Planned gifts are carefully crafted to your financial and estate plan and enable you to arrange charitable contributions in a manner that maximize personal giving objectives while minimizing tax liabilities. Planned giving is sometimes called deferred giving because the beneficiary of the gift will often not realize benefit from the gift until sometime in the future. Planned giving often allows you to make a substantial gift to Mid-America while retaining an income stream from the gift. Mid-America Reformed Seminary works with Barnabas© Foundation when helping you to create a planned gift.
Types of Planned Gifts
A charitable gift annuity is an irrecoverable monetary gift to Mid-America Reformed Seminary in return for a fixed lifetime income. This fixed income is based on the donor’s age and a charitable tax deduction for the calculate gift value. Gift annuities can be an excellent investment as they can often produce a higher rate of return that a certificate of deposit or a money market account.
There are two types of charitable gift annuities: current and deferred. A current gift annuity qualifies for immediate income tax benefits. A portion of the gift is tax deductible as a charitable contribution with a portion of the income received each year being tax-free. Furthermore, if a gift annuity is funded with long-term appreciated securities, the donor may also receive additional tax advantages. Not only is a portion of the capital gain on the appreciation avoided, but any reportable capital gain is also spread over the donor’s life expectancy rather than all in the same year.
A gift annuity can also be deferred. A deferred charitable gift annuity is a type of life income gift that allows you to defer the income until a later date, such as retirement, while claiming an immediate income tax deduction. You may determine the deferral period, and the annual income is higher when the payments begin. Like the current charitable gift annuity, a deferred gift annuity enables a portion of the appreciation to escape capital gains tax entirely when funded with appreciated assets.
A charitable remainder trust is an irrecoverable transfer of assets in the form of cash or securities to Mid-America Reformed Seminary. In return the donor receives income from the trust. The trust can be funded with cash, real estate or with long-term, highly appreciated securities to avoid the capital gain on the transfer to the trust. The trustee, who is designated by the donor, manages and invests the assets and pays to the beneficiary an income of usually between 5 and 8 percent for life or for a term of years. Funding trusts with appreciated assets enhances the tax benefits for the donor and may avoid capital gains liabilities.
A charitable lead trust is the reverse of a charitable remainder trust. A charitable lead trust provides for a gift of income interest from property for a designated term of years after which the property either reverts to the donor or passes to a non-charitable beneficiary designated by the donor. The income generated from assets placed in this trust is paid to Mid-America Reformed Seminary. At the end of the trust term, the principal either returns to you or is transferred to named beneficiaries such as children or grandchildren. While gift or estate taxes may be reduced or eliminated on the transfer of property to other family members, it is important that your tax advisor review the tax consequences prior to establishing a charitable lead trust.
The owner of a residence, vacation property or farm may donate the property to Mid-America but retain the legal right to occupy the property or continue to operate the farm for life. A significant income tax deduction may be immediately available and the benefits of a charitable bequest are also retained.
Do you have a written will? If you don’t, state laws will determine what will happen to your estate when you die. A written will should be a carefully planned document that ensures your estate will be distributed according to your wishes. You can name Mid-America Reformed Seminary in your will as part of your charitable bequest. Charitable bequests can take a variety of forms.
Individual retirement plans and company-sponsored pension and profit-sharing plans may be used to make charitable gifts to Mid-America while limiting tax liabilities for your heirs. Amounts remaining in qualified retirement plans at death may be subject to more than estate taxes, so a gift of the retirement plan balance may produce the greatest tax savings for your heirs. Additionally, if you are over age 59 and have excess retirement funds, it may be wise to give a portion during your lifetime to avoid penalty.
It is possible to name Mid-America Reformed Seminary as the beneficiary to all or a portion of a life insurance policy.
You have several options:
- Make Mid-America Reformed Seminary the beneficiary of an existing policy and earn an estate tax charitable deduction.
- Make Mid-America Reformed Seminary the owner and beneficiary of an existing policy, thus removing it from your taxable estate and earning an immediate income tax deduction approximately equal to the cash value of the policy (future premiums are tax deductible).
- Take out a new policy with Mid-America Reformed Seminary as the owner and beneficiary (all premium payments are tax deductible).
- Use in conjunction with a life income gift to “replace” for your heirs an asset that you have given to Mid-America Reformed Seminary.