Donations

AN OVERVIEW OF WAYS TO SUPPORT

MOUNT LEBANON LODGE

AND IT’S CHARITIES

To fulfill its mission, the Mount Lebanon Lodge Philanthropy Committee depends upon a variety of funding sources.  The most consistent sources of funding are our members and individual supporters.  A variety of methods are available for individuals looking for a way to help support the Lodge and its charities.  The most common is a gift of cash for membership and annual support.  However, there are several other creative ways to make a major gift while realizing significant benefits for you.  This summary describes the most common ways of giving and it outlines the income tax and financial benefits that these means of giving can provide to donors.

Gifts of Cash

Most contributions are made by check.  These gifts are tax-deductible up to 50% of donors’ adjusted gross income (AGI).  If the total of a donor’s charitable gifts exceed 50% of the AGI limit, the balance may be carried over for up to five additional years.

Gifts of Appreciated Securities

Gifts of appreciated securities have a double benefit for a donor.  The securities’ full market value is tax-deductible, and if the securities have appreciated in value, capital gains taxation can also be avoided.  When any donated property has appreciated in value (including stock or real estate), the donor’s deduction is limited to 30% of AGI, instead of the 50% limit allowed for cash gifts.  The same five-year carry over rule applies, and the unused portion may be deducted in subsequent years.

Gifts of Land

A gift of property can provide substantial tax benefits and can give the Lodge significant new capacity to carry out its land conservation programs.  Real estate can be expensive to maintain or difficult to sell – and if it has appreciated greatly in value, its sale can lead to substantial capital gains taxes.  A gift of land to the Lodge removes what can be a burden for some landowners, and it gives the donor a charitable deduction for the full value of the property, again, subject to the 30% limitation.  It also removes the land from the donor’s taxable estate.

The Philanthropy Committee believes that, in many cases, private owners are the best long-term stewards of land.  Depending upon the intentions of the donor, the Philanthropy Committee will evaluate the best means of conserving the land.  If warranted by the circumstances and consistent with the donor’s intent, the chosen means of conservation may involve placing conservation easements on the property and selling the property.  In other cases, the Lodge will retain ownership and active management of the property.  Finally, some gifts are of developed properties without conservation values.  In the event of a sale, the proceeds are used to support the Lodge and its charities.  In this manner, important family lands can be protected while providing tax benefits to the donor.

An Example of the Effect of the 30% Limitation

A landowner donates an appreciated asset valued at $80,000 to the Lodge.  Her adjusted gross income in the year of the gift is $50,000.  Assuming her income remains constant over the next five years, she could use the charitable deduction resulting from the gift as follows:

30% of $50,000 = $15,000

Year                Deduction

Year 1             $15,000

Year 2             $15,000

Year 3             $15,000

Year 4             $15,000

Year 5             $15,000

Year 6             $  5,000

    Total     $80,000

Note: if the landowner’s donation value had exceeded $90,000, she would not have been able to “use up” the entire deduction.

Donation of a Remainder Interest

Although it may come as a surprise to many landowners, a landowner can donate land and continue to live on it.  This is known as a gift of a remainder interest, or a gift of land with a “reserved life estate.”

A gift of a remainder interest to the Lodge reserves to the donor and any other named persons the right to continue living on and using the property during their lifetimes.  At the end of the specified life interests, full title and control of the property automatically transfers to the Lodge.  Again, the Lodge Philanthropy Committee will evaluate the most appropriate means of conserving the property, consistent with the donor’s intent.  Thus, the final outcome is very similar to that of an outright gift of land.

The donation of a remainder interest offers several advantages:

• the donors continue to use and enjoy the property throughout their lifetimes;
• the property is permanently conserved;
• the donor may be entitled to an income tax deduction when the gift is made if the property is a personal residence, farm, or land having conservation value; and
• again, in the event of a sale, any proceeds would be utilized to support the land conservation programs of the Mount Lebanon Lodge after the life interests conclude.

Gifts that Provide Life Income to the Donor

Some types of charitable gifts can result in a continued income stream, as well as an income tax deduction to donors.  While there are a variety of tools and techniques available, perhaps the most important is the Charitable Remainder Trust (CRT).

Charitable Remainder Trusts (CRT):

With a CRT, the donor transfers land or other property to the CRT.  The trustees of the CRT sell the property and reinvest the proceeds.  The donor receives an income tax deduction, and there is no capital gains tax due when the property is sold.

The trustees make regular payments to the donor and/or other designated beneficiaries.  These payments continue for either a term of up to 20 years or for the beneficiaries’ lifetimes; they are based on a fixed percentage of the value of the trust.  As the principal of the trust changes, so do the payments.  Once the life interests end, the trustees distribute the CRT’s assets to the Lodge and any other named charitable beneficiaries.

A Charitable Remainder Trust offers several advantages:

• an immediate tax deduction;
• increased income for the donor and other beneficiaries;
• avoidance of capital gains taxes; and
• elimination of estate taxes.

To be cost-effective, the CRT should have a principal value of at least $100,000.  There is no minimum age or limit on the number of beneficiaries, although both of those factors have an impact on the size of a donor’s charitable deduction.

When land with significant conservation value is used to fund a CRT, protection of the land’s resource values can also be achieved.  In this case, the donor must transfer a conservation easement to the Lodge before creating the CRT.  This step will assure that when the CRT trustee sells the property it will remain perpetually conserved.  The easement donation may also provide the donor with the benefits of a charitable income tax deduction for the value of the easement interest donated to the Lodge.  A failure to take this crucial step in establishing a CRT can jeopardize the permanent protection of the land.