What Will Your Legacy Be?

Posted by Judy Zarick on 5/21/18 7:18 AM

What Will Your Legacy Be?Your faith is an important focus of your life—which is why you visit our websites or read our journals, magazines, or books. We often receive comments from readers who found help in these resources that they want to make sure they are available for generations to come. And you might feel that you want to do everything you can to sustain the good work of ministries that touch your heart and feed your soul. But how can you afford that?

I don't know about you, but I never considered myself as somebody who could leave a “legacy.” We are squarely middle class, with house and car payments, college tuitions, and weddings on the horizon. We can, and do, make our weekly offering at church and we make donations to help causes close to our hearts, but legacy giving didn't seem like something for us.

While traditionally viewed as the gift that an individual makes near the end of his or her lifetime, Legacy Giving can be a way for the middle class to make a major gift. It is possible for almost anyone to plan a gift that will represent the legacy you will make to future generations.

An important step in this process is to be prepared by collecting information about your assets. To learn more about what information you should collect and for a downloadable planning guide click here.

There are many kinds of planned gifts, including simple bequests in a will or an estate plan, charitable gift annuities, charitable remainder trusts, charitable lead trusts, and non-cash assets. The following are some of the ways you can plan your giving.

 

Life Insurance

You can donate an old or new policy and deduct future premium payments—or just name the charity as policy beneficiary. This enables you to make a large gift at little cost. This donation is simple to set up and exempt from federal estate tax. Again, changing a beneficiary designation form is a relatively simple way to make a deferred (upon your death) gift of a valuable asset.

 

Retirement Plan Assets, IRA

Retirement funds paid to a charity are tax-free. Funds left to children may be hit with income and estate tax of 70% or more. You can name the charity as your beneficiary of the plan. This avoids double taxation at your passing and gives tax-advantaged assets to your heirs. This donation is exempt from federal estate and income tax.

You can continue to take withdrawals from your plan during your lifetime. This type of gift is often overlooked, but it is easily given.  The way to make a gift of retirement assets is to change the “beneficiary designation form” attached to the retirement account.  If you name a charitable organization as a beneficiary on the applicable beneficiary designation form, that organization would receive the designated account upon your death outside of the probate process.

 

Charitable Gift Annuity

This is a simple gift contract that provides lifetime payments to one or two persons. It is an irrevocable transfer of property (e.g., cash, securities) in exchange for a contract to pay the donor or the donor’s designee an annuity for life. Depending on state law, payments could begin immediately or may be allowed to be deferred until a future date.

Because the value of the property exceeds the value of the annuity, it is partially a gift to the institution. While most charitable gift annuity contracts are established between the donor and the organization to receive the remainder gift amount, community foundations have been given permission from the IRS to issue such gift annuity contracts on behalf of other qualifying charitable organizations.

Additionally, there are different types of charitable gift annuities—and not all states permit the use of each type. For example, when all of the annuitants have passed away, the residuumor remains of the initial gift plus any interest incomeis distributed to the charity to be used according to the contract’s directions. Usually, this is for general use by the charity but may be restricted by the donor for a particular use, such as student scholarships or biomedical research.

 

Charitable Bequest

This is a provision in a will, trust, or estate plan that allocates a gift to a designated charity. The most common gifts to nonprofit beneficiaries are cash, securities, and real property including homes and personal property (things). This is the simplest form of gift planning (plan now, give later). It is a gift that costs nothing during your lifetime. This donation is exempt from federal estate tax and allows you to make a substantial gift when you no longer need the assets. It is easy and revocable if your situation changes.

 

Real Estate

When you make a substantial real estate gift to a charitable organization, you avoid capital gains tax and receive a large income tax deduction. It removes taxable assets from the estate. There is an immediate income tax deduction for the full value of the property. This is good for transferring the burden of managing the property and it won’t reduce your disposable funds. Coordination with the charity before making this decision is advised.

 

Cash

Of course, if you want to maximize the deduction and minimize the gift details, than writing a check or giving online is the easiest way to go. It removes taxable assets from your estate and gives an immediate income tax deduction (for those who itemize) for the full value of the money.

 

Living Trust

This is a legal entity that holds assets during your lifetime. It then transfers ownership of them—or benefit from them—upon your death. This is similar to a will. You can just name the charity as a beneficiary inside the trust document. Assets that are already held inside a trust when the person who created the trust dies do not have to pass through the probate process.

 

Personal Property or Tangible Personal Property

Think of this as things that are tangible. Examples of gifts of tangible personal property to charities include book collections, art, equipment, and jewelry. It does not include, however, cash or cash equivalents such as checking accounts. Donating these puts assets you no longer need or can maintain to good use. It removes taxable assets from the estate. There is an immediate reduction in income tax of full value if the charity can use the asset. 

 

Securities

Securities is a general term that includes the following: shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that can be exchanged for money. You can contribute longterm appreciated stock or other marketable securities and not have to pay capital gains tax on that stock (this is a general rule; please consult your tax advisor). The gift also removes taxable assets from the estate. 


This is intended to provide general gift planning information. Our organization is not qualified to provide specific legal, tax or investment advice, and this letter should not be looked to or relied upon as a source for such advice. Consult with your own legal and financial advisors before making any gift.