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 the bequest.

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 economic trends.

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 liability. 

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.

DISCLAIMER...
This Not Intended as Legal Advice

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 counsel.

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 goals.

Contact Melinda Ryles-Smith at 859-873-4481.