Who is Mediation Works Incorporated?

Mediation Works Incorporated (MWI) is a private, 501(c)3 non-profit dispute resolution service and training organization dedicated to helping clients resolve difficult disputes since 1994. 

Why a planned gift to Mediation Works Incorporated?

The Planned Giving Program at Mediation Works Incorporated is an important and integral part of our ability to provide ongoing mediation services to clients served by MWI’s Public Service Initiatives.  Your meaningful gift to Mediation Works Incorporated will assist us to continue to help families in crisis and tenants facing eviction throughout Massachusetts.

The most meaningful benefit for most people is the feeling of personal satisfaction they enjoy when they have taken steps to help children work through differences with their parents or to help tenants reach mutually beneficial agreements with their landlords in mediation.  For others, it may be the substantial tax benefits allowed by the IRS for such commitments and may allow our benefactors to give more than would otherwise be possible.  The following information will provide those interested in making a charitable contribution to MWI with several, widely accepted strategies in which your important gift can be made.

CHARITABLE GIFTS

A charitable gift can be a gift of virtually anything tangible.  Cash, stock, real estate, vehicles, limited partnerships, furniture, art objects, and other assets may be given to MWI.  Making gifts to MWI may help to reduce your exposure to federal and state estate death taxes.  You may also give assets during your lifetime or at your death.  Either technique may reduce the value of your taxable estate, and therefore, your estate taxes.  A properly structured lifetime gift to MWI may also reduce your personal income taxes.

• An outright lifetime gift to MWI can be made by simply giving cash or a valuable asset.  There are limitations on the income tax deduction depending on the type of gift and your adjusted gross income in the year the gift is made.  These limitations do not apply to the charitable deduction for federal estate tax purposes.  Generally, when an appreciated asset is given to MWI, there is no tax on the capital gain to the donor, even if MWI were to sell the particular asset at some later time.  For example, should you decide to gift 100 shares of stock which is traded at $50 per share on the date of the gift, a gift of $5,000 is made (the value of a gift for gift tax purposes is the current fair market value of the asset at the date of gift). The rules for the valuation of charitable gifts are no different than gifts to individuals.  However in the example above, a tax deduction of $5,000 would be available for this gift.  This is true even if the stock originally cost $1,000.  If the stock were sold, there would normally be a $4,000 capital gain and tax on this amount would have to be paid.  By giving the appreciated stock to MWI, no capital gain tax would be due, and you would thereby enjoy the full deduction for the current fair market value.  There is a limit on the itemized deduction that one can take for gifts to charities during the year.  First, to get the deduction one must “itemize” deductions on schedule A of their income tax return (form 1040) rather than accept the IRS standard deduction of a fixed amount.  In addition, the deduction for cash gifts cannot exceed 50% of one’s adjusted gross income for that tax year.

• An outright charitable gift at death provides an estate tax deduction.  (For many people, an estate tax deduction provides no actual tax benefit because the unified credit may already exempt the entire taxable estate from federal estate tax).  Outright gifts at death can be made by designating MWI as a beneficiary under a will or for certain financial assets, such as life insurance, annuities, IRA’s and other retirement plans.  Furthermore, your gift could be split with non-charitable beneficiaries, for example, by specifying that MWI receive a stated dollar amount or a stated percentage of the value of an asset with the remainder to children or grandchildren.

GIFTS TO MWI MAY ALSO BE MADE TO SPECIAL TRUSTS 

• A Charitable Remainder Trust can be created to provide you or another person with income for a fixed period or for life.  The remainder interest (remaining principal) passes to MWI when the income beneficiary dies or the fixed period comes to an end.  You may be able to take an income tax deduction for the present value of the remainder interest left to MWI.  If an appreciated asset were placed in this type of trust, you would not pay capital gains tax on the appreciation.  You should consider a charitable remainder trust only if you would not need the trust principal to meet your lifetime financial needs.

• A Charitable Lead Trust provides an income interest to MWI for a specified time with the remainder interest either reverting to the donor or passing to other non-charitable beneficiaries such as your children.  This type of trust is most frequently used as part of very sophisticated estate planning method to reduce the gift tax cost of passing assets to other family members.  A gift or estate tax deduction may be allowed for the actuarial value of the income interest given to MWI.  Under some circumstances, an income tax deduction may also be available.

• A Charitable Remainder Annuity Trust (CRAT) or a Charitable Remainder Unitrust (CRUT) The primary difference between the two is the determination of the annual payout to the non-charitable income beneficiary.  In a CRAT, the annual payout is fixed.  In a CRUT the annual payout fluctuates depending on changes in the value of the assets held in the trust.  Generally, the CRAT is used for older income beneficiaries who want to be able to plan on a fixed amount of income each year for the rest of their lives.  On the other hand, younger donors being aware that inflation could over a period of years erode the value of a fixed dollar amount, usually choose the CRUT.  Because the income stream is variable, they would hope and plan for the variability to change on the positive side.  In other words, they would hope that the trust corpus would grow and that the income stream would grow as well.  By designing the CRUT wisely and by administering it judiciously, the Trustees can fit the income stream to the needs of the income beneficiaries.  It is important, however, to speak with a financial advisor regarding the investment allocation of the corpus in order to properly manage the desired growth so that the income stream will increase each year while continuing to outpace inflation.

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For more information about Mediation Works Incorporated and MWI’s Planned Giving Program, please contact:

Charles P. Doran, Executive Director
Mediation Works Incorporated
4 Faneuil Hall - Fourth Floor
Boston, MA 02109

Phone:   617-973-9739 x22 / 800-348-4888
Fax:       617-973-9532
E-mail:  cdoran@mwi.org
Web:     www.mwi.org
 

It is important to consider your own personal cash flow needs prior to implementing a charitable giving strategy.  Please consult with a financial advisor before making any decisions.