Planned Giving

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Planned giving: Making the most of your charitable giving.

The term “planned giving” refers to charitable gifts that require some planning before they are made. Planned gifts can provide valuable tax benefits and/or income for life. Whether a donor uses cash or other assets, the benefits of funding a planned gift can make this type of charitable giving very attractive to both the donor and charity. Potential benefits of planned gifts:

  • Increase current income for the donor or others
  • Reduce the donor’s income tax
  • Avoid capital gains tax
  • Pass assets to family at a reduced tax cost
  • Make significant donations to charity

With the assistance of a well-informed development officer and/or financial advisor, anyone can craft a planned gift to meet his or her charitable and financial goals. Planned gifts include bequests, trusts, and contracts between a donor and a charity.

Types of planned gifts:

Bequest – When a donor decides to leave assets to charity in his or her will, he or she is making a bequest. The donor’s estate will receive a charitable estate tax deduction at his or her death, when the gift is made to charity.

Charitable Gift Annuity – A Charitable Gift Annuity is an agreement between an individual/couple and a qualified charitable organization. The individual or couple transfers assets to the charity and, in turn, receives fixed payments for the remainder of their lives, guaranteed by the full worth of the charity, usually at a greater return than current investments.

Charitable Remainder Trust – This trust makes payments, either a fixed amount (annuity trust) or a percentage of trust principal (unitrust), to whomever the donor chooses to receive income. The donor may claim a charitable income tax deduction and may not have to pay any capital gains tax if the gift is of appreciated property. At the end of the trust term, the charity receives whatever amount is left in the trust. Charitable remainder unitrusts provide some flexibility in the distribution of income, and thus can be helpful in retirement planning

Charitable Lead Trust – This trust makes payments, either a fixed amount (annuity trust) or a percentage of trust principal (unitrust), to charity during its term. At the end of the trust term, the principal can either go back to the donor (a grantor lead trust) or to heirs named by the donor (a non-grantor lead trust). The donor may claim a charitable income tax deduction for funding a grantor lead trust or a charitable gift tax deduction for funding a non-grantor lead trust. Since lead trusts are typically used to pass assets to heirs, non-grantor lead trusts are far more common than grantor lead trusts.

Retained Life Estate – A donor may make a gift of his or her personal residence to charity and retain the right to live there for the remainder of his or her life. The donor receives an immediate income tax deduction for the gift. At the donor’s death, the charity can use or sell the property.

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