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To Your Wealth December, 2005 Michael P Haubrich, CFP |
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Ah yes, the sweet
sound of merry bells are once again filling the air, serving as a reminder of
the fast approaching season of giving. This period between expressing our
thanks and preparing for the Holidays is an ideal time to ponder your
approach to gifting through charitable contributions. In a year marked
by natural disasters, we have been compelled to give to charitable causes to
an unprecedented degree. These gifts have contributed to the gradual recovery
of the traumatized people and regions that were victims of the tsunami,
earthquakes, hurricanes and landslides. And the recovery efforts and need
continue to exist. Making charitable contributions to these specific causes
can certainly be a part of your gifting approach along with other strategies that
allow you to contribute to groups or causes for which feel a great deal of
passion. Following
Hurricane Katrina, the Federal Government enacted
new tax legislation, called the Katrina Emergency Tax Relief Act, which
suspends the percentage limitations and the deduction cut-back for cash
contributions made after Because of the complexity of the
charitable contribution limitations, and the uncertain benefit of the
charitable contribution relief offered by the Act, we strongly urge you to
consult with your financial advisor if you plan to make any large cash
contributions before the end of 2005. During the holiday
season, often thoughts of gifting gravitate toward local needs and
interests. As part of your gifting
approach, you may want to include things like stocks, life insurance, real
estate and volunteering time. Gifting can also be done through public,
private or community foundations, as well as planned giving options such as
annuities or charitable bequests. In developing a
strategy for charitable giving, you should focus on causes that are most
meaningful to you. For sizable gifts, a community foundation, such as the
Racine Community Foundation (www.racinecf.org), represents a vehicle that
supports your near- and long-term intent for your charitable contributions
and the grants screening committee process ensures that future gifts also
support your purpose. The same may not always be true of gifts made directly
to specific organizations as they can change their focus and the causes they
support today and, over time, may no longer align with your original
intent. Making a
charitable donation may also help to reduce your estate, income and capital
gain tax liabilities. Each type of donation can have
distinct financial or tax implications, so it’s best to work with your
financial advisor to develop a gifting strategy that best suits your
situation. You’ll need to make sure that your charitable donations are
appropriately accounted for on your income taxes. An organization that is tax-exempt does not
automatically mean that your contribution is tax deductible. Tax exempt
simply refers to the fact that the organization does not pay taxes. On the
other hand, tax deductible refers to your ability to claim that donation on
your itemized tax return. Be sure to work
with your financial planner to assist you in ensuring that your charitable
gifting strategy is consistent with your objectives and can truly be a gift
that lasts long after those holiday bells have faded. Mike Haubrich is president of Financial Service Group, a
registered investment advisory firm in |