOTE: These related changes to the loan rules do not expand the availability of loans from IRAs. Whether loans are permitted from employee retirement plans remains subject to the terms of the plan.

The CARES Act suspended required minimum distributions (RMDs) for the year 2020. This includes distributions from most qualified retirement plans and IRAs, including inherited IRAs. If you already took your RMD for 2020, you may not return it to your account. Check with your financial advisor to see how this temporary rule will apply to you.

The following gifts will allow you to provide vital support to JDC’s work in the future– through contributions you make today or through gifts that first provide for your continued financial security and that of your loved ones:

Bequests through a Will or Living Trust

Bequests to JDC ensure that your philanthropic goals will be met and will provide you with a lasting legacy. Often, the wisest course of action is the simplest one; just include a bequest in your new will or trust, or add a simple codicil (amendment) to your current plans. Bequests can be a percentage of your estate, a gift of what remains after providing for loved ones, or a specific amount.

Charitable Gift Annuities

Charitable gift annuities provide advantages for both the donor and JDC. You transfer cash or marketable securities to JDC and receive fixed-rate, guaranteed payments for life, as well as a charitable income tax deduction for the year the gift is made. A gift annuity can have up to two people receiving lifetime payments. The payout is based on the age(s) of the person(s) receiving payments, and often, a portion of a charitable gift annuity payout is tax free. Another option is a deferred payment gift annuity, which can increase retirement income by allowing you to postpone the starting date of the annuity for a specified period of time, while still receiving a charitable income tax deduction for the year of the gift.

Charitable Remainder Trusts

A charitable remainder trust enables you to make a gift to JDC as part of your financial plans while first providing income to you and/or others you select. The trust term can run for life or for a term of years. You are entitled to a charitable income tax deduction at the time you fund the gift, and you may also be eligible for capital gains tax savings. Charitable remainder trusts can provide a fixed income or an income that will vary with the performance of the trust’s assets. When the trust terminates, all the remaining assets become a gift to JDC.

Charitable Lead Trusts

Charitable lead trusts, as opposed to charitable remainder trusts, enable you to fund a trust that provides income to JDC for a term of years beginning when the trust is funded. You can choose the term of the trust and the amount paid to JDC. At the completion of the trust term, its remaining assets are usually transferred to heirs you have selected, with possible reduced gift and estate taxes.

Is JDC in Your Estate Plans?


Contact

Kathryn Brantley

Kathryn.Brantley@jdc.org
+1 (212) 885-0871

Outright Gifts of Assets

In many cases, the best gift for you will be a gift of cash, the most common form of philanthropy. You usually will receive a charitable income tax deduction for the full amount of the gift, and can eliminate federal income tax on up to 60% of your adjusted gross income each year. Other popular forms of giving include stocks, bonds, mutual fund shares and real estate which have been owned for more than a year and increased in value. Such gifts don’t result in payment of capital gains tax. In addition, contributions of appreciated property are deductible for up to 30% of your adjusted gross income.

Please note that you can also support JDC through a planned gift with your local federation, for any gift our legal name is American Jewish Joint Distribution Committee. If you are interested in including JDC in your estate plans, please contact:

Kathryn Brantley

Planned Giving Senior Administrator
Kathryn.Brantley@jdc.org
Work: (212) 885-0871

All discussions will be held in strictest confidence.