Webinar Transcript (9/10/2024): “Charitable Giving: Timely Strategies and Considerations Under Jewish Law”
Host: Yeshiva University & ParkBridge Wealth Management
Moderator: Jonathan I. Shenkman, President & Chief Investment Officer of ParkBridge Wealth Management (Contact: jonathan@parkbridgewealth.com)
Panelists: Elizabeth Forspan, Esq., Forspan Klear LLP, Rabbi Daniel Z. Feldman, Yeshiva University, and Alan Secter, Yeshiva University.
This session is entitled "Charitable Giving: Timely Considerations under Jewish Law." We have an all-star panel to discuss this topic. I'll offer just a brief introduction of each panelist.
First we have Rabbi Daniel Z. Feldman, who's the Rosh Yeshiva at Yeshiva University as well as an instructor in the Sy Syms School of Business, and has taught for the School of Social Work and the Katz School of Continuing Education. He also serves as the executive editor of YU Press. Rabbi Feldman is an author, and also co-editor of more than 10 volumes of Torah essays and Jewish thought. He's also the spiritual leader of Ohr Saadya of Teaneck, New Jersey.
Our next panelist is Elizabeth Forspan, who's managing attorney at Forspan Klear LLP on Long Island. Elizabeth practices in the areas of Elder Law, Trusts and Estates, and Taxation. She regularly assists clients in achieving their Medicaid planning goals in a tax efficient manner through practical and considerate planning techniques. Elizabeth speaks throughout the United States on various aspects of elder care planning, tax law and estate planning, and she has been featured in New York Magazine and Newsday and has been quoted in the New York Times.
Last, but certainly not least, we have Alan Secter, Yeshiva University Senior Director of Institutional Advancement, where he raises major gifts and spearheads community programming for its Long Island region. His career in the Jewish community spans more than 20 years, during which time he has been fortunate to work for organizations focusing on higher education, social services, and Israel advocacy. He's a graduate of Harvard University's Kennedy School of Government and the University of Toronto.
With those introductions, let's first start off and turn to Rabbi Feldman. Rabbi, can you start by first giving us a bit of background on giving charity, or tzedakah, as it's called in Hebrew? What is the basis of charitable giving in Judaism?
Rabbi Feldman: Well, on the one hand, tzedakah is a mitzvah. It's a commandment. We read about it in the Torah a few weeks ago. It's actually a group of commandments telling us first to open our hands to those who are in need. Also coupled with prohibitions to not harden our hearts or clench our fist. Cannot be cold and insensitive to the needs of others. And it's also coupled with a mandate to lend to those who are in need. Sometimes that's even preferred to actual gifts for various reasons.
So it's a commitment. And it's also protected by some negatives. But it's also much more than that. It's also a meta value. It's really what defines the Jewish people. We're told that charity elevates the nation, and that attribute of kindness, whether it's what we call chesed, physical acts of kindness and service to others, or whether it's what we call the monetary chesed of charity. Both of these are the defining attributes of the Jewish people, and this goes back to our ancestor Abraham, who engaged in this kind of behavior, of helping people of hospitality, which is the combination of both monetary charity, because it costs, and also service. And that kind of behavior was the reason really, which God declares "I love this man and all of his descendants are going to bear my message to the world of kindness, and reaching out to others in need."
So it's a concept. It's an obligation. But it's really a defining value of who we are.
Jonathan: Okay. And the next question, and I realize this is more involved, and we need to cover at least 15 minutes. So feel free to take your time and go into depth. But according to Jewish law, how should Jewish families prioritize their giving, and feel free to take your time on this one.
Rabbi Feldman: Well, if I really took my time, then that would be more than time that you have, not because of me, but because the topic is so vast, so I'll try to lay out a few principles, and we'll see how far we can get in those 15 minutes that you mentioned.
To understand when we refer to it as a meta value - so it actually comes from two directions. So when we talk about the idea of this broader notion of helping those in need of which charity runs parallels a major part of, and a different kind of application of. There are two broad themes. One is, we want to be as helpful as possible. We know that we have another meta value of "kamokha", of love your fellow as yourself. So this notion of trying to be of service to others is itself one of the values that animates the considerations of tzedakah.
And we also have another theme which we read about in the Torah throughout Sefer Devarim, that we're reading now. The idea of it's called "v'halachta bidrachav" that we're told to imitate God. Which seems like quite the challenge, because we don't have the same skill set. How exactly do we imitate him? And the Talmud explains in a number of places, we imitate him by trying to imitate his values, and his value system is defined by kindness. And that's again why he chose Abraham, and the attribute that he uses to identify his nation.
So every time we engage in charitable giving, we are strengthening that quality. So Maimonides wrote, for example, that even when you're going to give the same amount of money to charity, it's still worth doing it in multiple gifts. Even if it adds up to the same, because every time you engage in the act of giving, every time you have to reach into your pocket, or write out a check, that has a profound effect on the soul, and that brings you closer to that divine model that we're supposed to copy.
So when we think about how we're trying to realize this mandate and this value of charity, we think about it from both directions. How are we most helpful and how are we also going to strengthen this attribute of imitating God? And sometimes those go in the same direction. Sometimes they go in parallel directions. And they contribute to the questions that we ask when we look to donate, and we look to express this charitable instinct.
And it's an unusual area of Jewish law. Because here you actually do have a section of the code of Jewish law, the laws of charity which give us rules, and tell us how we should prioritize the giving. And yet within that there is still a large amount of discretion and subjectivity. And it's an area where we have a mandate and a requirement. But we're also able to express our individuality, both our preferences and our inclinations in terms of what's important, and also those who we are close to, because we find that "aniyei ircha kodmin", we find that we have an obligation to prioritize those who are closest to us, those who are connected to us, our family members, and those who surround us.
Which is in some circles a controversial principle. There are some who argue philosophically that we should only look at need, and that it's wrong to prioritize those who are closest to you. But Jewish law feels differently about that. Jewish law feels that there is an obligation to first start with those who are closest to you, and that could be for practical reasons. It could be because that's how we're best able to maximize the good that we can do. If everyone takes care of those closest to them, then ideally there will be a distribution of effort in a way that will cumulatively help the whole world. But also that is how we strengthen our charitable instinct. And ultimately that's for the best of everyone. The more we respond to those who are part of our umbrella, and who we see as our responsibility, the more we are involved in giving and the more giving we do ultimately and ultimately the world benefits.
So the idea that we're supposed to see ourselves for our own needs, but also to look to include as many people as possible in that umbrella of who we are. So I don't have to define me in a very narrow way, in the words of one of the great Roshei Yeshiva of Europe, who taught in YU for a year or two, we don't have to define ourselves in the narrowest terms. So more broadly, we can define the term ourselves to include the people closest to us in the broadest and widest possible sense. So the greater our character is, and the more we're going to be involved in charitable giving.
So we have that idea of prioritizing those who are closest to us and those who are involved with us. But we're also sensitive to the fact that there's people who are in greater need, who may be outside of that circle, who may be further away. So many authorities assumed that there's a balance between these two that we're trying to focus both on those who are neediest and also those who are closest to us, and those are not necessarily at all going to be the same consideration. So we're balancing the two. We're trying to consider those two together with each other, and that also brings up the fact that when we talk about prioritizing, we, for example, would make a list. And let's say we would say, "Okay, these are 10 top causes in order." So it wouldn't mean that we would give all of our charity that's available to cause number one and only when cause number one is totally satisfied would we move on to cause number two, and only if that's totally satisfied, will we move on to cause number three. Because if that would be the attitude most of us would never get up to cause number two, or cause number three. So the understanding is that here there's a balance, too. So once you make this list, so you'll start with item number one, and you'll give that cause number one, and you'll give them the majority of the funds that you have available for charity, and then what's left? You'll move on to cause number two and give them the majority of what's left, and then move on to cause number three in descending proportions. But ultimately we want to diversify and try to get as many of the causes on this list to have some involvement and some connection to our charitable giving.
And that reflects the fact that we do have multiple. On one hand, the purest definition of tzedakah is helping those in financial need. Those who are destitute to some definition. The Torah refers to "that which is lacking", "machsoro", which we should seek to try to address, but that also has many definitions. On the one hand, that could refer to those who are genuinely destitute by objective standards and don't have enough to cover basic needs, such as food and clothing and housing, and aren't able to get married for financial reasons. So these are considered very basic necessities. And that's one definition of what's lacking. On the other hand, there's also a relative need. Sometimes an individual may have some basic necessities, but due to the standard of living that is accepted in the environment that they're in, they have a relative sense of poverty, and that's also significant and has to be addressed also. And then the Talmud has a perhaps surprising standard, that sometimes there is an individual who may have been used to a wealthy standard, but has fallen on harder times, and we try to address that also, and that's itself a fascinating consideration, because that shows that we're speaking here also to emotional needs which don't necessarily rank the same way as more objective kind of poverty. But the halacha also recognizes that there are all kinds of different types of suffering, and all kinds of different types of both practical and emotional needs, and theoretically they all could be considered charity, even if they don't rank the same way, even if they're not necessarily going to take the same priority as someone who has a more basic survival kind of need. But it's also a part of what we want to be sensitive to in terms of the different types of needs and charitable causes that exist out there.
So there's a whole slew of causes that are there under the heading of financial assistance for individuals who are in need. And then there's also causes, and we recognize that charity can reflect, on the one hand, helping the poor and helping those who are in individual financial need. But also it's our way of being involved in activities that are worthwhile and necessary, but we don't necessarily have the ability as individuals to carry them out ourselves.
So we want to make sure to support the schools. We want to make sure to support the shul. We want to make sure to support the mikvah. We want to make sure to support everything else that the community needs. So this is our way of being involved and directly providing for the community in all kinds of other ways which are not necessarily about the poor, but also require our funds in order to do that.
So that's also on the consideration. It's also on the list of how we try to proportion our giving and how we try to factor it all in. So there's a lot of subjectivity there. And at the same time there's also a framework that guides.
Jonathan: So the Torah has this language that we shouldn't clench our fist, which is very evocative language to be charitable, and we shouldn't clench our fist, and we shouldn't harden our hearts. So what does that mean in terms of - is that just a general exhortation not to decline tzedakah? Or does it have a broader symbolic meaning?
Rabbi Feldman: It's an interesting question, and there were those who suggested that it had a symbolic meaning. That when you close your fist, so it looks as if all of the fingers are the same size. It looks as if everything's equal and can be plugged into a computer, and you can just do the math. And when you open your hand you see that all your fingers are different sizes, and you see that reality is much more complicated, and there are considerations that go beyond the rules that may seem as if they're very generalized, and our individuality and our discretion and personal inclinations and connections end up playing a big role in the kinds of decisions that we make here.
And there are so many other causes that we also try to factor in. We also try to factor in, for example, something that's very much on all of our minds right now - the needs of the people in Israel. And the recognition that that is very front and center, and that comes from a number of different directions. That comes from the fact that there are pressing financial needs. It comes from the fact that there is a tremendous crisis that affects our entire nation, and that we're all connected to, and that we all want to do our parts in trying to help as much as we can. So this could mean, for example, helping to support the soldiers who don't have everything they need. It means helping those who are members of bereaved families. It means doing whatever we can to support in all kinds of different ways.
So the whole notion of our being involved in charitable giving can take on many different forms. It's our way of taking care of those who are in need. It's our way of being a part of important causes that we need to be a part of and accomplishing things that wouldn't otherwise be accomplished without us, and that we wouldn't otherwise have an active physical role in.
And there also are different standards depending on what role you're playing. So as important as it is to be involved in giving charity, the Talmud also says that it's equally important, and perhaps more important in some ways to be involved in facilitating charity and encouraging charity. The Talmud has an expression, "gadol hame'aseh", that one who is able to get other people to be involved in charitable giving is considered even greater than the one who does it himself. You might think you're getting off easy if you can use somebody else's money, but anyone who's tried to bring that about recognizes it's not as easy as it sounds. And when that can be accomplished, that's itself considered to be a tremendous source of merit.
So it's also a tremendous responsibility, and to a certain extent that also comes with different rules. Because those who are giving money from their own pocket are obligated to support their own relatives first, and those who are closest. That's considered to be a basic responsibility and a mandate from the core notion of how we're connected to people. But somebody who's administering a public fund has a very different standard. He's not allowed to prioritize his relatives. He has to be objective in relative terms. But, of course, what objective means in this area remains complicated, because there's still so many considerations that we have to try to factor in. And there's so many variables of real life that there's never a pure objectivity. But there's a different standard that applies when you are giving out those funds that have been contributed by others for the tzibur, and that which is from your own personal pocket.
Jonathan: Everything making sense so far?
Rabbi Feldman: There are a few other considerations that come with this idea of "dei machsoro". The idea that we're supposed to try to fill all of the needs of those who are around us, and we detailed before that they can be pretty expansive. They can go all the way from basic necessities to helping those who may have been very wealthy, and have fallen to a lower status. So to put that responsibility on anyone is going to be quite overwhelming. And it's hard to imagine how exactly that's something anyone can fulfill. And this especially in light of the fact that the average individual has a limitation how much he's supposed to give. That, on the one hand, we have a very wonderful custom called ma'aser, that we encourage giving at least 10% when one is able to, and ideally, really would be more than that - would be closer to 20%. But Talmud would also says, for the average person that is actually a limit also. That the person who's making a normal income, an average kind of income should not give more than 20%, because we're concerned that that will imperil their ability to continue to give, and, in fact, lead to that individual themselves becoming a recipient. Which itself is a fascinating example of the balance between the two considerations. On the one hand, if you want to be godlike, so you want to give away everything. You want to say, "Let me give everything I have, and I'll be completely selfless. I won't hold on to anything," and that will maximize my sense of generosity, which it will do. But at the same time the goal of actually helping people will not be served by that, because you won't maintain your ability to be able to give in the future. And you'll also end up having to then take from the tzedakah funds. So that's not going to overall be much of a contribution to the cause. So because we see these things in balance, so the rabbis actually imposed this limit and said that somebody who's making an average income shouldn't give more than 20%, because that's going to cut in too much to what they need to sustain themselves. And of course there are exceptions under certain circumstances, such as very urgent needs, or somebody who's incredibly wealthy. Somebody who's very, very wealthy could give away 99% of his income and still be richer than everyone else, so wouldn't be bound by that kind of restriction. But under general average circumstances, so that limit reflects the fact that we're balancing these two considerations.
So if that's the case, so then it doesn't make sense to impose on anyone this idea of "dei machsoro" - all of the needs of those who surround you. So here the Rambam, one of the great codifiers of Jewish law, understands that this is not an individual responsibility, but it's an aggregate responsibility. That as a community, we seek to make sure that we are addressing everything collectively. So we do what we can to play our own part in proportion to what we're able to do, and at the same time we also seek to make others contribute, and we also take on the general responsibility of looking to address the needs of the whole community collectively, not only as individuals, but also collectively as a whole.
And the idea that the Torah couples the mandate for tzedakah together with these twin prohibitions, which seemed very evocatively phrased - don't clench your fist, don't harden your heart. Is that just a poetic way of saying, don't ever say no? If so then we're gonna be in trouble, because none of us are able to always say yes. We're always confronted by so many needs and so many causes, some more reliable than others, some more verified than others, so we're never gonna be able to say yes all the time. So if there's really a prohibition never to say no, that seems very daunting. But, on the other hand, there are those who suggest that the language isn't simply poetic, but it's actually literal. That the Torah is not telling us that we're never allowed to say no. Sometimes there are reasons why we have to say no, if we're not sure that the one who's requesting is necessarily a reliable individual, we're not sure that this is the best use of our funds. If we have the list of priorities and there are other priorities that we have to give to. If we are past the limit of what we're capable of giving, and to be able to continue to sustain ourselves as people who can go on giving. There are a number of reasons why this individual who's asking may not necessarily be the appropriate recipient. So there are reasons why you may have to decline a request.
So there are those who suggest that the language the Torah uses is phrased the way it is in order to tell us that not that we're never allowed to decline, but that the declining has to come from some kind of these good reasons, and it doesn't come from a place of a hardened heart or a clenched fist. It doesn't result from one saying, "I don't care about you, and you're not my problem, and charity is not my issue." Quite the opposite. We recognize that charity is the defining attribute of the Jewish people. It is not simply a commandment, but it is a commandment that represents our character and a meta value. But we also want to make sure that we carry that out in a way that accomplishes its goals in the most efficient and effective way possible, and that allows us to continue to be a part of that process and to do the most that we can to refine our character in the image of God. So all of that contributes to the various goals and considerations and calculations that we bring to the table. And it's our hope that we can do that sincerely and effectively, and accomplish what we're asked to as the descendants of Abraham.
Jonathan: That background is phenomenal. I actually wrote down a few notes for myself. You know so much of my job and a lot of the folks on the call - professional advisors - is about building wealth, accumulating wealth, passing it on tax efficiently to the next generation, structuring investment policy statements. But I've alluded to in a few of my articles, I think one of them was in Barron's, was about having a spending policy statement. How do you prioritize your giving in particular? Where do you allocate your funds to kids, etc? And I don't mean to put you on the spot with this. So this is just kind of a curve ball. But if there's something you - if you could get back to me later possibly. Is there an article or a book written in English that may help advisors on the topic of giving philanthropy charitable giving, and some of the topics that you covered, and if you don't know now I'm happy to circulate it later.
Rabbi Feldman: Well, I do know of one book that's currently out of print, and I happen to know that the author was hoping to get it back out again soon.
Jonathan: Okay.
Rabbi Feldman: I can also send you the word files.
Jonathan: Okay, that'd be wonderful. Thank you so much, Rabbi Feldman, that was excellent. Before we continue on and move to Elizabeth, I always want to interject here briefly with the code for accountants and attorneys who are taking this program for credit. Please write this down. The code is E25. Again, E as in echo, the number 2, and the number 5. One final time is E25.
Okay. Now, back to the program. Now that we have some perspective on giving to charity through the lens of Jewish law, let's pivot to Elizabeth to share some of the technical planning aspects of giving to charity. Elizabeth, when you include a charity in your estate plan, do they typically ask the charity for specific language to how they would like their charity listed in the documents?
Elizabeth: Thank you so much. First of all, thank you so much, Jonathan. I'm so happy that I said my Birkat HaTorah this morning because there was a lot of Torah in Rabbi Feldman's talk! And it's not every day that I'm on the panel with a Rosh Yeshiva. So this is really tremendous. What an opportunity! To your question, taking a step back - what are we doing here when we are planning for our clients and our loved ones in their estate plan from a charitable perspective? So there's a lot of different aspects of charitable giving. We give during lifetime. But what we're gonna focus more on now is giving in our estate planning documents in our will or in our trust. And so what we are doing there is, we are potentially naming a charity such as YU or some other charity, that after 120, when we're not here anymore, or maybe perhaps during our lives, which I'll talk about in a few minutes, we want to leave certain assets or funds to that charity.
And so we would include in our will or in our trust a provision that states, you know, when I pass away, I am going to leave a dollar amount or a percentage to a specific charity. And to answer your question, Jonathan, you absolutely will want to run the language that you include in your will or your trust by the charity. And I'm gonna give you an example with something that I'm dealing with right now.
I have a situation where the decedent, a woman passed away, and in her will she left a substantial amount of - she had a substantial estate, and she said, "I'm leaving 52% to the Harvard Medical Alumni Fund Office of Resource Development." Now, sounds very specific. We did not draft this will. This will was drafted many years ago, and this woman, unfortunately, has passed, and now we are having to probate the will on behalf of the executor. And it turns out that there is no such Harvard Medical Alumni Fund Office of Resource Development. And so we're stuck at a little bit of a pickle here. Okay? So we, of course, want to ask the specific entity that we intend to benefit, how they want us to word the name of the charity or the division of that charity.
My husband went to Yeshiva University, and let's say he says in his will something to the effect of, you know, "I want to leave a specific amount to Yeshiva University to their microbiology fund or their microbiology lab for the specific study of mitochondria." If that's a thing - I don't know. The only science I majored in in college was political science. So you know Alan will probably tell us. Well, there is no such fund that exists, so that might leave us with a little bit of a problem.
So what I would say is that when we name a charity, we want to name the specific entity. We want to make sure that the purpose for which we intended it to be used is okay with that charity. We would want to include the name of the charity, the legal name of the entity, its tax identification number, if possible, in the document, the principal address of the charity, and any successor in interest. So, for example, there may be a specific charity that existed at the time that you executed your will, but by the time you pass that charity may not exist anymore, but there may be a successor to it.
So we want to be very, very specific with the name of the charity and the purpose for which we would like it to be used. And in order to do that, I absolutely advise the clients, and sometimes I do this on behalf of my clients, to reach out to the charity, the development person there, and see if that if that still exists, and if there's any additional language that they want us to include.
Jonathan: Alright, and this is a related question. Do your clients inform the charity once they have been listed as a recipient in the client's estate planning documents?
Elizabeth: So I would say that that cuts both ways. Okay. So, as I mentioned before, we want to give the charity a heads up right because we want to get the specific language. Now in terms of notifying the charity as to whether or not they've been included in our estate plan, in many circumstances it makes a ton of sense. Right. You might have a single client, and I will say that you know, of the clients that I include that ask me for - the clients that ask me to add specific language regarding charity, or to have a specific bequest to charity, those are often, not always, but often single people who do not have a spouse or children. That is extraordinarily common, I will say. Because I would say that people who are married and who have children, they think about their family, and that's their primary purpose. Now, that's not to say that those individuals and couples don't also want to leave - sometimes they do. And I think I'll speak about this in a few minutes about times where they want to leave to charity because they're charitable, and they're philanthropic, but also because there are some tax benefits which we'll talk about. But typically, and very often we will see that single individuals leave to a charity. Okay.
Now it's an unfortunate situation, and I'm dealing with this right now. We had this woman. She was a physician. She died in her nineties. She was not married, she had no children. And unfortunately nobody knew she died. Okay. Nobody knew she died. Now she has a substantial estate. I mean worth in the many, many millions of dollars. Now, this is a crazy case. I mean, we actually found her body. We were able to bring her to her final resting place. And in that situation she had left a substantial - which also took us a long, long time to find - she left a substantial amount to charity. And the charities had no idea.
Had the charities known that this particular doctor was leaving something to them, perhaps they would have been a little bit more in touch with her. Perhaps someone would have known that she passed away. And perhaps they would have been able to use those funds for good purposes. Right? That's the whole purpose of charity.
So I would say, for those individuals, it's very important to notify the charity and to let them know. And typically, the charity will check in on them. As I mentioned, it's kind of a double edged sword, right? It cuts both ways. Because sometimes - and this I would never accuse Alan of this, because I know him quite well, and he's such a mensch - but there are other charities where the development people could be a little annoying and you know they might call all the time and say, "Okay, I know you're leaving us money when you die. But could you give us something now?" And you know we've all seen that. And so there are some clients who specifically do not want to notify their charity. But I would say generally speaking, it's a good idea to notify the charity that you are leaving them something in your estate plan.
Jonathan: Right. Is leaving money to charity beneficial from an estate planning perspective? And if it is, how so?
Elizabeth: Okay. So this really gets to the heart of really more of the technical stuff. And I'm gonna try not to be super technical here, because I know we have a wide range of people watching and tuning in today. But it does require some technicality.
We know that when we give charity during our lifetimes, that from an income tax perspective that could be very beneficial. From an income tax perspective, we can qualify for a charitable deduction against our income, right? If we itemize our deductions - meaning not take - if we itemize our deductions, which you have to obviously choose to do and not take a standard deduction, you might be able to offset your income by the charity that you give. So that's from an income tax perspective.
That also works from an estate tax perspective. Now we know that when people die, their estates might be subject to what's called an estate tax, right. And so, but coming back to estate taxes, when the person dies, if their assets are over a certain limitation, their estate might be subject to an estate tax. Now those limitations are very high on the Federal level right now - over 13 million dollars. Right now, assuming you haven't made any taxable gifts during your lifetime, and from a Federal perspective you will - your estate will not be subject to an estate tax, and it's even higher in the case of a couple where we have something called portability, where spouses are able to put their exemptions together.
Now on a state level, we have to be mindful that there might also be a state estate tax on top of the Federal estate tax. So there are 17 states which currently have a state estate tax. New York happens to be one of them. New Jersey does not have a state estate tax. It used to have one. It currently does not. It has an inheritance tax which is related, but entirely different. But New York has a $6.94 million estate tax exemption.
Now people think that that's a very high number, and of course it is. And I'm reminded of this particularly after we just heard Rabbi Feldman speak about people who really are very much in need of tzedakah. But it's not that difficult to reach a $6.94 million threshold or a $7 million threshold in New York when you take a look at your home, life insurance, and maybe your IRA retirement assets. So it might be relatively easy for certain families to reach that amount, and there is no portability. Husbands and wives cannot put their exemptions together in New York unless you do some more advanced planning.
So if your estate exceeds a certain level, your estate will be subject to an estate tax. At the highest rate on the Federal level, it's 40%. New York at the highest rate, it's 16%. If in your estate plan, if in your will or in your trust, you say "I want a specific dollar amount or a specific percentage to go to charity," then your estate will receive a deduction against the gross estate. Alright, just like we have in terms of income taxes, that is also available from an estate tax perspective. So that's fantastic.
Now generally speaking, people who leave money to tzedakah are charitable. They want to benefit a charity. As I mentioned a few minutes ago, they also want the tax benefits of doing that. So they might want to leave a specific amount to charity in order to bring down the tax that's imposed when they die.
There's an interesting provision that some of us include in our estate planning documents, or some clients want. We, you know, in a funny way, referred to as the Santa Clause - I don't know if I'm allowed to mention that on the Yeshiva University lecture - and that is the Santa Clause provision, where we say "I'm not necessarily leaving to charity. However, if my estate reaches a certain amount and my estate would be subject to estate tax, then based on the specific formula, if I instead give some amount to a charity which I name, or charities which I name in my estate, and that can bring my estate down to a level where there will be no estate tax, then I want to do that." And it's a completely formulaic provision that you would include in your will or in your trust.
And oftentimes we see that - now a lot of people have been doing this specifically New Yorkers, because the New York exemption, as I mentioned, is a little under $7 million. Once you reach - once your estate is 105% of the New York exemption, 105% of $6.94 million, we have something called the cliff, which means that your entire estate back to dollar one, back to your very first dollar, would be subject to New York State tax. That differs from the Federal estate tax where you are only taxed - your estate is only taxed for every dollar above the exemption. Right? The Federal exemption is $13.6 million, over $13 million. Your estate would only be taxed for every dollar over the exemption. That is not the way it works in New York. Once you've exceeded 5% above the exemption. So we often see this provision for those of our clients who live in New York because it would be a very big hit from an estate tax perspective once they go over that exemption amount.
Jonathan: Last question for you is, can you speak a little bit about charitable trusts? And when you have seen them be beneficial.
Elizabeth: Absolutely. Before I mention charitable trusts, I want to mention something called a QCD. I don't know if anyone has spoken about that. I think it's something that's super important, a qualified charitable distribution.
That's Alan's territory. So just touch on it slightly.
Jonathan: Is Alan gonna speak about that?
Elizabeth: Yeah, a little briefly.
Jonathan: Oh, okay. So then I'm not gonna speak about it at all, because Alan can do a much better job than I can. Alan has a Harvard degree. It's not as good as Yeshiva University, but I don't know actually, nowadays, maybe a Queens College degree or a YU degree is worth a lot more than that. Right? So. But Alan has that Harvard - just kidding, Alan. It's still worth a lot. Alan will talk about the QCD.
I'm not gonna give it away. But what I will say is that anybody who has reached a certain age who is charitably inclined should consider a QCD. It is so underutilized. And I am giving my full endorsement to a QCD for those who are charitably inclined.
So moving on to charitable trusts. We have charitable trusts. They're wonderful. And these are specifically designed for people who are charitably inclined. But some people use it that are not so charitable. But what I will say is that if you're not charitably inclined, there are other planning techniques we can have to bring down the value of your estate so that less of your estate is subject to an estate or gift tax.
But charitable trusts are fantastic. That's where you fund an amount that will go to charity. Now there's a couple of different types of charitable trusts, and within those couple of different types there are other types of trusts. What we're gonna talk about is a charitable remainder and a charitable lead trust.
The charitable remainder trust is fantastic. That's where you fund but you can continue - you or your children, or some beneficiary, the person who benefits from it can continue to benefit from the trust, but still you can benefit a charity.
With a charitable remainder trust, you fund the trust with a certain amount. And during the lifetime or the term of the trust - and there are specific rules about how long that term should be which we're not going to get into today - during the term of the trust the beneficiary can benefit from, let's call it the income of the trust. Either they're going to benefit from what's called an annuity, which in this case of a charitable remainder annuity trust, a CRAT, or in the case of a CRUT, a charitable remainder unitrust, they will benefit from a specific percentage every year. And at the end of the term of the trust, whatever remains goes to a charity or charities of your choosing.
It's fantastic because it allows you to first of all, get certain income tax deductions which you may be able to use over a period of 5 years if you don't need it in the first year. And it allows you to continue to live off of the income. And it allows you to benefit a charity at the end of the day.
And then we have something called a charitable lead trust, which is very similar but opposite a charitable remainder trust. Which is that you fund a trust and based on a specific amount or percentage, a charity will receive the income during the term of the trust, and then, at the end of the day, your beneficiaries will benefit from what's remaining in the trust. That's the charitable lead trust.
Now we know that there are tremendous estate tax benefits to this, because you can significantly reduce the size of your taxable estate. We talked about that by funding a charitable trust. But there are also income tax benefits to funding a charitable trust. For example, let's say you have highly appreciated assets that if you were to sell, you would incur a huge capital gain. Well instead, and we know that sometimes people give appreciated assets directly to a charity like YU because that allows them to avoid having to pay that capital gains tax that they would have ordinarily had to pay, and the charity because it's a 501(c)(3), because it's a tax exempt organization, the charity will not need to pay income tax on it.
The beauty of doing this within a charitable remainder trust is that you will donate or contribute those highly appreciated assets to a trust. And then the trust can sell them. And it won't be necessarily subject to the tax. Maybe some of it will be subject to the tax in this, in the form of whatever slowly and then in a small way comes back to you. But it will change the nature of the assets.
So, whereas you would not have been able to live off of that highly appreciated asset - perhaps it wasn't giving or throwing off a big dividend - now it's converted potentially into cash or to some other asset that is throwing off income, and through the charitable remainder trust you or the beneficiary is receiving the income, and then, at the end of the term, or at the end of the day, the rest of it goes to charity.
So I would say that charitable trusts are a fantastic planning technique for those of us who are charitably inclined, and for those of us who also want to recognize and realize some substantial tax savings.
Jonathan: Great. Thank you so much, Elizabeth. That was insightful as always. We're gonna end with Alan. Let's move to you. Rabbi Feldman and Elizabeth have set the stage on charitable giving from the perspective of Jewish law and some technical planning ideas. Now let's shift to what you see come up day to day with the work that you do. From your vantage point at Yeshiva University, what are some popular ways you see donors give to the university today?
Alan: Thank you again, Jonathan. Can you hear me okay?
Jonathan: Yeah, perfect.
Alan: Wonderful. It is an honor to be here on this panel with Elizabeth and with Rabbi Feldman, and with you, and I want to thank you again for the opportunity to partner with Parkbridge on today's symposium, and let you know how much I appreciate your commitment to YU, as an alumnus of our business school and as a community leader who recognized the importance of Yeshiva University to our community.
I learned a lot today. Before I address the what and the how that's embedded in your question, I want to take a moment and talk a little bit about the why. Because I think if I've learned nothing else from the Rabbi and Elizabeth, the why should be at the heart of decisions that govern giving to charity. And then the techniques around tell us how to go about doing what we want to do.
This has been a very difficult and a very extraordinary year for the Jewish people all over the world, and especially in Israel. It's also been very challenging to watch the rampant antisemitism on college campuses throughout the United States and Canada.
So with that having been said, I personally have never been prouder to be associated with Yeshiva University. Our president, Rabbi Dr. Ari Berman, has really led with moral clarity since October 7th and relentless conviction. He has a son in the IDF. He took a commission of university presidents to Auschwitz for Yom HaShoah. He bestowed the YU Presidential Medallion upon Senator John Fetterman, and secured a $1 million gift from Patriots owner, Robert Kraft, to help fund transfer students from other elite universities to YU. Rabbi Berman even threw out the first pitch at Sunday's Mets game.
Our students are no less amazing. This past summer, YU ran four Israel programs. Our students worked on farms and rebuilt communities in the Gaza envelope. They interned at high tech companies in Tel Aviv, did medical research at Israel's top universities. And they even traveled from Italy to Israel as they studied archaeology and Jewish history with their professors. So, not surprisingly, our enrollment, both undergraduate and graduate has never been higher. In addition this year, YU launched an accelerated post-baccalaureate nursing program, and next year we're opening a dental school in midtown Manhattan, on a new 160,000 square foot campus. This is what Rabbi Berman means when he says YU is moving history.
To see all this happening at YU is incredible. But I want to talk about today some of the creative ways that advisors such as accountants can partner with YU to move history forward, and some techniques that affluent families can employ to be simultaneously generous and mindful of tax and estate planning considerations.
So it's true that many families choose the straightforward approach of writing a check. It's simple. And as Elizabeth mentioned, it's beneficial from a tax perspective. And while the strategies I want to speak about are a little bit more involved, they are worth considering, depending on the individual's financial tax and estate planning situation.
Elizabeth mentioned briefly the charitable qualified charitable distribution, the QCD, from your IRA. This is really in the realm of the no-brainer. Investors who are 70 and a half years old can donate up to $100,000 a year from their IRA as a QCD. The distribution is made from pretax dollars and can be used to satisfy one's annual required minimum distribution or RMD. Typically one would need to pay ordinary income tax on an RMD. And this strategy is a great way to sidestep the tax liability while benefiting a charity such as YU.
Now, this may not seem like a big deal, especially if you itemize, but remember that IRA distributions are taxable to you and your beneficiaries, meaning that it is not a very tax efficient way of leaving an inheritance through an IRA. Many people have built up substantial IRAs over the course of careers. Elizabeth alluded to the fact that it's not so hard to get to the $7 million threshold. If you have a sizable IRA, then using a QCD annually can be an easy and effective way to move money out of your IRA, help the charities you already intend to support. You can then work with your advisors to find other more tax efficient ways of leaving an inheritance to your kids.
Jonathan, you referred a client a couple of years ago, who has become a loyal donor and a member of our President's Society for exactly these reasons, and we receive a QCD from her every year. Thank you.
YU receives a significant number of qualified charitable distributions from IRAs each year, ranging from a few thousand dollars to the $100,000 maximum. Candidly, there's no easier planning technique than this one. The advisors, the plan administrators, and the charities do all the work. The donors get the recognition and the tax benefit.
Elizabeth also alluded to another effective strategy that we see often is donations of appreciated stock. This could be especially helpful in a year like 2024, where the market has gone up meaningfully in value. When investors have long-held stock positions with large unrealized capital gains, donating these highly appreciated securities directly to charity helps avoid paying the capital gains tax that you would otherwise need to pay when selling the security. It also allows you to minimize a large position which in turn helps you to de-risk your portfolio.
As a fairly sophisticated organization, YU is set up to receive and give donors credit for gifts of appreciated stock as soon as we receive them.
I want to throw in another technique that's a bit more sophisticated, but worth considering if somebody wants to make a stretch gift to an organization like Yeshiva, and that is gifts of life insurance. Several years ago I had a donor who was a very successful physician, who wanted to give YU $1 million. He could certainly have done that in his will, but he didn't want to wait, as he was fairly young, and he was in his peak earnings years.
What did he do? He took out a $1 million permanent life insurance policy. He donated it to YU, making us the owner and the beneficiary of his policy. He then signed a pledge to make a donation to cover the premiums over a period of 10 years, for which he received a tax deduction every year. YU became the owner of a $1 million life insurance policy. We got and the donor became a million dollar donor. It took a little work to get it done, but it was a real win for everyone.
Jonathan: Great. Thank you. Let's move on to one thing that happens often in my own practice. I have many clients who don't give directly to charity. Instead, they use a donor advised fund, also known as DAF, or private foundations. Do you have any experience handling these type of donations for the University?
Alan: Every single day. We see this with increasing frequency. We get a lot of donor advised fund gifts, and we have relationships with many private foundations ranging from modest ones to fully staffed institutional foundations. By quick way of background, donor advised funds, or DAFs as they're known, are accounts where you can deposit assets for donation to charity over time. The donor gets an immediate tax deduction for making the contribution. They can still manage how the funds are invested and distributed to charity. It's simple to set up at an organization locally like the Jewish Communal Fund or Jewish federations around the country, or financial firms like Fidelity.
Donor advised funds can also be very useful if an investor wants to bunch their charitable contributions into a single year. This involves donating several years of contributions in a single year, which is sometimes done for tax planning purposes. Contributions to the DAF will be deductible in the year they are given, but the grants from the DAF can be made at any time. The donor takes the itemized deduction in the year they make the gift, but then they can take the standard deduction in subsequent years, but they can still make grants from the donor advised fund to the charities of their choice.
Private foundations come next. A private foundation is an independent legal entity set up for charitable purposes. The funding generally comes from an individual, a family or corporation, which receives a tax deduction for donations. Starting a private foundation is one way to create a legacy beyond your lifetime. Additionally, the family has full control over grant making, which includes the ability to support a wider array of organizations than a 501(c)(3) public charity, which may not be the case with a donor advised fund. One downside of starting a private foundation is the ongoing cost associated with establishing it. It requires the assistance of advisors, which makes it more cumbersome and involved than simply using a donor advised fund, but for the right threshold of wealth it's definitely worth considering.
Jonathan: The last question for you is, many of the items that you mentioned are more creative ways of giving. What is the most common way you see folks give to Yeshiva University today?
Alan: So all the items that I mentioned we see with some regularity, less on the trust side that Elizabeth spoke to, but we certainly see a fair number of those as well as a big organization. But by far the most common legacy or planned gift that we see is donors leaving YU a bequest in a will or making Yeshiva the beneficiary of an insurance policy or a retirement account.
In fact, bequests make up more than 90% of all planned gifts across the country. It's seamless to update your or your clients' estate planning documents to leave a legacy to an organization like Yeshiva, and these beneficiary designations can be changed at any time. This is a very important conversation for professional advisors to have with their clients, especially because many people can make much more substantial gifts in their estates than they can in their lifetimes.
As Elizabeth said, it's important to make these decisions in conjunction not only with your advisors, but also with the charities, especially to ensure that the language in the wills and the estate planning documents are correct to ensure that the charitable intent of the donor is fulfilled. So if you or your clients do decide to leave a bequest to YU or any other organization, please let the charity know during the planning process, so the charity can work with you, your family, your attorneys to ensure that the legacy you leave is the one that you envision, and in the case of YU, so that we can recognize you as a member of the Rabbi Dr. Norman Lamm Legacy Society.
I'll leave you with a quick story about the power of a bequest. In 2012 I received a letter from an attorney in Philadelphia that came with a check to Yeshiva for a million and a half dollars. The letter indicated that there would be another $1.5 million coming from the estate of Herb and Naomi Danberg, a Jewish couple in Philadelphia, who died without children.
What was remarkable was that the Danbergs had no prior connection to Yeshiva. Herb and Naomi were not orthodox. They never attended YU, nor had they ever donated anything to YU. But Herb Danberg was a very successful investigative reporter who had an Emmy Award-winning TV show, and they had a very successful business career. In subsequent conversations with his family, I learned that he did not want to give money to his alma maters, Harvard and Penn. Rather he wanted to establish his legacy at a university that shared his Jewish values, especially his passionate love for Israel.
Herb was an investigative reporter. He did his research. He decided that Yeshiva University was aligned with his values in a way that these other elite universities were not. This was in 2012. I'm very proud to say that we now have an endowed Danberg chair at YU, and they gave me my very own Emmy Award when I went to visit them in Philadelphia.
Jonathan: That's pretty cool.
Alan: It's up in the attic. I'll show you anytime. One more parting thought. Since many of these strategies are a bit out of the box, it's important to consult your team of tax, legal and financial advisors to determine an approach that makes sense for you, and if I can help in any way, or if you want any more information about anything that I've shared, or Yeshiva University, please be in touch. Thank you very much.
Jonathan: Great. Thank you so much, Alan and Rabbi Feldman. That was a very informative session, a lot of different topics, and a lot to chew on. If anyone has any specific questions or any other issues they'd like to discuss, you can feel free to reach out to the panelists where appropriate, and I'm going to be sure, as always, to include all their contact information in the follow-up email to this program.
And, by the way, if you'd like to find out more about Yeshiva University's role as the world's flagship