Saturday, July 29, 2000

Dodging taxes isn't only reason to give

Higher purpose seen in charitable donations

By Amy Higgins
The Cincinnati Enquirer

        Estate tax or no estate tax, Richard and Jeanne Hannan would still be giving their money away.

(Gary Landers photo)
| ZOOM |
        So would thousands of other charitably inclined people nationwide, say proponents of a potential repeal of the federal estate tax.

        While estate planners and lawyers have touted the benefits of trusts and foundations as a way to keep money out of government hands, those giving say resoundingly that taxes aren't the reason they give.

        Taxes ranked seventh in a survey of the top 10 reasons people give to charity, according to a survey by U.S. Trust Co.

        “The first six were all about emotional reasons,” said Barbara Culver, financial planner with Resonate Inc. in Blue Ash.

        Still, with an estate tax threatening a potential 55 percent rate, giving to charity has a powerful financial motivation. While the states may continue levying their own version of a “death tax,” the removal of the federal estate tax may remove some people's motivation to give to charity.

        Indeed, $13.6 billion was bequeathed in 1998.

        The “planned giving” strategy stems from an exclusion of $675,000 from federal estate taxes. That exclusion — scheduled to rise to $1 million by 2006 — has led many folks to create trusts to hold the bulk of their estates, effectively eliminating their federal estate tax liability.

        Better to give to charity than the government.

        But people like the Hannans think it's just better to give to charity. Period.

        “We believe the basis of education is the boulevard to quality of life,” Mr. Hannan said.

        Therefore, the Indian Hill couple set up a foundation about 10 years ago that in 1999 held about $187,000. Last year, the trust granted $35,550.

        Mr. Hannan said much of his charitable tendencies come from the dire poverty he's seen in his travels around the world. Still, he hopes the education his money provides doesn't just go toward a material quality of life, but a philosophical one as well.

        “Education can help somebody,” he said. “It's relationships with families, and doing good in the world.”

        He said he understands why some people use trusts as tax shelters: He's seen friends and business acquaintances spend time and money on planning strategies trying to figure how to avoid taxes. Instead, they should be putting those efforts into their businesses, he said.

        Sociologist Paul Schervish at Boston College, however, said that's part of the rationale in eliminating the estate tax. It will create a wealth effect that ultimately could benefit the economy and increase overall charitable giving.

        Even those receiving bequests aren't concerned that eliminating the estate tax will eliminate a prime motivator to giving.

        “People may have some interest in avoiding the estate tax, but they also have an interest in instituting the benefits and philosophical values in their children,” said Amy Cheney, vice president of advancement at the Greater Cincinnati Foundation.

        Mr. Hannan says it this way: “Don't do things just because of taxes.”

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