Bequests in your living trust or will

One of the easiest ways to make a planned gift is through a bequest in your will or living trust. Bequests allow individuals to make significant gifts that they may not have been able to make during their lifetime. Bequests can also generate significant estate tax deductions. When you make a charitable bequest, you retain ownership of your property during your lifetime and have the flexibility to change your living trust or will if your circumstances or family needs change.

Giving retirement funds

Qualified retirement plan assets often represent a major portion of the average person's estate. Due to special tax considerations that apply to these plans, they make excellent choices for funding a testamentary charitable gift to the Jones Center. Retirement plan benefits are subject to federal estate taxes and can give rise to a substantial income-tax liability as they may represent taxable income to the beneficiary who receives them. Consequently, a charitable gift of qualified retirement plan benefits can produce double savings. First, the value of the interest passing to the Jones Center is fully deductible for estate-tax purposes. Second, since the Jones Center is a charitable organization, it will pay no income tax on the retirement benefits. Directing qualified retirement benefits to the Jones Center, while directing other assets without income-tax consequences to family or other non-charitable beneficiaries, increases the benefits to all. Other double tax assets that make wonderful testamentary charitable gifts include U.S. Savings Bonds and commercial annuities.

You may also use retirement funds to establish a charitable trust, naming your children as income beneficiaries for a period of 10-15 years. As a tax-exempt entity, the trust pays no income tax, and you receive a partial estate tax deduction. The total benefits to your children may be greater than if you had simply left your retirement funds to them as a lump sum. You may also use retirement funds to fund a bypass unitrust, paying the income to spouse and children for their lifetimes.

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

• Charitable Remainder Unitrust
  The primary feature of the unitrust is that you establish a fixed percentage rate for payment. The payment percentage must be at least five percent of the value of the trust assets. The unitrust payment is made at least annually. Because the value of payments is liked to the market value of the trust, distributions will vary from year to year. For example, as the value of the trust increases over the years, the income you receive will increase correspondingly. You may also add property to the unitrust over time.
  
• Charitable Remainder Annuity Trust
  The annuity trust is similar to the unitrust. However, instead of a payout that may vary, the annuity trust provides a fixed payment of not less than five percent of the initial fair market value of the original gift to the trust. The fixed-payout feature of the annuity trust makes it particularly suitable for a beneficiary who needs the security of a specified payment. Although you cannot add property to an annuity trust, you can establish new annuity trusts if desired.

• You receive an income-tax charitable deduction in the year you create a charitable remainder trust.
• You may remove appreciated property from your estate by creating a charitable remainder trust. If you are subject to federal estate tax, you may achieve substantial savings.
• You can avoid the capital-gains tax if you use appreciated property to establish a charitable remainder trust.
• You may substantially increase your income over that produced by the appreciated equity asset used to fund the 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. As a result, you are provided with a current charitable income-tax deduction for the present value of the payments the Jones Center receives during 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. Through the family lead trust, you may significantly reduce or even eliminate transfer (gift or estate) taxes on the value of the assets funding the trust. In addition, any appreciation in the value of the assets in the family lead trust will avoid transfer taxes when eventually received by the family.

Gifts of real estate with retained life interest

You may 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. A farm includes any land used for producing agricultural products or raising livestock.

Calculations and Illustrations

You can receive calculations and illustrations of charitable remainder trusts, charitable lead trusts, life estate reserved 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@jcf.jonesnet.org