Gift and Estate Planning Opportunities Offer Many Benefits

By Phil Purcell, J.D.

Vice President for Planned Giving and Endowment Stewardship

Ball State University Foundation

The beginning of the New Year is an excellent time for clients to consider tax, estate, and financial plans.  Review these techniques that should be considered in order to take advantage of available opportunities.

Charitable Gifts.  Gifts for the benefit of a charity made on or before December 31, qualify for an income tax charitable deduction for a 2006 tax return filed in 2007.  Cash gifts qualify for a charitable deduction up to a maximum of 50 percent of the adjusted gross income (AGI).  Gifts of appreciated property such as stock, mutual fund shares, or real estate qualify for a charitable deduction up to 30 percent of the AGI.  In addition, gifts of appreciated property allow escape from potential capital gains tax if the property is sold rather than donated to charity. For cash and property gifts, if the value of the deduction exceeds the deduction limit, the client may carry-over excess deductions for up to five years beyond the year of the gift.

Annual Gift Tax Exclusion.  Clients may make non-charitable gifts to unlimited individuals up to $12,000 each year without liability for gift tax.  Any amount given to an individual over $12,000 will be subject to gift tax.  Charitable gifts, regardless of the amount, qualify for an unlimited gift and estate tax charitable deduction.

Payments for Tuition or Medical Expenses.  Any payments made on behalf of another person for their education tuition and/or medical expenses qualify for unlimited gift tax exclusion.  Clients may pay more than $12,000 per year for tuition and medical expense and owe no gift tax.  Payments must be made directly to the educational institution (for tuition expense payment) or the medical provider (for medial expense payment) rather than to the individual.

Section 529 Savings Plans.  Clients can invest in any state sponsored Section 529 college savings plan on behalf of their children or others.  An annual investment will qualify as a gift tax exclusion up to $12,000 per year.  Clients also may contribute up to $60,000 in a single year and elect to spread gift tax exclusions over five years.  Investments within a Section 529 plan grow in value income-tax free.  When the recipients withdraw money from the plan it is tax-free and not subject to income tax liability so long as the money is used for qualified higher education expenses.

IndianaIncome Tax Credits.  Effective January 1, 2007, Indiana taxpayers will receive a 20 percent state tax credit up to a maximum of $1,000 for contributions to Indiana's Section 529 college savings plan.  In addition, charitable gifts to certain colleges and universities in Indiana such as Ball State qualify for a charitable income state tax credit up to a maximum of $100 for a single return and $200 for joint returns.

Questions about the many gift and estate planning opportunities may be directed to Phil Purcell, J.D., at the Ball State University Foundation at ppurcell@bsu.edu or call (765) 285-8312 or toll-free at 1-888-235-0058.