Connecting Children with Charity: Paper Cranes for Japan

As parents, we have the opportunity to teach our children compassion and empathy, to expand their perspective of the world, and to instill in them a sense that they have the power to make the world a better place.  Estate planning is an opportunity to continue this teaching process.  As Silicon Valley attorney John Hopkins says, when parents leave a portion of their estate to charity, when they treat the community as extended family, they pass along a powerful personal legacy to their children in addition to their wealth.

Estate plans do have their limitations though -- a testamentary gift in a will or trust will not do much to instill philanthropic values in children if parents miss the opportunity to do so during their lifetimes.  John Hopkins, Jon and Eileen Gallo and others emphasize the need to start young.  The letters posted at The Giving Pledge reveal that some of our biggest philanthropists learned the value of giving from their own parents:

Both of us were fortunate to grow up with parents who taught us some tremendously important values. Work hard. Show respect. Have a sense of humor. And if life happens to bless you with talent or treasure, you have a responsibility to use those gifts as well and as wisely as you possibly can. Now we hope to pass this example on to our own children. -- Bill and Melinda Gates

The challenge for parents is to find opportunities for volunteering and charitable giving that are meaningful and age appropriate. 

StudentsRebuild, in partnership with and Architecture for Humanity, have launched Paper Cranes for Japan.  This project involves making paper cranes to represent a message of support and healing for Japan and to cause a gift to be made by the Bezos Family Foundation:

These simple yet powerful gestures will trigger a $200,000 donation from the Bezos Family Foundation - $2 for each crane received - to Architecture for Humanity's reconstruction efforts in Japan. Once we reach our goal of 100,000 submissions, the cranes will be woven into an art installation - a symbolic gift from students around the globe to Japanese youth.

The Paper Cranes for Japan project is also an example of how philanthropy is changing -- it demonstrates how technology provides the opportunity for many individuals to coordinate efforts to make a substantial impact.  Somehow I believe we'll see more than 100,000 paper cranes.  Many more.

Making Donations to Help the People of Japan

The first thing I do each morning these days is check the Daily Beast and Huffington Post for news about Japan.  The stories break my heart.  I come from a family that has survived earthquakes.  My grandmother's sister used to tell me stories about the 1906 earthquake -- how scared and confused she and the other children were, how the family lost their business and their home, how they left San Francisco to start over in West Oakland.  I can't imagine what families must be experiencing today in Japan. 

What I do know is that I want to help, and others here in the United States want to help, through charitable donations.

Taxgirl has posted some things to keep in mind when making charitable gifts for disaster relief in Japan such as:

Do your homework. Check out the credentials of a potential donee/charitable organization before you make a donation. Charity Navigator is a great site to gather information (that link takes you directly to the Japanese earthquake relief part of the site). You can also confirm charitable status through the IRS web site – remember that some organizations (like churches) may not be listed, so ask the organization for more information if you’re not sure.

Remember the rules. The rules for charitable giving still apply, even in a disaster of this magnitude. That means that only contributions to domestic tax-exempt charitable organizations are deductible. However, those that provide assistance to individuals in foreign countries qualify for charitable deductions (think Red Cross, etc.) so long as they otherwise meet the rules as domestic tax-exempt charities. Again, check with the IRS – or ask to see the organization’s credentials.

Private foundations wanting to make grants for Japanese earthquake relief must be careful to comply with the rules governing cross-border grant-making.  The Council on Foundations has posted resources for grant-makers.

Some additional resources for those who want to donate:

Chronicle of Philanthropy  (Responses from Charities to the Japan Earthquake and Pacific Tsunami)

Silicon Valley Community Foundation (Support Japan Earthquake and Tsunami Efforts)

Budget Calls for Congress to Do Away with 2010 Estate Tax Repeal

This week, the House and the Senate approved the concurrent budget resolution for fiscal year 2010.  The budget calls for a permanent extension of the 2009 federal estate tax levels -- in other words, a $3.5 million federal estate tax exemption per individual and a 45% top federal estate tax rate.  

The budget also calls on Congress to "extend incentives for enhanced charitable giving from individual retirement accounts, including life-income gifts."  This language refers to extending and expanding the IRA charitable rollover.

The budget resolution does not change current tax laws.  It is a nonbinding document.  Unless Congress acts, the estate tax will be repealed for 2010 and will return with a $1,000,000 federal estate tax exemption in 2011.  But the budget is a blueprint for major tax legislation and indicates Congressional support for a permanent extension of the 2009 federal estate tax levels.

The New York Times and the Wall Street Journal reported on Congress's approval of the budget resolution.

If you'd like a nice roadmap to the federal budget process, the Center on Budget and Policy Priorities offers this overview.


Will Congress Expand the IRA Charitable Rollover This Time?

Currently, individuals who are at least 70 1/2 are able to make tax-free charitable gifts directly from their IRAs to eligible charities.  This law is set to expire at the end of the year.  There are also some important restrictions under the current law:

  • The donor must be at least 70 1/2
  • Charitable IRA distributions are capped at $100,000 annually
  • Gifts cannot be "life income" gifts -- the IRA distribution cannot be made in exchange for a charitable gift annuity, to a charitable remainder trust, or to a pooled income fund
  • Gifts cannot be made to private foundations, donor advised funds, or supporting organizations

On April 22nd, Senator Dorgan (D-ND) and Senator Snowe (R-ME) introduced The Public Good IRA Rollover Act of 2009 (S. 864) to make the charitable IRA rollover permanent and expand current law.  Versions of this bill were introduced in prior sessions of Congress, but did not survive.  The Partnership for Philanthropic Planning issued a bulletin that describes the new Senate bill:

This legislation would make the IRA Charitable Rollover permanent, remove the $100,000 annual limit on donations, provide IRA owners with a planned giving option starting at age 59½, and allow for distributions to supporting organizations, donor-advised funds, and private foundations.

Companion legislation (H.R. 1250) was introduced in the House last month. 

The bill contains the following provisions: 

  • Donors still have to be 70 1/2 to make direct charitable gifts from their IRAs
  • Starting at age 59 1/2, donors can make planned gifts using IRA funds -- i.e., gifts in exchange for a charitable gift annuity, gifts through a charitable remainder trust or to a pooled income fund (with special rules, of course)
  • The $100,000 annual cap is removed
  • Gifts can be made to public charities and private foundations, donor advised funds and pooled income funds

The House and Senate bills are in committee.  As you know, many bills don't get any further.  But if the bills survive, I'll continue to report on their progress.  The ability to make lifetime tax-free gifts of IRA assets to charity has been an attractive choice for some individuals who are concerned about the heavy taxation of IRA assets and are charitably inclined.

Building an Endowment & Planned Giving in a Recession

I was in San Diego yesterday to give a presentation to the Board of Directors of Employment & Community Options, a public charity that provides employment services for disabled adults in multiple counties in California. 

The presentation focused on endowment building and planned giving.  We discussed why an endowment is key to the survival of a charity -- how, for example, an endowment can safeguard a charity if annual gifts or government funding drops off.  We talked about planned gifts -- gifts like bequests, gifts of life insurance, and charitable remainder trusts.

You might think that all charitable giving decreases in an economic downturn, when just about everyone is feeling the pinch.  But some recent studies conclude that charitable bequests (gifts in wills and revocable living trusts) actually increase in recessions.  (Thank you to the Nonprofit Law Prof Blog.)

This makes sense to me based on my own work with clients.  A lot of people want to make charitable gifts, but they may be unwilling or unable to part with any of their income.  Instead, they might name a charity in their will or trust to receive a specific sum or a percentage of their estate after their death. 

If you want to make a bequest and already have a will or trust in place, you should see your estate planning attorney to draft a codicil (for a will) or trust amendment (for a trust).  If you are doing your estate plan for the first time, part of the planning process should focus on your charitable goals, including whether you want to make gifts to charities in your will or trust.