Your investment in the lives of children can change lives not only
now, but also into the future. With a planned gift, you can create a
meaningful legacy of care that lasts beyone your lifetime.
Investing In Kids Through Your Will
When a donor leaves assets to charity through a will, he or she
is making a bequest. The donor's estate will receive a charitable
estate tax deduction at death, when the gift goes to charity. Your bequest may be for
general purposes or for a restricted purpose that you describe in your
will. You may give a specific amount of money or specific assets (stock,
property, land) or name the charity as the recipient of the “rest
and residue” of your estate (all remaining monies after your specific
bequests are fulfilled). Always make sure you give the correct legal
name for the charity. The Home’s legal name is the Methodist
Home of Kentucky, Inc.
Gifts of Stock in Your Will
To give securities rather than money, simply give a correct description
of the securities and designate the Methodist Home of Kentucky, Inc.
as the recipient. For example, “I give 100 shares of XYZ Corporation
to the Methodist Home of Kentucky, Inc.” Special care should
be taken to include language that covers additional shares of XYZ Corporation
issued subsequent to the writing of the will due to a stock split or
issued by a successor corporation in exchange for shares of XYZ Corporation.
One way to address these contingencies is to gift “all of my
shares of XYZ Corporation, their successors and assigns, to the Methodist
Home of Kentucky, Inc.”
Gifts of Other Investments in Your Will
Similarly to a gift of stock, gifts of mutual funds, bonds, CD’s,
IRA’s or other investments may be considered for a bequest
to the Methodist Home of Kentucky. A correct description identifying
the investment instrument should be included with the language of
Investing In Kids Through A Charitable Gift Annuity
A gift annuity is a contract between a charity and donor. In return
for a donation of cash or other assets, the charity agrees to pay
the donor, (or a friend or family member if the donor so chooses),
a fixed payment for life. The donor can also claim a charitable tax
deduction. If a donor funds a gift annuity with long-term capital gain
property like appreciated stock, the donor will report only some of
the gain, and may be able to report it in installments over many years.
Like any other annuity, this plan will pay you a fixed dollar amount
for life. You begin by making an irrevocable gift of money or securities
to The Kentucky United Methodist Homes for Children and Youth. The income
you will receive is determined by your age (and the age of a second beneficiary,
if you choose) at the time of the gift. The Kentucky United Methodist
Homes for Children and Youth guarantees the amount, which remains constant
once your gift is made.
Example: Alice, 75, enters into an agreement
with the Methodist Home of Kentucky, Inc. for a Charitable Gift Annuity
in the amount of $50,000. In return for her irrevocable gift of $50,000
Alice receives a contractually-guaranteed annual payment of 7.1%, or
$3,550 (based upon her age) every year for her lifetime.
This type of income plan is particularly attractive because the older
you are, the higher the rate you can secure when the contract is signed.
Here are examples of recent rates:
ONE LIFE TWO LIVES
AGE RATE AGE RATE
55 5.5% 65/60 5.5%
65 6.0% 70/65 5.7%
75 7.1% 75/70 6.1%
85 9.5% 85/80 7.3%
Note: For current rates, please call us. The above numbers
are samples of rates that have been given in the past. Rates are
based on the published rates set by the American Council on Gift
Annuities, of which we are a member, and which reflect nationwide
You are entitled to an income tax charitable deduction in the year of
your gift. Also, a large portion of each annuity payment to you is tax-free
for a period of years. Both figures are based upon life expectancy as
determined by the U.S. Treasury tables.
Investing In Kids Through Other Planned Gifts
Life Insurance and Beneficiary Designations
Insurance policies (new or existing) may be given to charities in
most states. Depending on the contract’s paid-up status,
the charity may need to continue paying premiums. Donors may also
name a charity as a beneficiary of an existing policy, either entirely
or in part. Additionally, a charity may be named as a beneficiary
of a retirement plan (e.g., IRA, 401k, profit-sharing, etc.) or annuity
contract. The advantage of this strategy is that the charity
usually receives the proceeds without the accompanying income tax
Retained Life Estate
A donor may make a gift of a farm or residence to charity and retain
the right to live in the house for the remainder of the donor's life.
The donor receives an immediate income tax deduction for the gift. At
the donor's death, the property goes to charity.
Charitable Remainder Trust
This trust makes payments, either a fixed amount (annuity trust) or
a percentage of trust principal (unitrust), to whomever the donor
chooses to receive income. The donor may claim a charitable income
tax deduction and may minimize any capital gains tax if the gift is
of appreciated property. At the end of the trust term, the charity receives whatever
amount is left in the trust. Charitable Remainder Uni-Trusts
(CRUT - paying a fixed percentage) may provide some flexibility in
the distribution of income, and thus can be helpful in retirement
planning, while Charitable Remainder Annuity Trusts (CRAT - paying
a fixed dollar amount) are more rigid and restrictive.
Suppose you would like a life income determined by a percentage of the
fair market value of a trust you create with assets you choose. A fixed
percentage is agreed upon at the outset, and your income for each year
is calculated by multiplying this rate by the latest annual valuation
of the investment portfolio of the trust.
Example: Fred, 62, contributes $100,000 in cash to
a unitrust, arranging to receive 6% of the fair market value of the unitrust
assets each year, payable quarterly. The first year he is entitled to
$6,000 (6% of $100,000). At the time of the second valuation, the unitrust
portfolio is worth $110,000. For that year Fred is paid $6,600 (6% of
$110,000). If the trust value had decreased to $90,000 at the time of
the second valuation, Fred would have received $5,400 (6% of 90,000).
In each subsequent year, the same process is followed. In the year he
creates the unitrust, Fred is entitled to an income tax charitable deduction
of $36,849 (deductible up to 50% of his adjusted gross income). If necessary,
he has an additional five years to use up the deduction.
Contact Melinda Ryles-Smith at 859-873-4481.
This Not Intended as
A will should always be drawn by or with the advice of a lawyer and
this information does not diminish the need for such professional legal
While many of these split
interest gifts and techniques are used for donors with larger estates
having anticipated tax liabilities, they still work when the donor
has a modest estate. A
good advisor should be able to suggest tools to help a donor preserve
personal financial security and still fulfill his or her charitable
Contact Melinda Ryles-Smith at 859-873-4481.