Making a Gift to a Church
How to Make a Planned Gift
Wills
Life Income Gifts
Charitable Remainder Trust
Charitable Lead Trust
Life Insurance
Retirement Plans
Gifts made through your Last Will and Testament
A gift through your will (a bequest) can provide significant support to the Church. It also provides the following benefits: (a) the opportunity to make a major gift while preserving assets during life; (b) reduction in federal estate taxes; (c) the opportunity to designate the gift to a specific program at your Church. Remember, your will only passes probate assets. It does not transfer assets that designate a beneficiary, such as life insurance. These are called "non-probate assets."
A gift through your Will can be made in the following ways:
- Specific Bequest: Your Church receives a specific dollar amount, a specific piece of property, or a stated percentage of the estate. This is one of the most popular forms of bequests.
- Residuary Bequest: The Church will receive all or a stated percentage of an estate after distribution of specific bequests and payment of debts, taxes, and expenses.
- Contingent Bequest: The Church will receive part or all of the estate under certain specified circumstances.
- Trust Established Under a Will: A trust may be established that provides for both the Church and other beneficiaries.
Life Income Gifts A donor may make a gift to the Church and receive direct financial benefits. The benefits include an income for life to the donor and/or the donor's spouse and a charitable income tax deduction, in addition to the good feeling that comes from making a gift.
There are several forms of the gifts. They can provide you with an immediate income of a variable or fixed rate, or you may want a gift that will give you a fixed rate of return some time in the future. This last form is especially useful as a retirement planning device. In determining which life income gift is most appropriate, the following questions should be answered:
- What is the age of the donor and/or the donor's spouse?
- Will the gift be based on one or two beneficiaries?
- Will the gift be funded with cash, appreciated securities, or real estate?
Benefits of Life Income Gifts:
- Income paid to the donor for lifetime and/or spouse's lifetime
- A charitable income tax deduction
- Possible avoidance of capital gains taxes on appreciated property
- A higher yield than from current investments
- A reduction in federal estate taxes
Charitable Remainder Trust A charitable remainder trust provides a donor with a lifetime income and a charitable income tax deduction. The donor selects the payout rate, usually between 5% and 7%. The higher the payout rate, the lower the charitable income tax deduction. This gives the donor, and perhaps the donor's spouse, an income every year for life. If the donor funds the trust with appreciated securities, the donor will avoid capital gains taxes.
Donors may choose from two types of charitable remainder trusts: the annuity trust and the unitrust. The annuity trust pays a fixed, guaranteed dollar amount regardless of the trust's investment performance. The unitrust pays the donor a predetermined percentage of the fair market value of the trust's assets as revalued annually.
Benefits:
- Avoid capital gains taxes on the transfer of appreciated property
- Increase dividends ranging from 2% to 4% to dividends as much as 6% or more
- Obtain a charitable income tax deduction
- Provide income to one or two beneficiaries for life
- Establish an endowed fund at your Church through the trust
Charitable Lead Trusts A lead trust is the opposite of a charitable remainder trust. The "lead" income is paid first to your Church, and after a number of years (based on a term or a lifetime) the remainder is returned either to the grantor (a grantor lead trust) or to someone other than the grantor, such as the grantor's beneficiaries (a non-grantor lead trust).
It is an extremely tax efficient way of passing assets to future generations while, at the same time, making a large donation to the church. The church is given a stream of dependable annual income to carry out its mission. The donor may be able to pass the asset to heirs at a very low tax cost.
Benefits:
- Philanthropic satisfaction
- Principal returns to donor
- Tax deduction taken in the year of the gift
- Church receives outright gift for term of trust
- Church can plan for longer range.
Life Insurance The need for insurance coverage usually lessens as we age. by that time, insurance has served its original purpose of protecting our families at it can be used for other purposes.
There are two types of insurance: Term insurance protects us for a stated term, usually one year. Whole life buys the policyholder a death benefit and will also pay the holder the cash value of the policy if he/she terminates the policy before death.
A life insurance policy can be given in an outright gift. The donor gives-up all rights of ownership in the policy and thereby receives an income tax deduction.
A donor can also name a charity as a total or partial beneficiary of the policy, continue to maintain the policy, and receive a charitable tax deduction for premiums he or she makes to keep the policy in force. You have to change the beneficiary form.
Here are the alternatives in making a gift of life insurance:
- Make a gift of an existing life insurance policy.
- Establish a new policy and name your Church as the owner of the policy.
- Use life insurance to replace the value of gifts to the Church.
- Change your beneficiary to give a proportion to the church.
Retirement Plans These plans include IRAs, Section 401(k) and 403(b) Plans, Qualified Pension Plans, and Qualified Profit-Sharing Plans. You can transfer all or part of these assets to a charity. These options include an outright gift, designation of a beneficiary, bequest, and transfer to a charitable remainder trust. The last three options are the most frequently used. An outright gift subjects the funds to certain statutory limitations of charitable tax deductions.
Designation of beneficiary. A donor can designate a charity to receive all or a stated percentage of a retirement account upon death. The donor receives an estate tax charitable deduction. Please note: As regards some retirement plans, your spouse must also sign a statement agreeing to include the church as a beneficiary.
Bequest. In the absence of a beneficiary designation, you can transfer your retirement accounts upon your death through your will. A bequest of a retirement account should be a specific bequest to avoid income taxation of the funds.
Trust. If the plan permits, a donor may transfer the account to a charitable remainder trust. The plan donor will be taxed only on the funds received by him/her. At death, the balance will be paid to a charitable remainder trust, which can pay income to one or more beneficiaries for life, with the remainder going to the charity upon the death of the last beneficiary.
