|
|
|||
|
|
Home New Generation Programs Next Generation Infant & Toddler Center SecondGeneration Thrift Shoppes
|
Planned Giving Options©
A. Lifetime Gift. A person gifts an asset directly to New Generation during his or her lifetime. This option is particularly attractive to individuals with highly appreciated assets (stock, real estate, business, artwork, etc.) that would otherwise be subject to 15% capital gains tax if the person sold the asset during his or her lifetime. The donor is entitled to an income tax charitable deduction for the value of the asset gifted.
Example : John has 1,000 shares of stock. He bought the stock for $5,000, and it's now worth $35,000. If John sells the stock, he would pay 15% capital gains tax on the appreciation, or $4,500 (.15 x $30,000). John decides to gift the stock to a charity, which can sell the stock without paying capital gains because it is a tax exempt organization.
B. Bequest at Death. A person drafts his or her estate planning documents (i.e. Will, Revocable Trust, Retirement Benefit Designation Form) to provide that a designated asset passes to New Generation at his or her death. The asset goes to the charity free of federal estate tax and free of the income tax due at death on retirement benefits.
Example : Mary leaves $500 to charity in her Will. The bequest passes federal estate tax free.
Example: Joe lists a charity as beneficiary of his $100,000 IRA. The distribution to charity passes federal estate tax free, and the charity is exempt from paying the income tax due on the IRA at Joe 's death.
C. Life Insurance - Charity as Beneficiary. A person lists New Generation as beneficiary of his or her life insurance policy. The person remains the owner of the policy, and can therefore change the beneficiary at a future date. The life insurance proceeds pass federal estate tax free at the person's death.
Example : Jane buys a $50,000 life insurance policy, naming a charity as beneficiary. The premiums are $200 per year. Jane decides to buy the policy rather than gift $200 to the charity each year.
D. Gift with Retained Life Estate. A person gifts real estate to New Generation now, but retains the right to live in the property during his or her lifetime. This option is particularly attractive to individuals with second homes.
Example . Mr. and Mrs. Doe gift their home in Florida to charity, but reserve the right to use the property during their lifetimes. When Mr. and Mrs. Doe pass away, the Florida home passes to the charity, free of federal estate tax.
F. Charitable Remainder Trust. A person places an asset in a trust. He or she receives income (usually 6-8%) from the trust each year (i) during his or her lifetime, or (ii) for a certain term of years, at which time the trust ends and the trust principal, including any appreciation, passes to charity, free of federal estate tax. The person can reserve the right to change the charity, as well as the trustee. This option is particularly attractive for individuals with highly appreciated assets (stock, real estate, business, artwork, etc.) who want a stream of income from the asset, and therefore do not want to give the asset directly to charity during their lifetime. An income tax charitable deduction can be taken for a portion of the value of the asset, depending on the age of the donor. The charitable remainder trust is often combined with a wealth replacement trust whereby a portion of the annual stream of income is used to purchase insurance on the donor's life in an amount to replace the value of the asset originally placed in the charitable remainder trust. The heirs are significantly better off with the wealth replacement trust because the insurance proceeds are not subject to federal estate tax.
Example : Carol owns stock that has tripled in value since she bought it. If she sells the stock, she will pay 15% capital gains on the appreciation. Instead, she puts the stock worth $500,000 in a charitable remainder trust. The trust sells the stock free of capital gains (because the ultimate beneficiary is a charity), and Carol receives $40,000 in income from the trust each year for the rest of her life. Carol uses some of the $40,000 she receives each year to buy a $500,000 life insurance policy, payable to her heirs, estate and income tax free, when she dies. Carol can take a charitable deduction for a portion of the $500,000 put into the trust. The actual amount of the deduction will depend on Carol's age (i.e. how long the $40,000/yr. stream of income will likely be in effect). When Carol dies, whatever remains in the charitable remainder trust passes to the charity designated by Carol.
Example: Frank has a fully depreciated rental property worth $400,000. If Frank were to sell the property, he would have to pay capital gains tax. He places the property in a charitable remainder trust, the property is sold capital gains tax free, and Frank receives $32,000 each year for his lifetime. Frank can also take a significant income tax charitable deduction. When Frank dies, the amount remaining in the trust passes to the charity of Frank's choice.
Example: Mike owns an interest in a business that recently went public. If he sells his interest, any appreciation will be subject to 15% capital gains tax. Mike decides to put his business interest in a charitable remainder trust. The trust sells the business interest, capital gains tax free, and invests the proceeds. Mike receives 8% of the value of the trust each year as income, and can take an income tax charitable deduction for a portion of the value of the business originally placed in the trust. When Mike dies, whatever remains in the trust passes to the charity of Mike's choice.
G. Charitable Lead Trust. Often referred to as the "mirror image" of the charitable remainder trust. Person places an asset in trust. New Generation receives the income (usually 6-8%) from the trust for a specified term of years. At the end of the term, the trust terminates and all of the remaining trust principal, including appreciation, passes to the person's heirs, free of federal estate tax. Transfers to a qualified charitable lead trust produce an income tax charitable deduction.
Example : Julie owns real estate on Nantucket worth $1,000,000. She places the real estate in a qualified charitable lead trust, and the property is sold. The charity of her choice receives $80,000 each year for 20 years, at which time the trust ends, and the money remaining in the trust, including appreciation, passes to Julie's heirs, federal estate tax free. Julie takes an income tax charitable deduction at the time the real estate is transferred into the trust.
H. Charitable Gift Annuity. Same concept as the charitable remainder trust, but the asset is given directly to New Generation, which is responsible for the administration of the asset, and for distribution of the income stream during the donor's lifetime or the designated term of years.
Example : Amy gifts stock worth $300,000 to a charity, which sells the stock without incurring capital gains. The charity agrees to pay Amy $24,000 each year (i.e. 8% of $300,000) for the rest of her life. Amy is entitled to a significant income tax charitable deduction. If she cannot use the entire deduction in one year, she can carry any unused portion of the deduction forward for five years. (Note: the five-year carry forward rule applies to all income tax charitable deductions.)
U.S. federal tax advice in the materials was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed with respect to the matters addressed. Some of that advice may have been written to support the promotion or marketing of the transactions or matters addressed within the meaning of IRS Circular 230, in which case, be advised that the advice was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and you should seek advice based on your particular circumstances from an independent tax advisor.
If you are interested in participating in any of these plans, call the office at 603 436-4989.
|
© Copyright 2008, New Generation, Inc. Greenland, NH