Saturday, July 29, 2000

Estate tax repeal may affect charities

Keeping money out of government's hands was groups' appeal

By Amy Higgins
The Cincinnati Enquirer

        Avoiding a federal estate tax that can reach 55 percent is one reason many bequeath part of their estate to charity. But Americans now are a presidential signature away from a repeal of that tax.

        Even though President Clinton has vowed a veto, many nonprofits have nonetheless realized that a repeal could forever change the way they raise money.

        “It's certainly going to be an impact on our field,” said Shari Fox, vice president of development and community relations of Beech Acres and president of the Greater Cincinnati Planned Giving Council. “The tax structure has driven what we do. ... It gives you a chance to talk to people about what they want to accomplish.”

        Bequests accounted for $13.62 billion in 1998. People gave that money to charities for many reasons — primarily belief in the cause and the desire to help. Some also prefer not to leave too much to their children.

        But often, the goal of keeping money out of the government's hands is what turns those good intentions into actions.

        Indeed, it sometimes seems that Americans enjoy the popular pastime of using the law to do something with their money rather than paying taxes. With an estimated $10.4 trillion of net worth to be inherited in the next 40 years, philanthropy has become the sport of choice.

        “Only by using charitable giving can you keep it out of government hands,” said Paul Schervish, director of the Social Welfare Research Institute at Boston College.

        Mr. Schervish said he at first thought that the estate tax's repeal could decrease what is bequeathed to charity. Bequests account for 7.8 percent of giving nationwide.

        But he and other national experts now think that an estate tax repeal could actually increase overall charitable giving.

        “More people will be wealthier; and when people are wealthier, they give more money to charity,” he said. “Just by making people wealthy, they will increase their charitable giving.”

        That increase in lifetime gifts is expected to offset whatever decrease in after-death gifts there may be. A U.S. Department of Treasury study found in 1998 that eliminating the estate tax could decrease bequests by 12 percent.

        “But people will give more because they have more, and their children will have more,” said Patrick Rooney, chief operating officer at Indiana University Center on Philanthropy.

        They also might be faced with giving in different ways. The estate tax repeal includes a provision that might trigger capital gains taxes for many heirs who inherited highly appreciated stock. Creative giving could minimize the capital gains hit, as it holds back the estate tax now.

        And that transfer from estate gifts to living gifts will prompt new discussions for people like Beech Acres' Ms. Fox and financial planner Barbara Culver.

        “Whether or not we have an estate tax as we know it today, we need to create a new conversation that will still motivate,” said Ms. Culver, with Blue Ash's Resonate Inc.

        Cincinnati estate planning lawyer Ron Christian agreed: “It will change the way gifts are (made); it won't change the amount of gift made.”

- Estate tax repeal may affect charities
Dodging taxes isn't only reason to give

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