Charitable giving can take many forms. The list to the right shows nine common methods to make charitable gifts. Each has advantages and disadvantages. Please click on the topics on the list to find more information about available options. We hope this information will both increase your knowledge about stewardship and will spur you to consider how you might become a more effective steward of the resources God has given you.

Please contact Janis Heier, Director of Administration at Bethlehem for more information (225-9740 ext. 14)

Outright Monetary Gift

Outright monetary gifts are the most common and simplest method of giving. Each time you place a check or cash in the offering at church, you exercise this method of giving. If the donor itemizes deductions on his or her federal income tax return, the donor may be eligible for a charitable income tax deduction. A donor should keep a receipt of the donation to support a deduction, especially if a cash gift is made.

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Bequest in Will or Trust

Another giving method is through a will bequest at the donor’s death. To create the gift, the donor includes a gift provision in his or her will or living trust document to leave a specific asset, dollar amount or fixed percentage of the donor’s estate to charity. Upon the donor’s death, the donor’s estate representative or trustee is responsible for completing the gift to the charity identified in the will or trust document. Until death, the donor enjoys full control and use of the money.

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Investment Gift

An investment gift can be accomplished by transferring ownership of an appreciated investment, like stock, mutual fund shares, or real estate, to an IRS recognized charity. Why do some people make investment gifts? The benefits of giving highly appreciated assets to charity include the ability to take a charitable income tax deduction for the full value of the gift, assuming the donor can itemize deductions. In addition, the capital gains tax is completely eliminated as well through the gift. If the donor has a large estate on which estate taxes will be due, then the estate tax may be reduced or eliminated as well.

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Life Insurance Beneficiary

Every year, many people choose to provide a life insurance beneficiary gift to their church or to a qualified charitable organization. In this gift, donors simply name the organization as the beneficiary of their life insurance contract. The gift is simple to understand and implement. Contract owners maintain control of the contracts until their deaths, so they can choose to change beneficiaries if they want. Insurance proceeds are estate tax deductible. For those who want to leave a gift at death and for those who desire to create a larger gift through smaller annual premiums, the gift of life insurance is ideal.

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Life Insurance Contract

Donors can irrevocably “gift” new or existing life contracts with annually required premiums to a charitable organization by making the organization the sole owner and beneficiary of the contract. The donor then donates the equivalent of the premiums to the charitable organization, which pays the premiums to the life insurer. After the donor’s death, the charitable institution receives the proceeds of the insurance contract. This provides a larger gift (death proceeds) from a smaller gift (premiums). In addition, the gift may result in income tax deductions for the premiums gifted, and the insurance proceeds are removed or deducted from the donor’s estate. Often, the estate to the donor’s heirs is not substantially reduced because of the gift.

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Charitable Gift Annuity

Many individuals choose to support their church or favorite nonprofit organization through the use of a charitable gift annuity. This financial tool is a private agreement through which a donor gives an asset to a charity in exchange for a specified life income from that charity. This annuity allows the individual to give a meaningful gift and receive an income benefit without investment responsibilities. It also serves as a means of generating income from a low- or no-income asset. Gifts of appreciated property can also reduce a donor’s taxation of capital gains. Finally, donors may receive a partial income tax deduction from this giving method.

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IRAs and Qualified Plans

Some donors choose to support their church and favored nonprofit organizations through the gift of individual retirement accounts (IRAs) or other qualified retirement plan assets. This can result in a potentially substantial gift to the charity and the elimination of income and estate taxes due from heirs on the plans. This gift is revocable until the owner’s death and is well suited for donors who are concerned about multiple taxation issues, who desire to leave a gift at death, who wish to avoid publicity about the gift, who want ownership, control and use of the assets until death, and who do not need to provide their surviving spouse with income from the IRA or plan.

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Charitable Remainder Trust

A charitable reminder trust is a tax-exempt trust that receives and manages assets to provide an income to a donor and a gift to a charity at the donor’s death. The income can cover one or more lives or a term of years. It offers multiple tax-saving advantages (an income tax deduction; the bypass or deferral of capital gains tax otherwise due on the sale of an appreciated asset; and an estate tax deduction). In addition, a charitable remainder trust removes asset management responsibilities from the donor. Income from the trust may fluctuate, and setting up the trust generally requires professional tax, legal and accounting advice.

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Zero Estate Tax Plan

Giving through a zero estate tax plan combines giving gifts to charity with gifts of life insurance. Using this plan, a donor typically transfers an asset to a charitable remainder trust (CRT), which provides an income to the donor. The donor than acquires a life insurance contract on his or her life with a death benefit equal to the value of the asset given to the CRT. The life insurance policy is placed in a separate irrevocable life insurance trust. The donor then uses the income from the CRT to make gifts to the insurance trust as needed so that the trustee of the insurance trust can pay the annual insurance premiums. This arrangement allows the donor to benefit the charity while maintaining the amount of assets that will pass to his or her family.

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Please contact Janis Heier, Director of Administration at Bethlehem for more information (225-9740 ext. 14)