Ten Ways to Make a Planned Gift

You should consult with your financial advisor and attorney on what is right for you.
Our Planned Giving Committee can help you identify a reputable source of advice if you so desire.

1. An Immediate Gift of Cash or Liquid Asset

The assets described here may be used to fund both immediate gifts and life-income gifts. The procedures refer only to immediate gifts.

Cash

Gifts of cash are routinely used to pay pledges and make special (capital) gifts. Procedures: Make a check payable to the official corporate name of the church or agency. Example: “The Rector, Wardens and Vestry of Christ Church in Raleigh, NC.” In most cases, shortening it to “Christ Church” will be acceptable.

The date of the gift is the date of the U.S. Postal Service postmark on the envelope in which you sent the check. If another carrier is used, it is the date on which the church or agency received the package.

Appreciated Securities

Many donors use stocks, bonds or mutual funds to make gifts. If they have increased in value since you obtained them, there can be significant tax advantages:

  • Your income tax deduction is usually based on the full market value of the securities on the date of the transfer
  • You can usually avoid paying capital gains taxes that would have been due if securities had been sold.

If you wish to donate securities that have diminished in value since you obtained them, it is wiser to sell the stock, claim the capital loss as a tax deduction, and donate the resulting cash.

Procedures

If the securities are in “street name,” that is, held in an account at a financial institution but accounted for as belonging to you, instruct your broker by letter to transfer xxx shares of yyy stock to an account in the name of Christ Church. Call or email Sarah Wolf (919.834.6259 x110) for more information.

The date of a gift of securities is the date on which the transfer of ownership took place.

Valuation

The IRS calculates the value of the gift as the average of the highest and lowest selling prices of the securities on the gift date

2. Deferred Gifts

Wills and Bequests

The Episcopal Church has had an impact on many lives. Many of you grew, developed and were nurtured in your faith by the church’s witness and work. It is only natural that you would want to help continue its work by providing a gift through your estate planning.

A bequest through a will is the simplest and most common planned gift. It can be an outright monetary bequest, a percentage of your estate, a percentage of the “rest, residue, and remainder” of your estate after a number of other bequests have been fulfilled, or a specific asset such as personal or real property. It could also be a contingent bequest, to be exercised only if some other intention is unable to be fulfilled (such as a named heir predeceasing you).

You can have charitable bequests given for general purposes or to support specific programs at your church or church agency.

Examples of bequest language are:

  • “I give, devise and bequeath to the Rector, Wardens and Vestry of Christ Church, whose address is 120 E. Edenton St, Raleigh, NC, 27601, the sum of $____, to be used for its general purposes.”
  • “I give, devise and bequeath 10% of the rest, residue and remainder of my estate to Christ Church, whose address is 120 E. Edenton St, Raleigh, NC, 27601, to be used for its music program.”

Procedures

You should always make your estate plan with the assistance of an attorney. The money spent is minimal compared to the savings in taxes and the reduction in complications and confusion.

You can also make charitable gifts through the use of a codicil to your will, or refer to an instruction letter in the will itself. The instruction letter can be changed from time to time without the trouble and expense of rewriting the will.

Simple Codicils

  • Unrestricted General Bequest
  • Unrestricted Specific Bequest
  • Unrestricted Residuary Bequest

Click Here for Codicils

3. Real Estate and Personal Property

Real Estate

You may have a second or, even, a third home. Your primary residence may no longer be practical. Giving real estate to the church is a time-honored way of making a substantial gift with an asset, usually highly appreciated, that might otherwise be underutilized.

Procedures

To make a gift of real estate, whether or not it includes a dwelling or other buildings, the property should be free of financial encumbrances such as mortgages or liens. It should be readily marketable, and you should be aware that the church may sell the property after it is given. The church will want to conduct an environmental assessment to insure that there are no hazardous waste conditions at the site that could become a liability to the new owner.

The donor usually pays for a property survey, appraisal, the environmental assessment and the preparation of the deed transferring the property. The gift date is the date of the closing.

Personal Property

You may donate assets such as jewelry, automobiles, paintings and antiques as immediate gifts, or they can be used to fund life income gifts. As with real estate, you will need to pay for a bona-fide appraisal of the item by a qualified appraiser.

Procedures

Your lawyer creates a deed of gift, and a closing takes place at which the item is delivered and the documents are executed. The gift date is the date on which this closing takes place.

Valuation

For your tax deduction to be based on the appraised market value of the item, the item must have a particular usefulness to the Church or church agency. That is, the item must be related to the charity’s purposes. For instance, the value of a classical painting donated to an art museum is appropriate to the museum’s mission. It would be deductible at fair market value. But it would be far-fetched to declare that the same painting is compatible with the mission of a symphony orchestra. The tax deduction for a gift of personal property that is not related to the charity’s mission is deductible at cost basis only. You should consult with your tax advisors for the appropriate evaluation and reporting requirements.

4. Retirement Assets

Retirement funds are an increasingly valuable asset to many people—an asset often overlooked as a source of charitable gifts. Giving from an IRA, a 401K or 403B plan can provide you with important tax advantages.

Since the money that has accumulated in these plans has never been taxed, the IRS levies heavy taxes on any distribution, unless that distribution is to a charity.

After you die, your retirement fund could be subject to this income tax, plus estate taxes, considerably diminishing its value before being passed on to heirs. By naming the charity as beneficiary of the remaining retirement fund assets, you can avoid this pitfall. Give other assets to family members and other heirs.

5. Gifts of Life Insurance

You may find that you have some life insurance that you no longer need. “Whole” or “universal” life insurance has cash value and can be donated to your church.

You would receive a tax deduction for the replacement cost of the paid-up policy at the time of your donation, not the face value of the life insurance.

If the policy requires continuing premium payments, you can continue paying those premiums and get a tax deduction for each one if it is done in the following way: the policy must be “owned” by the Church, and it must pay the premiums on it. You make a contribution to the Church each year in an amount that approximates the premium, and the Church pays the premium. You may also designate your parish or Episcopal organization as a full or partial beneficiary of any policy.

6. Charitable Remainder Trusts

The charitable remainder trust is a flexible and creative life income gift vehicle. It can provide you and your family a number of benefits, while providing a substantial gift to support the Church. A trust is created by a written agreement that designates a trustee and provides for income payments to named income beneficiaries (usually you and/or your spouse).

Assets are transferred to fund the trust, and you receive a tax deduction equivalent to the present value of the remainder interest. Trust income amounts are paid quarterly to the income beneficiaries, in an amount equal to the unitrust or annuity amount that is determined when the trust is set up.

At the death of the last income beneficiary, the trustee releases the funds to the charitable organization(s) named in the trust.

Income from a charitable remainder trust is taxed advantageously. Appreciated securities, real estate or cash can be used to fund charitable remainder trusts. There are two forms of the charitable remainder trust: the charitable remainder unitrust and the charitable remainder annuity trust.

A charitable remainder unitrust has a stated payout rate, say 5% or 6%, which is applied against the market value of the trusts assets, as valued annually. If the assets have increased in value during the preceding year, the payout will be higher, still at the same percentage, but now of a larger value.

A charitable remainder annuity trust also has a stated payout rate, but it is based on the initial value of the trust assets. Its quarterly payments do not change, whether the underlying assets of the trust increase or decrease in value.

7. Life Income Gifts

A life income gift enables you to make the gift but keep the income for the rest of your life. Growing out of the 1969 tax act, life income gifts became a way for people to make substantial charitable gifts from their assets, yet still keep— and live on—the income.

Several types of life income gifts work the same way: assets are transferred to a charity or to a trust that will eventually benefit a charity. The charity invests the assets and produces income, which is paid to the donor and/or spouse, or another person if desired. The income can be paid for the duration of their lives or, in some cases, for a specified number of years.

Creating a life income gift entitles you to a tax deduction for what’s called the “Present Value of the Remainder Interest.” This is the amount that the charity is expected to receive when you pass away, discounted for present-dollar value. The value of the income beneficiary’s right to receive income is called the “Present Value of the Income Interest,” sometimes needed to calculate possible gift or inheritance taxes.

Life income gifts are also called “split-interest” gifts, because assets are being managed by a trustee for the interests of both the income beneficiary (whose objective is to receive income) and the charitable beneficiary (whose objective is to receive the greatest asset value at your death).

The common types of life income gifts include charitable remainder trusts, the life estate reserved and charitable lead trust. At the end of this information, you will find, in table-form, the most common options, so you can compare them.

8. Gift of Real Estate with Life Estate Reserved

If you have decided to leave your home or farm to the Church in your will, through a life estate gift you can make the gift now, realize an immediate substantial income tax deduction, yet live in your home for as long as you wish. The property is appraised to determine a current value, then deeded to the Church. You are entitled to a tax deduction calculated on the basis of your life expectancy. In life estate arrangements, you continue to be responsible for real estate taxes, insurance, maintenance and upkeep.

9. Charitable Lead Trusts

A lead trust is constructed for a specified term of years and pays a unitrust or annuity amount from the assets to the Church or Episcopal entities you choose. At the end of the term, the trustee returns the assets (which might well have grown substantially) to you or your heirs.

10. Bargain Sales

A bargain sale is an arrangement by which a donor sells a portion and gives a portion of personal property or real estate to a charity.

Procedures

After a fair market value is determined based on a bona-fide appraisal by a qualified appraiser, the property is deeded to the charity. You may take a tax deduction for a contribution of any portion of the value of the property for which the charity does not compensate you. For example, you make a bargain sale of your $100,000 house to your church for $50,000. The church pays you $50,000. You may take a tax deduction for the $50,000 donated portion.

The gift date is the date the property changes hands.