Reasons and Types of Giving
There exist many reasons for giving in this world today. Certainly, with declining public support and rising costs, philanthropy is essential for sustaining the quality of life as we know it. There can be no loftier goal than to benefit humanity. The following thoroughly describes the many ways to donate to charity.
Some common ways:
Bequest in a Will
A bequest is the simplest planned gift you can make, and it can be made for any amount and for almost any purpose. A bequest provides a gift executed through your will.There are a number of different kinds of bequests you can consider: a bequest of a specific dollar amount, a specific piece of real or personal property, or a percentage of your estate. A bequest can be made for general operating purposes of the College or for a specific department, program, or project. You can establish an endowed fund which will bear your name and provide a permanent acknowledgement of your generosity.
A bequest offers several benefits. You defer giving assets during your lifetime, but your estate will receive a dollar-for-dollar charitable estate tax deduction.
Endowments
Endowments are held in perpetuity by a chosen charity or institution. The initial gift is invested, and a portion (typically about 5%) of the fund's market value is awarded annually for the purpose designated by the benefactor.
Charitable Remainder Trusts
Charities help those who are not as fortunate, and fill a wide variety of niches. Domestic violence... youths... disease... homes for the poor. Endangered species even have their own charities. And believe it or not, charities serve another purpose: they help wealthy Americans reduce their tax bill.In 1969, the U.S.Congress created a new type of trust that helped charities and not-for-profit organizations generate more revenue for their causes. In the past decade, this trust has been steadily gaining in popularity. This vehicle allows taxpayers to reduce estate taxes, eliminate capital gains, claim an income tax deduction, and benefit charities instead of the IRS. This type of trust is technically a Charitable Uni-Trust, but is more commonly known as a Charitable Remainder Trust (CRT). The Basics of CRTs Retirement Planning is built around the ability to maintain control of both Income and Estate Taxes and actually draw income from your donation.
CRT's are irrevocable trusts that actually provide for and maintain two sets of beneficiaries. The first set are the income beneficiaries (you and, if married, a spouse). Income beneficiaries receive a set percentage of income for your lifetime from the trust. The second set of beneficiaries are the charities you name. They receive the principal of the trust after the income beneficiaries pass away. Vassallo says, "This is what the big guys do. Charities put their name up in lights, and then start paying interest!"
Maintaining Control
While a CRT is an irrevocable trust, you and your spouse may change the charitable beneficiaries at any time. Under certain conditions, you may even serve as trustees of the CRT. As trustees, you can maintain full investment control of the assets inside the CRT. Great Givers use this technique favorably. It benefits both the donor and the recipient. Gift from TrustA gift from a trust is an easy gift to make. Simply direct your trustee to distribute a specific dollar amount, a percentage of the trust estate, or specific property to your desired charity upon the termination of the trust.A gift from a trust offers a range of benefits. A dollar-for-dollar estate tax deduction will be available to your estate. You can designate how your gift will be used, including establishing an endowed fund in your name.
A Charitable Gift Annuity is a simple contract between you and the Charity. In exchange for your gift, the charity agrees to pay you a fixed dollar amount for life. A portion of the annuity may be a tax-free return of principal. The annual annuity rate is determined by the age of the income beneficiary and by the annuity rates determined by the American Council on Gift Annuities (ACGA). A charitable gift annuity can be established for a minimum of $10,000.
A Deferred Payment Gift Annuity provides a high rate of return for deferring the start of annuity payments. The longer the deferred period, the higher the interest rate will be. You determine how many years you want to wait for quarterly annuity payments to begin. Those payments will be distributed to you for life. A deferred payment gift annuity can be established for a minimum of $10,000.
A deferred payment gift annuity offers several benefits. If you are not yet 65 but want to provide for a future guaranteed income stream a deferred payment gift annuity may be for you. You will enjoy favorable capital gains treatment when you transfer appreciated assets to the charity. You will receive a federal charitable income tax deduction for a portion of your gift. You determine when you wish to begin receiving quarterly annuity payments.
Charitable Remainder Unitrust
A Charitable Remainder Unitrust is written to distribute a percentage (five percent or more) of the annualized value of the trust principal for your lifetime or for a term of years. Although the growth of principal cannot be guaranteed, if the principal appreciates in value, the amount of income distributed will also increase. Upon termination of the trust, the assets will be paid to the chosen charity to be used for the purposes you determine. A minimum of $50,000 is required to establish a charitable remainder unitrust.A charitable remainder unitrust offers a range of benefits. You will increase your cash flow from your current stock dividends and bypass immediate capital gains taxes at the time the unitrust is funded. You will receive an immediate income tax deduction for a portion of your gift and favorable capital gains tax treatment of your appreciated assets.
Charitable Remainder Annuity Trust
A Charitable Remainder Annuity Trust offers a fixed income payout that provides income for life or for a term of years. You determine how much will be paid out. Upon termination of the trust, the assets will be paid to the chosen charity for the purposes you determine. You can establish a charitable remainder annuity trust with a minimum of $50,000.A charitable remainder annuity trust offers a range of benefits. You will receive favorable capital gains tax treatment when you transfer appreciated assets to the annuity trust and an immediate income tax charitable deduction. You will receive a fixed amount each year of the trust that will supplement your current income. The charity will serve as the trustee and the trust assets will/should be professionally managed.
Life Insurance Policy Beneficiary
A charity can be designated as a beneficiary of a life insurance policy, and your estate will receive an estate tax deduction for the gift. If you make the charity the owner and beneficiary of your insurance policy, you will reduce your eventual estate and estate taxes.
Retirement Plan Beneficiary
Your favorite charity can be designated as the primary beneficiary of an IRA, 401(k), 403(b), or other pension or retirement plan. By naming the charity, you will ensure that your estate will receive an estate tax charitable deduction. You can designate a specific amount or a percentage of the death benefit, and you can restrict your gift to a specific purpose or make an unrestricted gift..