As valuable as annual giving is, it has limitations. Our personal day-to-day obligations, as well as emergencies, often force us to make difficult choices with our money. As a result, when it comes to the charities we hold most dear, we often find ourselves saying “I wish I could do more.”
Planning our estates provides a once-in-a-lifetime chance to do just that.
The charitable giving options outlined below do not attempt to describe every element of those gifts. Instead, our goal is to provide the basics of each technique to help you decide where more information would be helpful.
For information, please contact the Development Office at firstname.lastname@example.org or 207-221-7007
It always makes sense to engage professional advisors (such as attorneys, CPAs, and financial planners) when doing legacy gift planning. We would be pleased to share our insights and expertise with you or your advisors at any stage of your planning.
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Bequest in a will or living trust
This is the most common kind of planned gift. As part of the final distribution of your assets, you simply provide that The Cedars and other favorite charities receive either a specific dollar amount or percentage of what remains.A powerful element of estate planning is to distribute your assets in sequence. For example, you may wish to provide for the care of a loved one for life, or to make educational opportunities available for children and grandchildren. Funds that remain after these personal obligations have been met are ideal for making a charitable gift.
IRA or other retirement account
A charity may be named as one of the beneficiaries of your IRA. This easy strategy ensures that your gift will be distributed quickly, without the delays and expenses of probate. It can also be accomplished without changing your will. All that is required is a change of beneficiary form.
Tax note: An unexpected special benefit of gifts from an IRA concerns income taxes. Traditional IRAs are taxed for the first time when they are distributed. In other words, when an IRA is left to individuals, they must pay taxes when the gift is received. However, gifts to The Cedars pass entirely free of income (and estate) taxes. Therefore, if you are going to make gifts to both individuals and charities, it makes sense to select assets for charity that will save your family additional taxes. IRAs are that kind of an asset.
New in 2020!!! The SECURE Act, passed at the end of 2019, made significant changes to the options most non-spouse individuals had as IRA beneficiaries. The commonly used “stretch IRA” is no longer available and may make the charitable gift from your IRA even more advantageous.
You may name The Cedars and other favorite charities as the beneficiary of life insurance policies, entitling them to receive all or a percentage of the proceeds. These gifts pass tax-free to charity and free of probate.If you wish to make a life insurance gift and receive a current income tax deduction, you can transfer the ownership of a current life insurance policy to The Cedars. Your immediate tax deduction is approximately equal to the policy’s cash surrender value.
Charitable gift annuities (CGAs)
A CGA is a contract between you and The Cedars. When you give The Cedars a sum of money or appreciated stock ($10,000 or more), you are entitled to receive a fixed, annual annuity for your life (or the life of you and another). Distribution to The Cedars for its use does not occur until all annuitants have passed away. The annuity rate is based on your present age.
Tax note: Your immediate charitable deduction will generally be 35 percent to 50 percent of the initial value of the gift. Why is it not 100 percent? The reason is that your annuity payment will consist of at least two parts: earnings from the fund and a return of some principal you originally contributed. The good news is that the return-of-principal amount is never taxed to you as income. In other words, a portion of your annual annuity payment comes to you tax-free.
Charitable remainder trusts (CRT)
A CRT is an arrangement whereby you transfer assets now for the ultimate benefit of The Cedars, subject to you receiving income for a term of years or life. This is a complex legal document, but it provides income flexibility beyond that available from a charitable gift annuity. Your income can either be fixed at the time the instrument is created (annuity trust) or it can be a percentage of the value of the trust as recalculated annually (unitrust). Again, there is a significant up-front charitable deduction, and The Cedars only receives distribution when the trust ends
Real estate where you keep possession for life
The technical name for this approach is “gift subject to a retained life estate.” This is how it works: You give The Cedars either your personal residence or vacation home and reserve the right to live in and use the property, exclusively, for the rest of your life (or lives, if more than one person is involved). During your lifetime, you continue to treat the property exactly the way you do now (paying taxes, insurance, utilities, and upkeep). When you pass away, The Cedars takes over the real estate, free of taxes and probate, and either uses it for The Cedars’ nonprofit purposes or sells it.
The immediate benefit of this gift is a current income tax deduction based on your age and the “useful life” of the improvements to the property
Partial gift of real estate prior to its sale
People who have owned their home for many years find they will owe significant capital gains taxes upon its sale. The partial gift of real estate, prior to its sale, can eliminate many of those taxes. This is a fairly complicated transaction, and although the benefits may be substantial, timing is critical. Therefore, the full engagement of your planning professional is essential to make it work properly.
Charitable lead trust (CLT)
Unlike a charitable remainder trust, where income goes to individuals first with the remainder to charity, a charitable lead trust provides for income to charity for a term of years, with the remainder to individuals. This option is most beneficial where one of your planning goals is to have children (and especially grandchildren) receive significant assets and you are facing tax limitations to accomplish this goal.