Introduction to Planned Giving
There are so many ways to create a legacy and help sustain St. Gabriel's and its mission. Thispage is designed to provide a brief overview of some of the more common types of planned giving members may wish to discuss with their legal and financial advisors. Thoughtful gift planning can enhance the value of your estate, provide meaningful tax benefits, and support the mission of St. Gabriel's (find.feed.fill.). If you have questions about the types of assets that are consistent with St. Gabriel's planned giving options, please feel free to contact Fr. Bill.
Generally speaking, planned gifts include the following areas:
Click around and visit some of these areas for a broad-based introduction to their structure. It can be helpful to be familiar with some of the more common terms before meeting with a legal or financial advisor.
Please keep in mind that tax laws change, personal situations change, and market values of assets fluctuate. Charitable Gift Planning is a technical arena and should only be undertaken with the advice of appropriate legal and tax counsel as it relates to your specific situation.
Life Income Gifts
A life income gift is an arrangement whereby assets are contributed to the church while still providing an income for the donor's life and the lives of other named beneficiaries. The income provided to the donor may be for a fixed percentage of the assets or it may be a fixed amount for a specified time period. If the donor chooses the fixed number of years option, a Charitable Remained Annuity Trust (CRAT) is established. If the donor selects an option based on their life expectancy and the lives of other beneficiaries, a Charitable Remainder Unit Trust (CRUT) would be established. In both cases, an irrevocable trust is created, a trustee is designated, and assets are contributed to the trust. The trustee then invests the assets appropriately and pays an amount to the beneficiary(ies) of the trust (you, your spouse, your children, etc.). Upon the death of the last named income beneficiary, the trust dissolves and the remaining assets are distributed to the charitable beneficiary (church). CRAT's and CRUT's are similar with the exception of the method of determining the payout amount. A CRAT pays a fixed amount for a specified term or for as long as the assets can sustain the payout. A CRUT pays a percentage of the trust's assets each year to the named trust beneficiary(ies). The amount paid will vary with the performance of the trust's investment portfolio.
One of the best benefits of the use of CRAT's and CRUT's is the capital gain on appreciated assets donated to the trust is avoided from a tax perspective. The trustee can also diversify the asset portfolio without triggering a capital gain event under current law. Those same results would not be possible outside of the trust instrument.
Charitable Lead Trusts
Charitable Lead Trusts are instruments that allow an immediate gift to be made to the church while ultimately transferring assets to your heirs. These trusts are typically used by larger estates seeking to minimize taxes and generally, there is no current need to support heirs in the foreseeable future. The goal is to provide heirs with a substantial inheritance after the donor's death rather than to provide an income during the donor's life like a CRAT or a CRUT would provide. When the assets under the Charitable Lead Trust eventually pass upon the donor's death to their heirs, gift and estate taxes are typically significantly lower.
Generally, a Charitable Lead Trust is established and assets are transferred during the donor's life to a trust for the benefit of the church. Management of trust assets may be handled by the charity, the donor, a financial institution, or an individual of the donor's choice. Sometimes a bank trust department is used. The trust then provides either a fixed amount for a fixed period to the church or it pays a variable amount based on a percentage of the assets to the church for a period of time. When the trust is established, the donor is entitled to receive a charitable tax deduction for the present value of the stream of income to be provided to the church over the duration of the trust's existence. Essentially, a deduction is received up front rather than having to wait until income payments are made to the church. When the trust period terminates, the remaining principal transfers to the donor's named beneficiaries. Upon transfer to the named beneficiaries, usually the heirs, little or no estate and gift tax will be assessed on the principal.
"I tell you the truth, whatsoever you did for even the least of my people here, you also did for me." ~Matthew 25:40
Gifts of Stock and Other Assets
Gifts of stock, mutual funds, or real estate are a tax-conscious way to create a legacy to the church. The gift of an appreciated asset helps you and the church. While the church receives a needed financial benefit, the donor may be able to avoid capital gains tax on the appreciated asset and also possibly reduce federal income tax burdens.
Gifts of tangible personal property allow a donor to obtain a deduction as a result of the gift; however, the deduction is based on whether or not the item contributed by the donor is related to the church mission. If the gift made is related to our mission, the donor will receive a charitable deduction for income tax purposes for the full fair-market value of the property donated. If the gift donated is not related to the church's mission, the donor will only receive a deduction for the amount they originally paid for the item (their cost basis).
Gifts of Life Insurance, Annuities, or Retirement Plans
The church accepts gifts of life insurance proceeds. Proceeds of a life insurance policy are paid to the church when we are named the beneficiary or contingent beneficiary of a life insurance policy (or a portion thereof). The church can also be named beneficiary of annuity policies and retirement plan assets. Donors have the freedom at any time to change their mind and their beneficiaries. The same flexibility and freedom to change their mind is also available under bequests in their Will. Other instruments may not afford the same flexibility depending on the structure chosen to convey the gift to the church.
Gifts of qualified retirement plan assets can provide quite a few tax benefits. First, the donation of retirement plan assets to a qualified non-profit organization like a church, reduces the donor's taxable estate. Second, when contributions were made to a donor's retirement plan, they likely did not pay income tax on the amounts contributed to their plan. When a donor takes income out of their retirement plan in the future, the amounts distributed will be taxable as ordinary income when received. If the church receives a retirement plan asset, as a non-profit organization, it does not pay taxes on retirement plan assets it receives. Thus, the donor benefits from a charitable deduction and the ability to provide the full asset value to the church as a non-profit organization.
Gifts Via a Bequest in Your Will
One of the simplest ways to provide a financial legacy to the church is through a bequest in a Will or Revocable Living Trust. Upon the donor's death, the items specified will pass ownership to the church and the donor's estate will take a charitable deduction for the amount of the bequest. At the time ownership passes to the church, the amount of the bequest reduces potential estate taxes that may be due in the absence of the gift.