Charitable Giving in a Time of Uncertainty

UBS Financial Services Inc.

The Brewster Wealth Management Group

In the current economic environment, smart giving requires the same carefully constructed, strategic thinking that we apply to the rest of your finances. Even during the recession, almost half of all donors made gifts at the same level as in years past, with 26% of donors actually increasing their gift levels.* We need to be sure your philanthropic efforts are aligned with your other financial strategies so that charitable aspirations aren’t fulfilled at the expense of important objectives, and vice versa.

Most people practice a form of “checkbook philanthropy,” which involves simply writing checks regularly to a particular organization, or randomly in response to requests from multiple organizations and individuals. While donating cash is simple and straightforward, it doesn’t always offer optimal tax advantages. Donating appreciated securities—instead of selling the securities first, paying capital gains tax and then contributing the proceeds— may be a better alternative. If the charity sells the stock after it receives the donation, as a tax-exempt organization, it will not pay tax on the capital gains triggered by the sale.

Charitable giving vehicles

Besides what to donate—cash, securities or tangible assets like cars and art— another major issue to consider is how. You may choose to give to charity outright or donate through a charitable vehicle, such as a donor advised fund, private family foundation, charitable trust, gift annuity or pooled income fund.

All offer various tax benefits but differ in their structure and administrative requirements. Three of the most common are:

• Donor advised funds. The fastest growing form of philanthropy, donor advised funds offer a simple and organized way to give. Donors make tax deductible contributions of cash or securities to the fund, and can direct the fund to make grants to charities of their choice. Contributions are invested and professionally managed, giving donors the potential to have their contributions grow and make larger grants over time.

• Charitable trusts. Charitable trusts offer an immediate income tax deduction and can be structured to provide an income stream to either the donor or the charity. Charitable Remainder Trusts allow the donor to transfer assets to the trust and receive payments for a certain term, with the charity receiving any remaining assets at the end of that term. Charitable Lead

Trusts pay the income stream to the charity, with any remaining assets in the trust passing to the donor’s heirs free of gift and estate taxes.

• Private foundations. Private foundations are often established with larger donations by an individual or family to further a charitable purpose.

They offer donors control over grants and a way to encourage heirs to get involved in philanthropy. Private foundations, however, can have high administrative costs, offer a more limited income tax deduction, and require an annual distribution to charity of 5% of foundation assets. If you’d consider yourself a checkbook philanthropist or you just want to know how to get more out of your charitable giving, let’s talk about ways to make your philanthropy more organized and effective. We can discuss:

• Which organizations you want to support

• How to track and organize your gifts

• If you want to direct how funds should be used

• Ways to encourage the next generation to become philanthropists in their own right

I look forward to talking with you about how we can integrate charitable giving with your overall wealth management plan. If you have any questions in the meantime, please don’t hesitate to contact me.

---Team---

John G. Brewster

Senior Vice President - Wealth Management

Senior Portfolio Manager - Portfolio Management Program

john.g.brewster@ubs.com

Randall V. Brewster

Financial Advisor

Account Vice President

Portfolio Manager - Portfolio Management Program

randall.brewster@ubs.com

Susan McGeachen

Senior Registered Client Service Associate

susan.mcgeachen@ubs.com

61 South Paramus Road

Mack Center IV, 2nd Floor

Paramus, NJ 07652-1236

201-441-3496 800-698-2707

ubs.com/team/brewsterfinancialgr

---Disclaimer---

*The 2008 Study of High Net Worth Philanthropy, “Issues Driving Charitable Activities Among Affluent Households,” Center on Philanthropy at Indiana University, Sponsored by Bank of America and Merrill Lynch, March 2009.

As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at ubs.com/workingwithus.

UBS Financial Services Inc., its affiliates, and its employees are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

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