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Exploring the Benefits of Planned Gifts

By Maria Mas Blet, CTFA, Senior Vice President and Philanthropic Consultant, Wachovia Nonprofit and Philanthropic Services

tax law restrictions). The deductible amount is the pre- sent value of the charity’s remainder interest in the trust.

Charitable Lead Trusts

For many individuals, support- ing the work of a favorite charity has become second nature. When a charity asks for help, they think nothing of writing a check and sending it off. In fact, for many organizations, contri- butions from individuals are typically the greatest sources of funding.

While you may be particularly passionate about the work of one or more charitable organizations, you may also feel that you are currently limited in the amount of financial support you can offer. You may worry about outliving your resources and have con- cerns that a large charitable donation might impact your future financial security. Or you may be unwilling to do anything that could reduce the size of the estate you hope to pass on to your spouse or heirs.

These are legitimate concerns. However, charitable giving is not just about outright gifts. There are other giving options that can allow you to assist your favorite charity without compromising your financial security. These options are known as planned gifts, and they include a variety of gift assets ranging from cash and marketable securities to a family home or other real estate. Other options include closely held business assets, mineral rights and intellectual property.

Whether you are concerned about lifetime income, the continued beneficial use of a property or providing for family members, a planned gift may be the solution you need. Here is a brief overview of several planned gift options that may be of interest to you.

Charitable Remainder Trusts

A charitable remainder trust (CRT) gives you or another noncharitable beneficiary the opportunity to receive an income from the assets you have donated. When you establish the trust, you designate yourself or another person as the income beneficiary for life or for a specific time period of up to 20 years. At the end of that period, your designated charity will receive the remaining trust assets.

Even though the charity will not receive your gift until some time in the future, your donation is tax deduc- tible in the year the trust is funded (subject to general

If you would like to benefit a charity and have little immediate need for additional income, a chari- table lead trust may be appropriate. You name a charity as the income beneficiary of your trust. The charity receives annual distributions during the term of the trust. At the end of the trust term, the remaining trust property returns to you or passes to someone you have designated (as the trust’s beneficiaries) free of additional gift tax.

Charitable Gift Annuities

You can make an irrevocable gift of cash or secu- rities to a charity, which, in turn, promises to make fixed payments to you (or another beneficiary) for life. This approach is known as a charitable gift annuity. The annuity amount that the charity pays you depends on various factors, including the value of your contribution and your age at the time you make the gift. Once the annuity rate has been set, it remains fixed for your life. You not only receive an income stream for life, but you also receive an income-tax deduction based on the actuarial value of the charitable gift.

Gifts of Life Insurance

You can also support a charity by making a gift of life insurance. You can do this in one of several ways. The least complicated approach may simply be to name a charitable organization as the primary ben- eficiary of your life insurance policy. When you pass on, your estate will receive an estate-tax deduction for the value of the policy proceeds paid out to the charity. You also can transfer ownership of a policy to a charity. The charity maintains the policy and you make an annual contribution to cover the cost of the premium, a contribution you can deduct.

Life Estates

When you make a gift of a personal residence or a farm to a charity, you stipulate in the transfer agreement that you retain the right to live in or use the property for the rest of your life. The charity, as remainder beneficiary, takes ownership of the proper- ty when you die. The trade-off is that you may receive a charitable contribution income-tax deduction

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