Planned Giving Corner

Aruna Pappu
Aruna K. Pappu, Esq., AACR Associate Director, Planned Giving

Dear Friends,

My name is Aruna Pappu, and I am delighted to share that I recently joined the AACR as Associate Director, Planned Giving. In this role, I will be endeavoring to enhance and grow our Planned Giving program. I want to thank you for your continued support of the AACR and its core mission of funding and advancing cancer research.

On behalf of all of us here at the AACR, welcome to the Winter 2021 Philanthropy Brief, a bi-annual publication. In this issue, you will read the personal stories of individuals who courageously conquered cancer. We hope you are inspired by these stories of donors and how they are raising funds for cancer research. They help to remind us how your generous support of the AACR and its mission directly impact the lives of so many people all around the world. This issue also includes two articles on current topics in the Planned Giving arena, which are available below. We hope they will be informative and beneficial to you and your family as the end of year fast approaches:

We have all, in one way or another, been touched by cancer. My connection to cancer is through my husband. He was one of the true-blue, good guys—a gifted physician and academic and an all-around wonderful human being. At age 55, he was in overall good health, experienced no notable symptoms, and had no family history of cancer. He was the one to whom others turned when they or someone they cared about had a pressing medical concern.

Then one day, in a cruel twist of fate and irony, he received the inconceivable news: He had a particularly aggressive strain of stage IV colorectal cancer. Being a physician, he grasped the seriousness of his situation and sought every available treatment, went to renowned doctors, and fought valiantly against his ravaging disease. In the final stages, the cancer had spread to his brain, and we were told that there were no more lines of treatment available—that the “cure” for my husband’s form of cancer had not yet been developed. We lost my beloved husband on Christmas Eve of 2016.

As I continue to come to terms with this painful personal loss, I am now determined that “something positive should come out of this tragedy.” In my new role here at the AACR, I am in a unique position to do exactly that: To directly impact and increase funding for cancer research across the board, so others’ lives will not be cut short by a cancer diagnosis. By joining forces—we are Finding Cures Together!

Aruna K. Pappu, Esq.

Using a Traditional IRA to Maximize Your Charitable Impact

As many people are aware, a traditional Individual Retirement Account (IRA) offers a tax-advantaged way to save money for the future. The key benefits offered by a traditional IRA are two-fold: 1) the ability to invest pre-tax dollars; and 2) the deferral of tax payments on the accumulated IRA monies until the time one begins taking income distributions. Under the present IRS rules, those with traditional IRA accounts must begin taking such income distributions by no later than age 72.

Now consider this: What if one ascertains that there is no need to withdraw additional money from the IRA account? Can taking the income distributions from the IRA be postponed until some future time? The short answer is no, this cannot be done. Even if one does not need or want the extra funds, at age 72, the IRS requires IRA withdrawals be taken in annual increments known as “Required Minimum Distributions” (RMDs).

However, taking the minimum distributions can incur a significant increase in income taxes. Under the IRS rules, RMDs are subject to income taxes in the year taken (because these funds were tax-deferred in all the prior years), and additional taxable income may push one into a higher tax bracket. A higher tax bracket may in turn adversely impact one’s eligibility for benefits such as Social Security income and Medicare. What’s more, if RMDs are not taken as mandated by law, one could be subject to a 50% penalty on the amount that wasn’t withdrawn.

Thankfully, for the philanthropically-inclined retiree with traditional IRAs, there is another option: the Qualified Charitable Distribution (QCD). The QCD gifting option allows an individual, starting at age 70½, to instruct their IRA administrator to direct IRA distributions, up to a maximum of $100,000 per person, annually, to a qualified 501(c)(3) charity of their choice. Because the IRA income is transferred directly to charity, one does not report the QCD as taxable income and does not owe any taxes on the QCD. This may be particularly beneficial to anyone who is forced to take RMDs but doesn’t need the extra money. By using IRA income rather than cash to make a charitable gift to the AACR, one may enhance personal tax savings while supporting the AACR’s mission to prevent and cure all cancers. It’s truly a win-win option.

Learn More about Qualified Charitable Distributions

Cash is Not Always King: Additional Benefits of Gifting Appreciated Securities

As the last quarter of 2021 approaches, the focus will be turning to the annual fetes of pumpkins, turkeys, and seasonal spirit. This time of the year is also when many finalize their philanthropic plans and goals for the year. As you consider how to support the AACR’s mission this giving season, it might be helpful to consider that cash is not always king. What does this mean?

First, all of us at the AACR are grateful for cash donations generously gifted by our supporters throughout the years. With that said, it is important to note that donors can enjoy additional tax benefits if they donate long-term appreciated stocks instead of cash.

This is how it works: Publicly traded securities (stocks) that have been held for more than one year are classified by the IRS as “long-term capital gain property.” Typically, these securities are purchased at a cost that is lower than their current fair market value (FMV). During the time period these securities are held, the value would have appreciated. This appreciation in stock value is referred to as “built-in capital gain.” Pursuant to the IRS tax rules, when these securities are sold, the seller would be subject to capital gains tax on the value of the appreciation. In many cases, the capital gain tax burden can be quite significant. For example, if an individual purchased a blue-chip stock when it was only $10 per share, and it is now worth $100 per share, just imagine the overwhelming appreciation in the value of their investment—and the equally astounding capital gains taxes imposed at the time of sale. Consider what happens if appreciated stocks are donated to a qualified charity: 1) Generally, a charitable deduction equal to the stock’s FMV as of the date of sale can be claimed; and 2) The capital gains tax one would pay if the stock was sold is avoided. Thus, the value of the stock’s built-in capital gain is not taxed. (Again, imagine the windfall if the blue-chip stock appreciation mentioned above avoided taxation). This approach can be a substantial double tax benefit to donors and their families. Additionally, donating appreciated stock can be especially beneficial to those facing the 3.8% net investment income tax (NIIT) or the top 20% long-term capital gains rate for 2021—a potential triple tax benefit!

So, for those who are charitably inclined and own appreciated stock, donating the stock to a charity can be an excellent option to consider minimizing the tax burden while maximizing the philanthropic impact to a favorite charity.

For more information about how a gift of appreciated securities to the AACR can benefit you and your family, please contact [email protected].

Learn More About Planned Giving Return to Philanthropy Brief, Winter 2021 Issue