Ways to Give
|Wills and Bequests||Gifts of Appreciated Securities|
|Bargain Sales||Charitable Remainder Trusts|
|Charitable Lead Trusts||Gifts of Life Insurance|
|Gifts of Real Estate||Gifts of Retirement Assets|
Wills and Bequests
A bequest is a gift of property or assets to a beneficiary as defined in a will. There can be long-term tax benefits because charitable bequests can reduce estate taxes. In addition, there are the emotional rewards of knowing what a charitable gift means to the charity and how it can benefit society. There can be other tax benefits as well if the bequest involves appreciated assets.
Specific language (see bequest information) is used to effect a bequest. The examples provided here are for general information - please consult your attorney to make sure your wishes are properly carried out. There is some additional information available about the benefits of utilizing a charitable bequest and how bequests enable you to keep control of your assets.
A Living Trust is a trust set up to operate during the life (and can operate after the death) of the one setting up the trust. It can be revocable, or, in other words, you can change your mind and have some or all of the trust property returned to you during your life. An irrevocable trust cannot be changed except in certain legal circumstances (fraud, unlawful agreements, merger of interests, decision of the Court). Gifts may be made through a Living Trust upon the death of the trustor. See Living Trust for more information.
Dr Ida of Belgrade University Children's Hospital, Serbia, sorts through medical supplies flown in by Ken Behring (on left) of Danville, California
The gift of an appreciated asset, often common stock or mutual fund shares, is a valuable way to make a contribution to a charitable organization and receive tax benefits based on the value of the asset(s). Appreciated assets have a higher market value than their basis or tax purpose value (in most cases, their cost). Such assets would, if sold by an individual or non-charitable organization at a price higher than their basis, potentially generate taxable capital gains (either long-term or short-term depending on the holding period).
The donor receives a charitable tax deduction based on the current market value of the gift and avoids tax on any capital gains. The charitable recipient sells the asset, realizes the full market value, and as a nonprofit does not have to pay tax on any capital gains.
While the gift of appreciated assets often involves stock, other marketable assets, such as land, antiques, and real estate, can be utilized as potential gifts with the possibility of valuable tax benefits. However, these other assets are reviewed on a case-by-case basis. For more information about gifts of appreciated assets, please contact us so we can respond to your specific needs.
A bargain sale occurs when a donor sells property to Macedonian Outreach for less than the property’s fair market value. The amount of fair market value over the sales price is the donor’s charitable contribution, which may be reduced by allocation of tax basis and reduction rules relating to unrealized gain. Almost any type of asset may be sold in a bargain sale, depending on the cash available for purchase and the suitability of the asset.
What are the advantages? The charitable contribution portion qualifies for income tax deduction. It may be carried forward for five years if not fully usable in year of gift and it allows the donor to receive some cash sales proceeds while making a charitable gift. A bargain sale may avoid capital gain tax liability on highly appreciated property.
Charitable Remainder Trust
A Charitable Remainder Trust is established for the life of the donor (also trustor or grantor) and/or for the life of any beneficiary(-ies) and is irrevocable. While there are certain changes that may be made, once the trust is established, it cannot be revoked. If it is desired, the income period of the trust can be established for a specified period of time not to exceed twenty years. The twenty-year maximum does not apply if the trust life is based on the life expectancy of the income beneficiary(-ies).
A new believer receives baptism near the Adriatic shores of Albania. Albania was under strict communist rule for 50 years and was the only European country to declare atheism as its religion. It is God's miracle that the doors have now opened for the Word of God to come in and have many receive Him as their Savior and Lord.
There are two different types of charitable remainder trusts.
A charitable remainder unitrust (see example) is a popular way to achieve tax benefits as well as a fixed annual percentage on the value of the assets in the trust. The assets are revalued annually and, if the trust value changes, the payment to the beneficiary(ies) changes.
A charitable remainder annuity trust is set up to pay a fixed rate of return based on the initial valuation at the time the property is placed in the trust. The trust assets are never revalued.
Charitable Remainder Trusts provide a good degree of flexibility that is valuable in charitable gift planning. For example, a variation on remainder trusts can be an effective way to make gifts of real estate.
Charitable Lead Trusts
A charitable lead trust is often called the reverse of a charitable remainder trust. During the term or life of the charitable lead trust, an annuity or unitrust income interest is distributed each year to the designated charitable beneficiary and the assets are eventually transferred to the trustor's or grantor's designated non-charitable beneficiary(ies).
The Charitable Lead Trust (CLT) is a powerful way to make a future transfer of assets to your heirs at a significantly reduced gift and estate tax cost, while also providing Macedonian Outreach with income. During a specified number of years, the lives of one or more individuals, or a combination of the two, a contribution is paid to Macedonian Outreach. A lead trust may be structured to provide a fixed dollar contribution annually (CLAT) or a fixed percentage contribution (CLUT). At the end of the trust term, the assets pass to the beneficiaries the donor's name. The donors choose the trustee.
In a village in Central Bulgaria, a Roma (Gypsy) girl is praying to receive Jesus as her Savior. Today, Bulgaria has an approximate population of 8 ˝ million; among them one million Turks and ˝ million Romi (Gypsies). Thousands of these prior Muslims have given their lives to the Lord Jesus Christ.
You can fund a charitable lead trust with cash, publicly traded securities, closely-held stock, income-producing real estate, partnership interests, or a combination of the above. You can establish a CLT during your lifetime, or as a testamentary trust through your will.
There are two basic types of Lead Trusts: Non-Grantor and Grantor.
Donors establishing a CLT should be advised by an attorney who is experienced in the area of charitable trusts and estate planning. Please contact us by phone or e-mail so that we can assist you.
Gifts of Real Estate
Depending on the circumstances that are involved, gifts of real estate can be an effective means of planning a gift. Much of the individual wealth in America is invested in real estate. While the first thought often is a home or farm, real estate also can involve a vacation or second home, an apartment or commercial building, a shopping center, or undeveloped land.
Often our real estate holdings, be it our house, a second home or investment property, are a significant part of our net worth. Gifts of real estate, therefore, can enable us to make significant contributions. Each piece of property and its unique circumstances need to be reviewed to determine the suitability of the property as a gift. Generally speaking, a rule of thumb is that an acceptable piece of property is one that can be readily sold.
There are many ways to donate property. It can be an outright gift, a retained life estate, or placed in a trust . It may also be a 'bargain sale,' which is a part sale and part donation arranged between the donor and Macedonian Outreach. A person holding property that is not perceived as readily marketable and who wants an immediate cash return may use a bargain sale. Or the property may be mortgaged and the arranged sale/gift allows the donor to pay off the mortgage with the proceeds from the sale.
In any case, while we discuss some generalities here about donating real estate, if you are considering such a gift to Macedonian Outreach, please contact us. There can be significant benefits for you and Macedonian Outreach.
Our Macedonian Outreach Board member is comforting a bedridden patient in the Petrovo Orphanage for children with special needs. Dozens of the children there, as well as in all the Balkan countries, go unreached unless we help.
As with all matters concerning estate planning, please consult your estate and tax specialists.
Gifts of Retirement Assets
Contributions to retirement plans can provide an excellent opportunity for growth, as they grow tax-free, meaning that the growth or earnings are not taxed annually but can continue to grow pre-tax. The earnings are taxed when they are withdrawn, but this has allowed more dollars to be invested for more growth. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.
However, careful planning concerning the withdrawals from retirement funds needs to be done. Not only is there a potential income tax burden, but if there is a balance in your retirement account at your death, there may be estate taxes as well. Estimates are that taxes could eat up as much as 75-80% of retirement assets under certain circumstances.
Using qualified retirement plan funds is an excellent source of assets to fund bequests. By designating The Macedonian Outreach as a beneficiary (it can be a contingent beneficiary after the death of a spouse - see sample bequest language), funds pass to Macedonian Outreach free of taxes. It is possible to set up the charitable beneficiary as the recipient of the entire remaining funds in the account or establish a percentage to fund the bequest.
Please note - the designation of Macedonian Outreach as a beneficiary of retirement fund assets cannot be simply written in your will or trust. The Macedonian Outreach must be designated as a beneficiary of the retirement plan.