Ways to Give
Endowment Funds – Ways to Give
Charitable giving can be arranged to maximize your personal objectives while minimizing your after-tax cost. Depending on your choice of gift asset and the type of arrangement you select, you can generally expect to obtain some or all of the following benefits:
– Fulfillment of your philanthropic goals
– Savings through charitable tax deductions for the value of your gift
– Avoidance of capital-gain tax on contributions of long-term capital-gain property
• CASH – a gift of cash is considered made on the date you hand deliver it or mail it. As a result of your charitable deduction, your net cost of making a cash contribution will be less than the dollar amount of the gift. Example: The net cost of a $1000 cash gift if you are in the 35% marginal tax bracket is only $650 after the $350 tax savings.
• APPRECIATED PROPERTY SUCH AS STOCKS OR BONDS – with careful planning, charitable gifts of certain types of assets will provide you with even greater tax benefits than a gift of equivalent value in cash. A gift of appreciated property held more than 12 months provides a double tax benefit. Example: Mr. Marsh, who is in the 33% income tax bracket, owns securities currently valued at $22,000, purchased several years ago for $2000. He contributes them to an endowment fund and realizes a $22,000 charitable deduction, saving him $7,260 in income taxes (33% of $22,000). He also avoids capital-gain tax on his $20,000 gain. This means a further savings of $3000 (15% of $20,000). Thus, the net cost of his appreciated gift is only $11,740 ($22,000 less $7,260 less $3000).
• YOUR WILL OR LIVING TRUST – gifts by will or living trust have become a standard of charitable giving which may enable a person to make a significant contribution that may not have been possible during life. These gifts can take various forms. A general bequest where you designate that the endowment fund receives a specific dollar amount. A percentage bequest is expressed as a percentage of an estate (e.g. 10%) rather than a specific amount. If fortune changes the size of your estate over the years, the bequest will change accordingly.
• LIFE INSURANCE – a frequently overlooked role of life insurance is the one it can play in planned charitable giving. Depending on the type of life insurance policy, it can be used as the direct funding medium of a gift, permitting you to make a substantial gift for a relatively modest annual outlay, or you may use the life insurance to replace the value of another asset that you have given to the endowment fund.
• IRA “Rollover” Distribution for contributors aged 70 1/2 or older – A contribution from your IRA directly to St. Paul UCC results in the amount being tax exempt.
Example: You have pledged $50 per week during our Faith Promise season or a total of $2600 per year. Your tax bracket is 25%. By using funds from your IRA, the full contribution is not subject to federal income tax. 25% of $2600 = $650, the amount saved in federal taxes by utilizing your IRA.
Additionally, the amount qualifies towards your annual Required Minimum Distribution (RMD) for your IRA.
Simply request your IRA administrator to generate a check DIRECTLY to St. Paul UCC, it’s that easy. Since you do not receive the funds, they are not included in your gross income, and no charitable deduction is allowed.
As always, this is an example only, and consulting with your financial and tax professional is recommended.
• Options – These are only a few of numerous planned giving options that are available. The examples are for illustration only and are for general informational and educational purposes. You should seek the advice of an attorney for applicability to your own situation.