Charitable Giving Considerations
Charitable giving should start with a reflection of what organizations have been important to you during your life. How do you want these organizations, including churches, to continue to be important after your death and how you wish for them to carry out their missions?
While you have more assets than you will ever need.
Americans are very generous people. For many people, it is hard for them to imagine giving more, especially in these tough economic times.
But what would you do when the day came when you had more assets than you would ever need?
It is a necessary question we all face knowing that on our death we will not personally need any of our earthly assets. Only if we plan ahead, we can use our assets by leaving a legacy at the St. Cecilia Catholic Community.
Planning for that day is what estate planning is all about.
Types of Planned Gifts
Most client are aware of planned giving through solicitations they receive from various colleges, museums and other charitable organizations. Solicitations explain various planned giving techniques such as: will bequests, charitable remainder trusts, gifts of life insurance, appreciated property, IRA distributions, gift annuities, and other more complex estate planning arrangements. These solicitations often describe win-win-win situations in which planned giving techniques enhance current income resources for the donor and beneficiaries while providing much needed resources for the charities.
Many planned giving arrangements are complex. Others are simple to implement.
For example, a client might think about leaving a legacy by gifting all or part of a life insurance policy, an IRA, 401K or an annuity.
Additionally, a legacy might be left via a bequest in your Last Will and Testament.
Life Insurance
One way to leave a legacy is to simply name the organization or church as a beneficiary or partial beneficiary of a life insurance policy while retaining the right to make changes including the right to change the beneficiary in the future.
With an insurance beneficiary designation in which the proceeds are paid to a charitable organization, your estate (if a taxable estate) receives charitable estate tax deduction as allowed by law.
Another way to designate life insurance proceeds at your death is to designate the Church as both owner of the policy and the beneficiary. This method benefits the Church and gives the donor a bonus in the form of an income tax itemized deduction. Additional sums donated for the premiums payment may also be deductible.
Finally, one might consider donating an existing policy that is no longer needed. In most cases, a donation of an existing policy is eligible for a similar charitable income tax deduction.
IRA’s and 401(K)
What is your IRA or 401K doing? What will it be doing in the future, if your IRA or 401(K) balances outlive you? How might those future balances perform to meet the critical needs of the charitable or religious community?
Bequests to the church or an exempt charitable organization of distributions from IRAs and 401(K)s are not subject to income taxation that otherwise apply to individuals and non-charitable beneficiaries.
Your Last Will and Testament
Another common method of leaving a legacy in your Last Will and Testament.
You might consider a specific dollar amount or a percentage of the residue.
You might have read about Mrs. Ray Kroc, the widow of the founder of McDonald’s donating $50 million in her will to the University of Notre Dame in 2003. But do you know that countless other people donate sums of $5,000 and up in their wills every year to various churches and charitable organizations around Houston?
Neither Mrs. Kroc’s nor these other bequests would have been possible if the bequests had not been included in their Last Wills and Testaments.
Charitable Lead Trusts and Charitable Remainder Trusts
Depending on the size of your estate and the type of assets, there are more complex charitable arrangements that can enhance charitable giving through income and estate tax advantage gifting. These split-interest charitable trusts are designed to financially support you, your family and the charitable causes important to you during your lifetime while permitting after death the transfer of assets for your and your family’s benefit or to the charity, in an enhanced tax efficient manner.
What Statement Does Your Last Will and Testament Make?
In addition to the Old Testament and the New Testament, there is something called your Last Will and Testament.
A charitable bequest in your Last Will and Testament makes a strong statement to others of the importance you have placed on the organization and charitable support.
Leaving A Legacy is Empowering
As stewards of earthly assets, we have a free will to make decisions on how to best use material wealth. As stewards, it is our responsibility to be knowledgeable about options and opportunities to provide for ourselves, our families, and our Church.
Your accountant, lawyer, and other financial advisors can assist you in coming up with optimized planning.