Support a cause that's important to you with a charitable gift and help our organization fulfill its mission for many years and generations to come
Example 1Using a beneficiary designation form to make an outright gift of a retirement asset is a simple process for a donor. This designation can be easily modified during the donor's lifetime. A nonprofit that receives a testamentary gift of retirement assets will benefit from the funds to the fullest extent, since the nonprofit will not be subject to income tax on the distribution as an individual beneficiary would be.
Teresa is an 85-year-old widow with approximately $100,000 held in IRA accounts. Some of these IRA funds were earned over the course of her career, and some had been transferred to her in the form of a rollover IRA upon her husband George's passing. In their retirement years, the couple had discussed their intentions of providing for each other and then dividing the remainder of their IRAs among ten of their favorite charities. Teresa and George had named each other as the primary beneficiaries of their IRAs, then listed ten charities as secondary beneficiaries, each receiving a 10% share. After George's death, Teresa updated the IRA beneficiary designation form to reflect the ten charities as equal primary beneficiaries.
Teresa notified her children and charitable beneficiaries of the charitable intentions she shared with George. She requested these testamentary gifts be recognized in their joint memory. Upon Teresa's passing, the children informed the charitable beneficiaries of the designations their parents had made. Teresa and George's children received kind notes from the various organizations. They were proud their parents had made a difference for many wonderful causes in their hometown.
Example 2A charitable gift annuity can be a great tool for a donor who wishes to provide a lifetime benefit to one or more loved ones, followed by a future gift to charity. A testamentary CGA funded with an IRA can serve as an excellent substitute for the "stretch" IRA payout that was phased out by the SECURE Act. The extended distribution schedule provides a long-term income stream and allows the beneficiary to spread out the income tax over his or her lifetime.
George and Eleanor are both 91 years old. They have three adult children who range in age from 68 to 72 years old. George and Eleanor live off the rental income generated by three small apartment buildings they have owned for many years. It has been understood in the family for many years that each child would ultimately inherit one of the apartment buildings.
George and Eleanor also have approximately $600,000 in their IRA accounts. While they strongly preferred to give their children real estate rather than a lump sum of cash, they feared their children might struggle keeping up with the expenses of the inherited properties if unforeseen expenses were to arise. Eleanor reminded George that they had received some literature from their local nonprofit animal rescue organization after attending a fundraising event for a remodel of their kennel facility. A description of a testamentary charitable gift annuity funded with an IRA had caught their interest.
The couple called the gift planner with the rescue organization to discuss the process of setting up a testamentary deferred CGA. They updated their beneficiary designation forms to reflect their intention to create a testamentary deferred CGA for each child. The IRA sums would be divided into equal shares to fund a two-year deferred charitable gift annuity for each child, with the payout rate for each child determined at the time of the parent's passing based on the ACGA suggested payout rate for the child's current age. This arrangement would allow each child to receive some income for life, with the remainder passing to the nonprofit. The couple completed a gift agreement to indicate their intention for their future testamentary CGAs to indicate that to the extent possible, the residuum of the CGAs would be used to support construction, remodel projects and continued maintenance related to the kennel facilities.
Example 3:A testamentary CRT can benefit a number of individuals, including those who are younger than the typical age for issuing a gift annuity. The trust can be structured to provide distributions for a term of up to twenty years, so unlike a CGA, it does not need to be tied to a beneficiary's lifetime. Drafting the CRT document will require the assistance of the donor's counsel. Once the document is executed, the donor can facilitate the testamentary funding of the trust simply by revising his or her beneficiary designation form for the relevant account. During life, the donor will retain the ability to change which accounts will ultimately fund the trust at death and in what proportions.
Jason and Kira are two successful physicians who met in medical school and married soon after graduation. For the last twenty years, they have dedicated their free time to a local nonprofit that provides medical care for children affected by domestic violence. When their son and daughter began preparing for college, Jason and Kira sat down with their estate planning attorney to revisit their plan. Although they had set up a revocable trust when the children were infants, they recalled that their IRAs were not part of their holistic estate plan due to the relatively small size of their IRA balances. Now, seventeen years later, they estimated they had accumulated approximately $1,000,000 in several IRAs.
Jason and Kira considered their options for their IRAs. On one hand, they did not want their children to receive a large inheritance all at once, in order to avoid the temptation of irresponsible spending. At the same time, they were concerned that if they planned a sizable outright charitable bequest at death, they might give away too much too early and disadvantage their children.
Their attorney suggested they consider a testamentary charitable remainder unitrust as a vehicle to distribute their IRAs. After the passing of the surviving spouse, the IRAs would be paid into the trust and then distribute 5% of the assets each year to their two children. After a term of twenty years, the remaining trust assets would flow to their favorite nonprofit.
Their attorney guided them on revising their beneficiary designation forms as well. Each of their IRAs named the other spouse as the sole primary beneficiary. They both identified the "Trustee of the J&K Family Charitable Remainder Unitrust dated July 4, 2021" as the secondary beneficiary. The forms would need to be updated upon the passing of the first spouse to ensure their plan is properly executed. The attorney explained that upon the passing of the surviving spouse, the trustee should contact the custodians for the various IRAs to coordinate the transfer process.
The attorney also noted that if the couple felt that circumstances no longer required the use of the trust, they were free to modify the beneficiary designations as desired and leave the IRA remainder to charity. Jason and Kira were reassured to know that they had an appropriate contingency plan in place while their children were relatively young, but that this plan could be reevaluated and adjusted as circumstances changed.
A charitable gift annuity is a great way you can make a gift to our organization and benefit. You transfer your cash or property to our organization and we promise to make fixed payments to you for life at a rate based on your age.more
© Copyright 2022 Crescendo Interactive, Inc. All Rights Reserved.
This site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice. For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.
Certain Style/Design Elements: © Copyright eCatholic