Retirement Planning continues to be the focus of much attention, primarily because baby boomers are hanging up their briefcases and tool belts in record numbers, but also because employers are increasingly shifting responsibility for retirement plan performance into the hands of individual employees.
Put simply, today you must become more proactive to create a fulfilling retirement. That means, first and foremost, locking in a secure income. But for many it also includes making time to enjoy family and friends, maintaining an active lifestyle, and taking advantage of the opportunity to give back to those organizations that have made a difference in their lives.
What is not so well known is that charitable giving can play a positive role in helping achieve these objectives. Whether you are retired or your retirement is several years away, there are charitable planning options that may help increase your retirement income and reduce your taxes. These plans give you the unique opportunity to do good for others while doing well for yourself. Below is a gift planning guide and provides a snapshot of various gift options:
OUTRIGHT GIFTS
Cash - Write check, or use credit card. Easy to make; income tax charitable deduction for full value of gift (subject to 50% of Adjusted Gross Income limit).
Securities - Typically, transfer to charity an appreciated asset (stocks, bonds) held for more than one year. Income tax charitable deduction for full fair market value; no capital gains tax payable on asset's appreciated value.
Closely Held Stock - Corporation gives stock to charity, than repurchases same stock from the charity. Fair market value of stock deductible as charitable contribution; no capital gains tax.
Tangible Personal Property - Donate property to charity. Income tax deduction for full fair market value if gift property used by charity for its exempt purposes (otherwise, deduction limited to adjusted cost basis.) Qualified appraisals often necessary.
LIFE INCOME PLANS
Charitable Gift Annuity - Assets (usually cash or securities) donated to charity in exchange for fixed annuity payments. Current income tax charitable deduction for gift portion of donation; part of payments may be tax-free return of principal; capital gains tax on transfer spread over donor's life expectancy.
Charitable Remainder Annuity Trust (CRAT) - Set up trust that pays specific annual benefit for life of beneficiary(ies), or for a period up to 20 years; trust property transferred to charity when donor benefits end; usually funded with cash or securities. Income tax charitable deduction; possibly avoids capital gains when funded with long-term appreciated property.
Charitable Remainder Unitrust (CRUT) - Similar to CRAT, except income amount varies each year as trust assets are re-valued; may be funded with cash, securities, and other assets. Same benefits as CRAT.
REVOCABLE GIFTS
Bequest - Use will to direct property to a charity at your death. Estate tax charitable deduction for value of gift; donor retains lifetime use and control of property intended as bequest gift; most popular form of planned gift.
Revocable Living Trust - Set up trust that directs disposition of assets, including gifts of charity; trust can be revoked or changed. Minimizes costs and delays of probate; facilitates transfer of assets; plan is private, not public (unlike as will); continuity of asset management in the event of death or disability.
Retirement Plan Assets - Charity named as beneficiary of retirement plan assets (other arrangements also possible). May have estate planning benefits, because income in respect of a decedent (IRD) is taxable to heirs, but not to charities.
OTHER GIFTS
Donor Advised Fund - Donors make irrevocable contribution to a restricted fund maintained by charitable organization. Income tax charitable deduction for full amount of gift; donor may advise regarding fund distribution, but donor may not place material restrictions on fund.
Real Estate - Make gift through outright transfer of ownership, through trust, or through will. Arrangements and benefits vary. Possible income tax deductions, possible capital gains tax savings, possible estate tax deduction.
Retained Life Estate - A form of real estate gift in which donor makes gift of real estate but retains right to live in property for remainder of his or her life. Income tax charitable deduction based on present value or remainder interest.
Charitable Lead Trust (CLT) - Charity receives annual trust income; trust principal reverts to donor or beneficiaries at end of trust term. Qualified CLT may qualify for a gift tax or estate tax charitable deduction, and sometimes income tax charitable deduction depending on type of CLT.
Life Insurance - Give life insurance policy to charity, or designate charity as beneficiary or policy, or use policy as wealth replacement tool for a CRAT or CRUT. Income tax charitable deduction for donated policy.
To learn more about The Community Foundation or for additional information on how to contribute, contact:
Development Officer
Phone: (765) 747-7181 • Email: jcrosby@cfmdin.org
