Estate Tax Law

Many nonprofits and especially the associations of nonprofits representing them, have called for retaining and even increasing estate taxes as a method of increasing donations.

I feel this position is counter to the founding roots of the nonprofit sector: built on faith, an American philanthropic culture animated by the donor’s freedom of charitable choice, rather than being spurred by the coercive effect of taxation

Forbes Magazine reports on the new estate tax law.

An excerpt.

“For donors, a crucial question has always been how much to give to charity while alive and what to leave as charitable bequests in their wills or trusts. The economic crisis has caused many people to cut back on current charitable giving, perhaps figuring they could always make up for it with bequests. But changes in the federal estate tax system signed into law by President Obama on Dec. 17 may well lead some of those who had postponed charitable giving to cut back on future bequests too.

“The new tax law raises the exemption from federal estate tax to $5 million a person ($10 million per couple) for deaths in 2011 and 2012. As a result, fewer families will even come close to paying the tax. That means that, except for the super wealthy, the tax benefits of giving through an estate plan have been wiped out.

“Previously, charities could point to the estate planning benefits of both lifetime gifts and charitable bequests. There’s an income tax deduction associated with gifts during life--adjusted gross income can be reduced up to 50% for cash gifts to public charities and by up to 30% for donations of appreciated assets, such as stock held longer than 12 months. But charities could also make another argument: If you’re not comfortable making a large gift now, remember your favorite cause or alma mater money in your will and you will be leaving less for Uncle Sam.”