New Tax Law Could Hurt Charities

The economic crisis has caused many people to reduce current charitable giving, and the new tax law will probably cause many people to reduce future bequests to charities too. With an exemption of $5 million, fewer families will have to pay estate taxes, meaning that the tax benefits of donating to charities through an estate plan have been wiped out for most.

Previously, charities could point to tax benefits of charitable bequests, but now they will have to rely mostly on the altruism of individuals for support. “[I]t’s small wonder that charities mostly stood on the sidelines during the 2010 debate over reinstating the estate tax. The charities would have fared much better if, as scheduled, the tax-free amount reverted to $1 million in 2011 with the tax on the balance rising to 55% in most cases. But had they openly lobbied for this, they would have angered potential donors.”

Deborah L. Jacobs, New Estate Tax Law Could Hurt Charity, Forbes, Dec. 28, 2010.