UPDATE 1-YOUR PRACTICE: Charitable giving in unclear tax times ...

Thu Oct 18, 2012 3:27pm EDT

By Jennifer Hoyt Cummings

Oct 18 (Reuters) ? Hurry up and wait ? that?s what some
financial advisers are telling their clients as an uncertain tax
environment makes it tough to plan charitable giving in 2012.

Some clients may want to give big now because the charitable
gift tax write-off is among the deductions that may become a
casualty of tax reform. But tax rates for the wealthy could jump
next year, in which case they?d want to set aside deductions for
2013, when the deductions potentially would be worth more.

Given the uncertainty, it?s a good idea to have clients hold
off on big gifts until late in the year in hopes that there will
be more clarity after the elections, tax experts say.

?Why not have all the best information before you make a
significant decision?? suggested Mark Blumenthal, chairman of
the family office practice at Plante Moran, a Midwest regional
accounting firm.

Still, there are things that should be done now to lighten
your workload for the last few weeks of the year.

HYPOTHETICALS

First, map out four or five strategies for charitable
clients, built around possible election results.

The election comes just before the Bush-era tax cuts are set
to expire, unless Congress decides to extend them. T his means
the rates for all income tax paying Americans would increase at
year end. Additionally, those who make about $177,000 and up
would also see their itemized tax deductions cut.

President Barack Obama supports maintaining ordinary income
tax rates for families making less than $250,000 annually. For
incomes above that level, he favors raising the top two tax
brackets to 36 percent and 39.6 percent. Those rates are now at
33 percent and 35 percent. He?d also like to cap itemized
deductions at 28 percent of adjusted gross income for wealthy
families.

Republican Mitt Romney has promised a 20 percent income tax
cut for all Americans, a move he said would be revenue-neutral
because he?d offset it with caps on deductions. He has floated
the idea of a cap ranging from $17,000 to $50,000.

Of course, it?s not just a matter of who takes the White
House. You also have to factor in which party wins control of
Congress and the chance that an agreement on taxes will be
reached in a lame duck session.

Mapping out your clients? alternatives could include
scenarios for what they could do if the Democrats win the White
House but lose control of Congress, and vice versa. The same
holds for the Republicans.

This is essentially what Brian Wodar, national director of
nonprofit advisory services at Bernstein Global Wealth
Management, did after a client said he?d hold off on giving his
church a six-figure gift in expectation of getting a bigger tax
benefit next year.

After Bernstein and the client?s tax adviser explained it
wasn?t a given that he?d get a bigger benefit by waiting, the
man decided to split the gift across this year and next.

?All we can do is provide them the landscape within which
they can make that choice,? Wodar said.

TAKING ACTION NOW

Start setting the groundwork for your clients? gifts now.

Everyone involved ?can make better decisions with two months
to go, t han with two days to go at the end of the year,? said
Ken Nopar, a philanthropic consultant to wealth advisers.

Help clients earmark the assets they?d like to donate . After
this year?s stock run-up, appreciated equity holdings are a good
choice as they allow the donor to avoid capital gains taxes.

Also identify clients whose yearly incomes were higher than
usual, like those who sold a business. Tell them that,
regardless of the election, this is a good year for them to take
a big deduction because of their higher income.

If you have clients who need more time to chose the best
places to give, help them set up a donor-advised fund. These
individual accounts give donors a current-year tax deduction on
contributions but release funds on the donor?s timetable.

Though it takes less than a day to set up one of these
funds, do it now so it?s ready to go if things get hectic at
year end. The accounts, which often require an opening deposit
of around $5, 000 to $10 ,000, can be established through
providers like Fidelity Charitable, Schwab Charitable and
Vanguard Charitable and also through community foundations.

Another tip: introduce yourself to the director of gift
planning at a community foundation now, before he or she is
inundated with calls at the end of the year, suggested Jason
Baxendale, director of gift planning with The Chicago Community
Trust. The foundation can help you identify good places for your
clients to donate their money.

Overall there?s no excuse to procrastinate, said Bernstein?s
Wodar.

?Putting it off until we have some kind of certainty with
taxes may literally mean you never ever do planning,? he said.

Source: http://g7finance.com/g7finance-news/update-1-your-practice-charitable-giving-in-unclear-tax-times/

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