STRATEGIES FOR PLANNED GIFTS

Typically based on assets instead of income, planned gifts afford excellent estate planning opportunities, ways to minimize taxes and flexibility in distribution to family and charity. There are a number of different gifting strategies that an individual may choose depending on his or her individual situation, and we have summarized some below. You may wish to visit with an estate attorney or qualified financial advisor to determine what will work best for you and your family, particularly as the tax regulations continue to evolve.

Giving Retirement Funds   

Qualified retirement plan assets (such as those in an IRA, 401k, Keough or pension plan) often represent a major portion of one’s estate. Retirement plan benefits are subject to federal estate taxes and can give rise to a substantial income-tax liability to the beneficiary who receives them. Due to special tax considerations that apply to these plans, funding a testamentary charitable gift to The Jones Center could be a good move.  Directing qualified retirement benefits to The Jones Center, while directing other assets without income-tax consequences to family or other non-charitable beneficiaries, can increase the benefits to all. Other double tax assets that make wonderful testamentary charitable gifts include U.S. Savings Bonds and commercial annuities.

Life Insurance  

Many people own some form of life insurance but the original needs for financial protection may no longer exist. The policy itself may be gifted to The Jones Center, enabling you to make a substantial gift for a relatively modest annual outlay. You will receive a charitable deduction for the premiums that you continue to pay on the policy. And, a gift of a paid-up policy can result in a substantial current income-tax deduction.  Alternatively you may choose to maintain maximum flexibility by naming The Jones Center as the beneficiary of your policy, without giving up ownership.

Life-Income Plans   

A life-income plan allows you to make a substantial gift to The Jones Center and still provide for your personal financial needs. There are several types of plans which combine life income payments for you and/or your designated beneficiaries and create a gift to The Jones Center at their conclusion. One of these plans may be appropriate for you if you are seeking substantial tax benefits and wish to increase cash flow to you and/or your beneficiaries, depending on the type of asset contributed.

Charitable Remainder Trusts
When you establish a charitable remainder trust, you transfer cash or appreciated property to a trust administered by a trustee of your choice. The trust pays an income to you or your chosen beneficiary(ies) for life or for a specified term of up to 20 years. At the death of the last surviving beneficiary or upon termination of the term of years, the trust principal is given to The Jones Center designated to programs you wish to support. There are two types of charitable remainder trusts: the Charitable Remainder Unitrust and the Charitable Remainder Annuity Trust. 

Charitable Lead Trust 
The charitable lead trust takes a different approach. It preserves the asset for later distribution to you or your designated beneficiaries while allowing The Jones Center to benefit from the investment return during the time allotted. The lead trust provides a series of payments to The Jones Center for a period of time, after which the property either reverts to the donor or passes to the donor's family. 
There are two types of charitable lead trusts: the grantor lead trust and the more often used family lead trust. Under the grantor lead trust, the trust assets are returned to you at the end of the trust term. Under the family lead trust, the assets remaining in the trust are distributed to your family, usually children or grandchildren, at the end of the trust term.

Gifts of Real Estate and Other Assets
Another option is to make a gift of your personal residence or farm to The Jones Center, and retain the right to the property for your life.  Under this approach you may continue to occupy the residence or operate the farm without disruption. Your gift of a remainder interest in a personal residence or farm provides you with a current income tax charitable deduction for the present value of the remainder interest and permits you to escape any potential capital-gain tax on the built-in appreciation in the property. You also remove the asset from estate tax. A personal residence may include a condominium or vacation home. Other assets that may be given include stocks, bonds, vehicles, art and jewelry. Such gifts typically provide tax savings.

You can receive calculations and illustrations of charitable remainder trusts, charitable lead trusts and other planned gifts as a free service of The Jones Center by contacting Kelly Kemp, Chief Advancement Officer at 479-756-8090, ext. 2119 or kkemp@jonesnet.org