In last month’s newsletter, we began talking about what specific gifts people can make – to their church directly, to an endowment fund, or for another designated purpose. We talked about the simplest gifts – gifts of cash, gifts of securities and gifts of real estate.
Today, we begin to discuss more complex gifts. These are not generally immediate gifts, but they can be transformative in nature for the beneficiary.
The first is Bequests. This is a designation in one’s will or estate plan that directs certain assets to a specific beneficiary. The assets can be cash, stock, a business interest, real estate or other personal property included in the estate of the donor. These transfer at the time of death to the beneficiary. Importantly, bequests to 501.c.3 organizations are exempt from federal estate taxes.
Arrangements for the transfer of these assets should be discussed in advance with the beneficiary and the attorney preparing the will or estate plan. As we discussed last month, gifts to a church or endowment fund need to be approved for acceptance, generally by a Gift Acceptance Committee. To avoid problems after the donor is no longer available to participate in the discussion and decision-making, these gifts should be discussed in advance.
Another way of making a bequest is to simply add a statement in a will or estate plan that indicates that the donor wants a certain percentage of their estate to be given to a particular beneficiary such as a church. It is becoming popular for people to include a Golden Tithe in their will or estate plan, i.e. a simple statement that says: “I want 10% of my estate to go to XYZ Church.” Generally, this is done in conjunction with a previously discussed and documented plan for use of the funds via an endowment or other designated fund. The executor for the estate will calculate the total value of the estate and the resulting bequest to the church. He or she will then utilize cash or liquidated values from the estate to fulfill the bequest. What an outstanding way to make our last gift to our church our best gift!
Life Insurance is another popular way to make a gift. Your life insurance agent or company can remind you of the current beneficiary(s) of your policy. Simply adding your church as a beneficiary and indicating the percentage you would like it to receive will accomplish your objective. Again, this should be done in conjunction with a previously discussed and documented plan for use of the funds.
Retirement Assets such as IRA’s, 401.k’s, SEP’s, etc. make excellent gifts for multiple reasons. First, a gift directly from these highly taxed plans avoids federal income tax on the holding. Second, it reduces the base for federal estate tax calculations. This leaves more inheritance for family and other beneficiaries. Your church can be named as a beneficiary of all or a portion of the funds in these accounts. Again, this should be done in conjunction with a previously discussed and documented plan for use of the funds.
Suppose you would like to give your residence, vacation home, farm or other real estate to your church, but you would like to continue to live there or use the property until your death. A Retained Estate can be arranged to do just that. The deed of ownership is signed over to the church with a provision that you be allowed to continue to reside or have use of the property. Generally, it is also agreed that you will continue to maintain the property in good condition, pay all taxes, utility bills, etc. What a wonderful way to be assured of what will happen to that property following your death!
Lots more to think about. Next month – Remainder trusts, gift annuities and lead trusts. Oh boy!!