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Volunteering for Deductions

Charities of nearly every kind rely on the services of volunteers, whether it’s delivering flowers to patients’ rooms at hospitals, walking dogs for an animal shelter, responding to natural disasters or working in a museum gift shop.  While the hours put in by volunteers are vital to the organizations, volunteers are not entitled to claim charitable deductions for the value of their time.  However, there are deductions available for:

  • Use of a personal vehicle in performing volunteer services, at 14 cents per mile.
  • Parking expenses and tolls paid getting to and from the volunteer assignment.
  • Out-of-pocket expenses, such as for special uniforms to be worn while volunteering.
  • Reasonable expenditures for meals and lodging necessarily incurred while away from home overnight in the course of performing volunteer services.

While the requirements for substantiating volunteer expenses are not as strict as for charitable gifts, volunteers should maintain a log of mileage, tolls and parking and maintain receipts for out-of-pocket expenses.  Most charities will provide acknowledgments for volunteers, detailing the days and hours worked.


Advantages and Disadvantages of Joint Ownership

Many married couples own the major assets — homes, cars, bank accounts, brokerage accounts, etc. — in their joint names.  In general, the spouse who lives longer automatically becomes sole owner of the entire property, without going through probate.

Joint ownership can present disadvantages, however.  What would happen to the assets if both joint owners died in an accident or within a short time of each other?  Unless the spouses have wills that direct how such assets are to pass, they could be distributed according to state laws.

Joint ownership also may present tax disadvantages.  When highly appreciated stock, real estate or other assets are left in a will or living trust, any capital gains tax liability disappears and the beneficiary receives a new basis in the assets equal to the date-of-death value.  However, with jointly owned property, the co-owner typically receives a stepped-up basis in only one half of the property.  Too much jointly owned property can also make it harder to set up estate plans to reduce or avoid state and federal estate taxes.

Joint ownership of assets certainly has a place in estate and financial planning, but should not be entered into without a good deal of thought and some guidance from professional advisers.


Involve Family in Charitable Estate Planning

Family members often are aware that parents or other relatives give generously to favorite charities, and therefore aren’t surprised to learn that they have included charitable gifts in estate plans.  Nonetheless, it’s usually a good idea to speak to loved ones about all the estate plans you have made or intend to make.  Not only does such a conversation avoid confusion, it can be a wonderful way to encourage those loved ones to honor you by continuing to support the causes that have been dear to your heart.

Many friends are proud to share that they are providing a legacy to charity as part of their estate plans.  Children generally understand that parents have a desire to leave the world a better place, and that their estate gift to support charity is both a source of satisfaction and a message to children and grandchildren on the importance of philanthropy.

Some donors make their bequests in honor of children or others, or as memorials to relatives who have died. In some cases there may be a need to provide financial support to one or more family members, which can easily be accomplished through gifts that provide lifetime income to loved ones before the assets pass to charity.


Time to Review Investments

With the recent increase in stock market values, it may be time to review your investments.  You may discover that your portfolio is out of balance.  Check with your financial adviser to see that your investments are still appropriate for your risk tolerance and goals.  Before selling stock, however, consider how you can use appreciated shares to make gifts to charity.  You’ll be entitled to an income tax deduction for the fair market value of the shares on the date of the gift, if you have owned them more than one year, and you’ll avoid the capital gains tax that you would have paid.

Even if you weren’t planning to sell, you can give the stock, buy new shares in the same company and get a higher basis, which may save capital gains taxes in the future.  By making the gifts now, you’ll lock in the higher stock values.  If you have loss stock that you’re thinking of selling, consider a gift to charity of the sale proceeds.  You’ll receive two deductions: one for the capital loss and one for the charitable contribution.  Hold off buying new shares of the same loss stock for at least 30 days after the sale, or your capital loss will be postponed until the new shares are sold.

If you’ve thought about making a gift but feel you can’t part with the income, consider using the shares of appreciated stock for a gift while keeping payments for life.  In addition to lifetime income, you’ll also be entitled to a charitable deduction for a portion of the value of the shares.


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