What Is Planned Giving?

Planned giving generally refers to a variety of ways gifts can be made to St. Thomas Church rather than ongoing present gifts of cash. Planned gifts can be comprised of both small, medium and large gifts, and are not the province of just the wealthy. Planned gifts often take effect at some future time, such at the donor’s death. Planned gifts often come with large tax benefits to the Donor.

Common forms of planned gifts:

1. By WILL. This is the simplest form of planned gift, under which a donor leaves a bequest in his/her Will to be given to the Church after his/her death, of a specific amount of money or a specific asset, or a percentage of his/her estate. The gift to the Church is free of federal estate tax, and usually of state inheritance tax. The gift made in the Will can be changed by the donor at any time before death.
2. LIFE INCOME GIFTS
   1. The Donor can make an irrevocable gift ultimately to St. Thomas Church, but reserves for his/her lifetime (or a term of years) an income interest in the property donated (or the Donor can specify that someone else may receive the income interest for life or a term of years, such as a surviving spouse). Species of this kind of gift can take the form of a POOLED INCOME FUND from which the Donor or his/her designee retains the actual income from the pooled fund (minimum gift $2,500) , or a CHARITABLE GIFT ANNUITY, from which the Donor or his/her designee retains for life or a term of years a fixed dollar amount (minimum gift amount $5,000). In both cases, a portion of the gift is tax deductible in year of gift, and in the latter case, a portion of the income interest retained is income tax exempt.
   2. The Donor can create a CHARITABLE REMAINDER TRUST (minimum gift $100,000) which has substantial favorable tax consequences. The Donor retains for his/her life an income interest for life, consisting of a total return of at least 5% of the value of the trust (which can be followed by an income interest for the life of another, such as the Donor’s spouse). The Donor receives a current income tax deduction for a portion of the gift in the year made, and an estate and inheritance tax deduction for the value of the remainder interest passing to St. Thomas following the death of the Donor. Moreover, if the property funding the trust is appreciated, the Trustees can liquidate the trust assets and reinvest the proceeds free of the customary capital gains tax that would have been generated if the Donor himself/herself had sold those assets.
   3. CHARITABLE LEAD TRUST is a trust (minimum gift $100,000) in which a Donor gives property to a trust which then pays the income to St. Thomas for a term for years, after which the trust terminates and the trust assets are paid outright to the Donor or members of the Donor’s family. This is fairly complicated, but there are significant tax advantages to the Donor and his/her family.
3. GIFTS OF REAL ESTATE, APPRECIATED PROPERTY, AND TANGIBLE PERSONAL PROPERTY If a Donor has various forms of property which have appreciated in value over the Donor’s cost basis, and this property is donated to St. Thomas Church, the property can usually be liquidated by the Church free of the imposition of any capital gains tax which would have been generated if the Donor had sold the property. Moreover, the Donor ordinarily will be entitled to take a charitable income tax deduction for federal income tax purposes in the amount of the full fair market value of the property at the date of gift.
4. LIFE INSURANCE POLICIES AND RETIREMENT ACCOUNTS
   1. LIFE INSURANCE
      Many people who are no longer youngsters have life insurance policies which they no longer need to protect their families, and indeed, many of them have forgotten they own them and they no longer count on the policies to protect their families after their demise. In fact, many of these policies are fully “paid up” and the Donor can maintain the policies without any cash outlay each year for premiums. These are perfect candidates for planned gifts to the Church. Owners of such policies can simply designate St. Thomas Church as beneficiary of the proceeds of the policies on the Donor’s death – the Donor will not get an immediate income tax deduction, but the Donor’s estate will not have to pay any estate or inheritance tax on the policy proceeds. An even better technique is for the Donor to transfer ownership of the policy to St. Thomas, which in turn the Church can name itself beneficiary, and decide whether to keep the policy in force and collect the death benefit at the Donor’s death, or to cash in the policy and receive the cash surrender value. The Donor will be entitled to a charitable income tax deduction for the cash surrender value at the time of the transfer of the policy to the Church.
   2. RETIREMENT ACCOUNTS
      Many people have tax sheltered retirement accounts with substantial balances. The only disadvantage of these is that when funds are withdrawn by the Owner, the amounts are subject to full federal income tax. Although Congress has limited the following tax benefit in recent years, it is unclear whether the favorable tax treatment will be available in future years. If available, the tax benefit of donating funds from retirement accounts directly to St. Thomas is substantial, enabling a Donor to save significant income tax by making such a donation.The foregoing is just a summary outline of the methods available to make planned gifts to St. Thomas Church. Those gifts constitute a critical element in providing long-term support of the Church. Barbara Stechert and all the members of the Resources for Ministry Commission would be pleased to work with any potential Donor to St. Thomas, and his/her legal counsel or financial adviser, to help them find a way of making a planned gift which is not only beneficial to St. Thomas, but which the prospective Donor believes is affordable and appropriate.A totally separate issue is concerned with the use of the assets gifted to St. Thomas. The planned gift must be made in writing. A Donor may choose to allow St. Thomas to expend the assets as the Church deems appropriate, both principal and income (this is the default position which governs if nothing to the contrary is prescribed in the gift). As an alternative, the Donor may require that the gift be added to the Endowment, with income only (at the rate specified by St. Thomas annually for Endowment funds) to be used generally for the Church’s purposes as it sees fit, or for a purpose specified by the Donor. However, if the Donor intends to establish a separately held fund for a specific purpose, the fund must be worth at least $25,000 at inception.When speaking with a Donor or prospective Donor, the St. Thomas representative should assure him/her that the Resources for Ministry Commission is charged with the responsibility of identifying, to the greatest extent possible, the specifics of all planned gifts, to make possible the Church’s financial planning, and that the information developed will be held by the Church in the strictest confidence. If any planned gift is to be publicly attributed to a Donor, the Donor’s written permission to do so must be obtained.