Why Planned Giving?
For starters, significant economic benefits exist to you, including reduced capital gains and income taxes, asset protection and an opportunity to have a guaranteed income for life! In addition, wonderful opportunities exist to pass assets on to your family members at a reduced tax liability, while allowing you to make a difference at CHI St. Alexius Health.
You can make a planned gift to CHI St. Alexius Health Foundation in a number of ways, including bequests, cash, life income trusts and annuities, life insurance, real estate, securities, and any combination of the above.
Wills or Bequests
Cash, securities, real estate, or personal property can all be given to CHI St. Alexius Health through a well-planned will. A bequest can be stated simply, as follows:
"I give and bequeath to the trustees of CHI St. Alexius Health ___% of my total estate (or $________ or other property)."
Such a provision creates an unrestricted bequest, which assures that your gift will be used where it is most needed at the time it is received. In addition to the unrestricted bequest, a gift by will may be designated for a specific program or purpose within the scope of our mission. When making provisions by will, it is important to use our correct name and address. Please contact CHI St. Alexius Health Foundation for specific information.
Charitable Remainder Annuity Trust/Charitable Remainder Unitrust
Both of these plans are irrevocable trusts that feature income based on the value of the property donated. An annuity trust pays a fixed income based on the value of assets at the time the trust is created, while a unitrust provides a fluctuating income based on a fixed percentage of the trust's annual value.
When the trust is created, capital gains tax can be avoided or postponed, and an income tax deduction is available for a portion of the value of the property. In addition, capital gain and/or dividend income from the charitable remainder trust may be taxed more favorably than other income. Gifts made in this manner can result in tax savings as well.
Gift Annuity Agreement
Through a charitable gift annuity, you can make a gift to a charitable interest and receive fixed annual payments for life. The payment amount is based on your age when the gift is completed; the older you are, the larger the payments. An income tax deduction is allowed for a portion of the amount transferred.
For a period of time based on life expectancy, only part of the payments will be taxed as income. If stocks or other property that has risen in value is given for a gift annuity that pays income to you and/or your spouse, a portion of the capital gain is never taxed, and the remainder may be gradually reported over a period of time. If you and/or your spouse are the only payment beneficiaries, the amount used to fund a gift annuity is generally not subject to estate taxes that might otherwise be due.
Life insurance gifts list CHI St. Alexius Health as the owner and beneficiary of your policy. These policies are great investments where you may continue to contribute to the premium each year and receive an annual tax deduction.
Whether it's an employer-sponsored retirement plan, a private fund such as an Individual Retirement Account (IRA), or a combination of the two, you can designate CHI St. Alexius Health as the final beneficiary of any remaining funds which you or your loved ones do not use.
This gift can be designated when the fund is first established, or it can be added later. The plan administrator will provide a change of beneficiary form upon request. You can then indicate the amount or percentage of assets you wish to allocate to charity. Giving in this way can help maximize estate and income tax savings for your heirs.
Charitable Lead Trust
A charitable lead trust can be created to provide income to CHI St. Alexius Health for a designated period of time-typically 5, 10, 15, 20, or more than 20 years. Through the use of this plan, it is possible to transfer assets to heirs while paying little or no gift or estate tax. This plan is especially attractive for those who believe they may still be subject to such taxes.
Revocable Living Trust
Just as in the case of a gift by will, through the use of a revocable living trust you can provide for eventual gifts of real estate, cash, or other property, knowing that all or part of the assets may be returned upon request during your lifetime. Since the property may be returned, there are no current tax advantages. Title to the property ultimately passes to charity under the terms of the trust agreement. It does not pass through the will, and may thus avoid the possible costs and delays of probate. Property passing to charity in this way is also free from the possible burden of estate taxes. The income from the trust during lifetime can be paid to the donor, another person, or a charitable interest, as directed.
While most charitable gifts are made in the form of cash, important advantages can be possible when gifts are made using other property that has increased in value.
Gifts of Appreciated Property
When stocks, bonds, mutual funds, real estate, and other appreciated assets are sold, tax is due on any capital gain. When making a charitable gifts, it is often pleasing to learn that when appreciated property is given that has been held long-term (more than 12 months), an income tax deduction is generally allowed, based on the current value of the property rather than just its cost. It is usually best to donate property that would be subject to the highest amount of tax if sold. The combined benefits of bypassing tax on the capital gain, receiving an income tax deduction, and making a charitable gift can be substantial.
Increasing Retirement Income
Many of the plans described here can be welcome additions to retirement plans. Assets that have increased in value but yield little income can be used to fund a charitable gift plan that features income benefits and thus helps assets do "double duty." The payments received from the gift plans described herein will generally be based on the full value of donated property, not just what would be left after payment of the tax on gain if the property were sold. Tax savings will also be enjoyed from the deduction available when the plan was created. This amount can be invested for additional income.
Example: John Harrison, 75, has been retired for five years. He has $100,000 worth of stocks that cost $35,000 and yield less than 1%. He would like to receive more than the $750 per year in income that this asset currently yields. If he sold the securities, he would owe capital gains tax on the $65,000 increase in value. He would thus have less than $100,000 left to invest after paying that tax. If he instead placed the stocks in a charitable remainder annuity trust with a payout rate of 6%, his spendable income from the property would increase some eightfold to $6,000 per year. He would not incur tax on the $65,000 gain at the time of his gift, and would thus receive income based on the entire $100,000. His income tax deduction would be approximately $50,000. Mr. Harrison's income tax savings from the gift would be over $17,000. In addition, he would gain the satisfaction of knowing he made a charitable gift that he did not think would be possible.
Federal Gift and Estate Taxes
Tax legislation enacted in 2001 results in more people being exempted from federal gift and estate taxes as tax rates fall and the threshold at which they apply rises over time. The threshold amount for federal gift taxation is now $1 million per person. The estate tax exemption is $2 million for 2008 and is scheduled for additional increases. You may find that the value of your assets now exceeds or will grow at a faster rate than the exemption amounts. This is especially true of gift taxes, where the exempt amount is not scheduled to rise above $1 million per taxpayer.
Benefits of Planning
As you can see, through careful planning of charitable gifts it can be possible to meet multiple goals. By choosing the best property to fund gifts, their timing, and the methods used to make them, it can be possible to make larger gifts while minimizing or eliminating federal estate and gift taxes that might otherwise be due. This can be accomplished while preserving, or even enhancing, your financial well-being.
The purpose of this information is to provide general gift, estate, and financial planning information. It is not intended as legal, accounting, or other professional advice. For assistance in planning charitable gifts with tax and other financial implications, the services of appropriate advisors should be obtained. Consult an attorney for advice if your plans require revision of a will or other legal document. Tax deductions vary based on applicable federal discount rates, which can change on a monthly basis. Some opportunities may not be available in all states. When the trust is created, capital gains tax can be avoided or postponed, and an income tax deduction is available for a portion of the value of the property. In addition, capital gain and/or dividend income from the charitable remainder trust may be taxed more favorably than other income. Gifts made in this manner can result in tax savings as well.
This information is intended as a guide to the gift planning process. More information is available on request. Please contact CHI St. Alexius Health Foundation at (701)530-7065.