Strategy

Description

Benefits

Outright Gifts

Outright gifts are immediate gifts of cash, securities, or tangible property, or real estate in which the donor retains no interest.

The donor receives a federal income tax deduction for the market value of the gift and the charity can make immediate use of the gift. Gifts of appreciated stock or bonds held over one year may not be subject to capital gains taxes.

Bequest

A bequest is a gift to charity at death. A bequest is the simplest type of planned gift to make and one of the easiest to implement. Most charitable bequests involve the transfer a specific cash amount, a percentage of your residual estate, or personal property.

The amount given is not subject to federal estate tax. The donor retains ownership and use of the assets while alive. The charity receives cash or property.

Life Insurance

There are various methods by which a life insurance policy may be contributed to a charity. A donor may assign a paid-up policy, assign a policy on which premiums remain to be paid, or name a charity as a beneficiary of a new policy.

This is a way to significantly increase a donor’s ability to make a significant gift to charity at little or no cost.

Charitable Gift Annuity

A gift annuity is a contract between a donor and a charity. The donor makes a gift of cash or appreciated property. In exchange, the charity makes fixed payments for the lifetime of one or two individuals. Payments are based on age, increasing as you get older, and are usually made according to a rate schedule set by the American Council of Gift Annuities. Payments may begin immediately or be deferred.

A portion of each annuity payment is tax free. The donor receives an income tax deduction for the present value of the gift. Deferred payments offer lager deductions and higher total payments. The charity receives cash or property.

Charitable Remainder Trust

A charitable remainder trust receives cash or property from a
donor, makes payments to the donor for a life, lifetimes or a period of years. The trust then distributes the remainder to charity.

A charitable remainder annuity trust pays a fixed dollar amount each year. By contrast, a charitable remainder
unitrust pays an amount equal to a percentage of the trust value at the beginning of each year.

The trust is able to sell appreciated assets tax free and the donor receives a federal income tax deduction.

Charitable Lead Trust

A charitable lead trust receives cash or property from a donor and makes payments to charity for a specified period. At the end of that period, it distributes the trust property to a specified beneficiary, usually family members.

When a donor gives property to a lead trust the appreciation passes on to his or her family with no additional tax. The donor also receives income tax deductions for the present value of the payments that will go to the charity.

Life Estate

The donor executes a deed transferring a personal residence to a charity and the charity grants a :life estate”, allowing the donor to live in the house for his or her lifetime.

The donor receives a federal income tax deduction for the remainder value of the home.

Pooled Income Fund

The charity accepts a gift of cash or stock from a donor and invests it with similar gifts from other donors, distributing proportionate shares of the earnings to all of the donors during their lifetimes.

The donor bypasses capital gains taxes when assets in the pooled fund are sold.

Bargain Real Estate Sale

A bargain sale works like any other sale except that the sales price is less than fair market value.

The donor receives a tax deduction for the difference between the fair market value and the cash received, avoiding the capital gain. When the donor sells the property to charity, he or she receives a cash payment or debt relief.