Planned giving is the process of identifying sources of contributions in the present that will not be allocated to an organization until a future date. There are many options for planned gifts and some require the assistance of an attorney or financial advisor.
A bequest is a written statement in a person’s will directing that specific assets, a specific amount, or a percentage of the estate, will be transferred to a specific charity at the donor’s death. Bequests are the backbone of all planned giving programs and historically are the most popular planned giving method. Donors like bequests because they are easy to understand and do not require the donor to part with assets during life.
Retirement Plans and IRAs
For many individuals, retirement plan assets represent the single largest asset in their portfolios. Like the bequest, naming an organization as the beneficiary of a retirement plan or IRA is easy to understand and easy to implement. This gifting opportunity involves obtaining a beneficiary designation form from the retirement plan administrator and naming a charity as the entire, or partial, beneficiary of the retirement plan assets upon the owner’s death. A donor may achieve significant income and estate tax savings by naming a charity as the beneficiary of the retirement plan assets - sometimes the tax savings is as much as 75 cents on the dollar.
Naming a charity as the beneficiary of a life insurance policy may be attractive because it affords donors the opportunity to make a gift at a sizeable face value for a minimal outlay of cash. Donors may gift an existing policy, either fully paid or partially paid, or a new policy. Similar to a retirement plan designation, the proposed gift to charity is accomplished by naming the charity as a beneficiary of the policy on the beneficiary designation form. Upon the donor’s death, the charity will receive all, or a portion of, the proceeds from the policy. The donor is entitled to a charitable income tax deduction equal to the cash surrender value of the property and any future premiums paid only if the charity is named as the owner and beneficiary of the policy.
Charitable Gift Annuity
A charitable gift annuity is a simple contract between the donor and the charity whereby the donor makes an irrevocable transfer of cash or property to the charity. In return for the contributed property, the charity agrees to pay a fixed amount of money each year for the lifetime of one or two individuals. The payout rate offered by a charity will depend on the number of annuitants and their ages. The annuitants have the option to defer receiving their annuity payments until some future date, provided that this decision is made at the time the contract is entered into.
Charitable Remainder Trust
A charitable remainder trust is an irrevocable trust in which the donor transfers cash or property to a trustee and in return, the donor or other individuals named by the donor as income beneficiaries receive income from the trust for life or a specified term of years not to exceed twenty years. When the trust terminates, the corpus is distributed to the charities named as the charitable remainder beneficiaries.
Charitable Lead Trust
A charitable lead trust is a trust arrangement that pays current annual income to the nonprofit organization for a specified period of years, with the trust principal reverting to the donor or the donor’s family when the trust ends. The annual income payment by the trust is similar to an outright gift of cash. The charity is free to use the cash as soon as it is received, subject, of course, to any restrictions placed on the gift by the donor. The charitable lead trust is probably the most sophisticated of all the planned giving instruments, so it is advisable to seek the assistance of an experienced charitable estate planner before entering into this type of arrangement.
Contact Deaconess Foundation
to discuss a giving option that works best for you.