Illinois Attorney James Provenza explains the things you must know about charitable giving in 2021.

1. CHARITABLE GIVING IN 2021
Incentives, how to prepare for the transformational gift and stories of gifts with a
big impact, and what to expect from the Biden administration.

2. CONTACT INFORMATION
• James C Provenza, JD, CPA
• Attorney At Law
• Phone: 847-729-3939
• E-mail: jprovenza@provenzalaw.com

3. WHO SHOULD BE
BENEFICIARY?
• If the account owner names
individuals, the individuals pay
income tax as they withdraw it.
• If the account owner names a
charity, the charity and the
family pay no income tax on the
portion going to charity.
• You should rarely name a trust.
This Photo by Unknown Author is licensed under CC BY

4. SAY GOODBYE TO THE STRETCH IRA
• Secure act was the most extensive revision
to retirement plan rules since 2002
• It was designed to encourage employers to
provide retirement benefits
• It also made major changes to IRA
distribution rules.
• It killed the stretch IRA.
This Photo by Unknown Author is licensed under CC BY

5. SUMMARY OF THE OLD RULES-STRETCH IRA
• Before January 1, 2020, an IRA account holder would name a spouse
as primary beneficiary and children as contingent beneficiaries.
• After the account owner’s death, the spouse would take
distributions over his/her life expectancy.
• On spouse’s death, children could take over their respective life
expectancies.

6. ECONOMICS OF A STRETCH IRA
• The children could commonly take distributions over 30 years.
• This would allow the children to accumulate more on a tax-deferred
basis.
• Congress never liked the idea that beneficiaries could use inherited
IRAs to provide for retirement.

7. INPUTS FOR CASE STUDY
• Age of (oldest trust) beneficiary 50
• IRA Balance $1,000,000
• Pre-tax growth rate 5%
• After-tax growth rate 3%
• Average income tax rate: life expectancy 25%
• Average income tax rate: ten-year rule 30%
• Distributions at beginning or end of period? End
• Lump Sum distribution or amortize Amortize

8. SUMMARY OF ECONOMICS-HOW MUCH DO YOU
KEEP?
Years after death Ten Year Rule Life Expectancy
10 $1,039,237 $1,195,301
20 $1,396,648 $1,818,366
30 $1,876,978 $2,633,563
40 $2,522,502 $3,598,207

9. SUMMARY OF THE NEW RULES
• Congress passed a major revision of retirement plan rules, including
IRA distributions, effective on January 1, 2020.
• The Secure Act changes the economics of leaving retirement plans
to charities.
• Account owner and account owner’s spouse – the account owner
and the account owner’s spouse continue to use their life
expectancies.

10. IMPORTANT PROVISIONS OF THE SECURE ACT
• Begin minimum required distributions (MRD) at MRD at age 72.
• If you were 70 ½ before January 1, you continue to use the old rules and
you must take MRD.
• If you weren’t 70 ½ before January 1, 2020, you can start taking MRD at
72.
• Beneficiaries other than the account owner and spouse must take the
entire inherited IRA within 10 years of the death of the account owner or the
spouse.

11. SOME SUGGESTIONS ON BENEFICIARY FORMS
• Provide sample language, including the exact name of your
organization
• If you have a legacy society, ask for a copy of the form as a
condition to getting admitted
• Ask the donor when they expect to get it done?
• Follow up with a phone call or a letter reminding them.

12. GIFTS OF APPRECIATED SECURITIES
• If you own an appreciated security
• Held For more than one year
• Donor gets a deduction for the full value of the
property
• Donor Generates no capital gains tax

13. REQUIREMENTS FOR CHARITABLE IRA ROLLOVER
• Donor must be 70 ½
• Must direct custodian to distribute directly to a charity
• Most public charities qualify
• Must come from a traditional IRA or Roth IRA.
• Maximum is $100,000

14. IMPORTANT NEW RULE
• There is one important change: if you do a Charitable IRA rollover with an
IRA for which you took deductions, it is not tax free.
• You must do it with an IRA rolled over from a 401k plan.
• Tax deductible contributions are recaptured.
• Investment growth is not recaptured.

15. EXAMPLE OF TAXABLE QCD
• Individual who turned 70.5 before 2020 deducts $5,000 for
contributions in each of 2020 and 2021 but makes no contribution
for 2022.
• The individual makes no qualified charitable distribution for 2020
but makes QCDs of $6,000 for 2021 and $6500 for 2022.

16. CALCULATION OF AMOUNT EXCLUDABLE
• Excludable amount is $6,000 for 2021 minus $10,000 in
contributions for 2020 and 2021, or ($4,000).
• Excludable amount for 2022 is $6500 minus the amount of
deductible contributions not previously applied to a QCD.
• Excludable amount is $6500 minus $4,000 = $2500.
• Deductible contributions are applied only once.

17. BENEFITS TO DONOR
• Donor reports no taxable income
• Donor gets no deduction
• Distribution satisfies the donor’s minimum required distribution
• Doesn’t show up on the taxpayer’s return at all

18. NEW RULE ON CHARITABLE IRA ROLLOVER
• SECURE ACT made one important change to the charitable IRA rollover.
• Must make the rollover from a rollover IRA.
• Don’t make it from an IRA to which you contributed.
• If you make from an IRA to which you contributed it is not tax-free.

19. WHAT IS A DONOR ADVISED FUND?
• Is a fund within a 501(c)(3)
• Donations are owned by the charity
• Donor (or other named individuals) recommends donations
• Donor gets a tax deduction going, in but not when distributed

20. ADVANTAGES
• Simple to set up
• Contract is usually 2 pages
• Allows flexibility in distributions. Usually no
required distributions
• No reporting for the donor
• Donations to DAFs and distributions from DAFs are
increasing.

21. HOW TO CULTIVATE POSSIBLE DAF DONORS.
• DAF sponsors won’t disclose identities of advisors
• Some DAF sponsors will send a request to possibly interested fund
advisors
• Post information on your website
• Insert an DAF option in response materials
• Ask donors that when the fund ends, suggest they name you as
beneficiary.

22. 100% OF AGI DEDUCTION EXTENDED FOR 2021
• The maximum charitable contribution for cash is100% of AGI
• Donors can get a deduction for the full amount of their AGI.
• It applies only to direct contributions to charities, not to
supporting organizations or private foundations or donor
advised funds.
• Can lead to a major or even transformational gift.

23. ABOVE THE LINE
CHARITABLE DEDUCTION
• Was extended through 2021
• Is still $300 for a single taxpayer
• Is $600 for a joint filer.
• It must be paid in cash.
This Photo by Unknown Author is licensed under CC BY

24. HOW TO PREPARE FOR THAT MAJOR GIFT
• Many gifts, but not all, are unrestricted.
• Have a policy for deciding about restricted gifts
• Make sure that you have an established policy for large gifts.
• Where does it go if the donor doesn’t specify?
• Large gifts have torn apart organizations that were not ready

25. HAVE A POLICY ON
RESTRICTED GIFTS
• One of the gifts described later was
restricted.
• What is the organizations attitude
towards restrictions?
• You need a written policy about how
and what restrictions to accept.
• What if the targeted problem no
longer exists?
This Photo by Unknown Author is licensed under CC BY-NC

26. WHAT RESTRICTIONS WILL YOU ALLOW?
• Unrestricted only?
• Restrictions for specific purposes?
• Endowment pools for specific purposes?
• Consider naming a specific person or committee to negotiate possible
restrictions.

27. HAVE A GIFT
ACCEPTANCE POLICY
• What gifts will you accept?
• What gifts will you turn down?
(Gas station?)
• What due diligence will you do
on a particular type of gift?
• Who makes the ultimate decision
on a gift?
This Photo by Unknown Author is licensed under CC BY-SA-NC

28. HAVE A PROCEDURE FOR MONITORING AND
ACCEPTING ESTATE AND TRUST GIFTS
• If a gift is coming through an estate or trust administration, what should you do?
• Get a copy of the will or trust.
• Make sure you get a copy of the inventory and accounting.
• Have your attorney or accountant review and monitor any proceedings.

29. ELSIE WELLNITZ GIFT TO OSLC
• Elsie Wellnitz was a member of Our Saviors Lutheran Church in Rockford.
• During her declining years, she received much care from the members.
• She had no children but did want to provide for several of her favorite organizations as well as
certain nieces and nephews.
• She left $200,000 to Our Saviors which the church used to purchase a modern audio/visual system
to enhance the worship experience.

30. GIFT TO NAACP
TO EDUCATE 50
CIVIL RIGHTS
LAWYERS
• Organization received a $40 million gift from an
anonymous donor
• Is to be used to send 50 individuals to law school
• The law students must spend a certain number of
years working as civil rights lawyers.

31. WHAT MIGHT BIDEN ADMINISTRATION DO?
• Propose reducing the exemption for federal estate taxes to $3.5 million.
• May encourage more people to leave to charity.
• Eliminate the step up in basis.
• Increase corporate tax rates
• Repeal the SALT limitation

32. CONCLUSIONS
• There are once again many changes to the tax law, but no universal
charitable deduction