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Tuesday, January 4, 2011

Forbes: New Estate Tax Law Could Hurt Charity

Forbes, New Estate Tax Law Could Hurt Charity, by Deborah L. Jacobs:

Billionaires Gates, Buffett and Zuckerberg will still give big. But what about ordinary donors?

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. ...

[M]eanwhile, the possibility of converting a traditional IRA to a Roth IRA -- an option that became available in 2010 to all taxpayers, regardless of their income or filing status -- has given the charities some stiff competition for IRA nest eggs that account owners don’t expect to need.

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