What is Planned Giving?

"Planned giving" is a term comonly used to describe a wide varity of giving vehicles that allow you to give to charity during your lifetime and/or after your death, while meeting your current income needs and providing for your heirs. Planned giving is typically done in conjunction with estate planning, and is a viable option for donors of all income levels.

From a donor's perspective, planned giving is attractive for many reasons. It amy allow you to make larger gifts than you otherwise could out of your current assets. Depending on how a planned gift is set up, it may also let you receive a stream of income for life, earn a higher investment yield, or reduce your capital gains or estate taxes. Planned gifts often appeal to people who want to benefit a charitable organization but aren't certain how much of their assets they'll need for themselves during their lifetimes.

Planned gifts can be used to benefit a specific nonprofit organization, to establish a fund at a community foundation, to create a supporting organization, or to start a private foundation

Planned Giving Options

The most common types of planned giving vehicles are:

  • Charitable Gift Annuities
  • Charitable Remainder Trusts
  • Charitable Bequests
  • Beneficiary Designations

Charitable Gift Annuities

A charitable gift annuity provides you with lifetime income. To establish a gift annuity, you contribute funds or assets to a nonprofit organization, and that nonprofit in turn makes fixed annuity payments to you from it's general assets for the rest of your life. you receive an immediate income tax deduction for a portion of the gift, and a portion of each annuity payment is treated as a tax-free return of the investment. The portion of the gift not used for payments benefits the nonprofit organization.

Example: If you are age 68 and transfer $20,000 to the Cheyenne Little Theatre Players as a charitable gift annuity, you would receive guaranteed payments of $1,400 each year based upon the 7% annuity rate for your age. The $1,400 may be paid in one sum each year, or in several installments throughout the year.

Over $700 of the income would be tax-free each year, for the next 17.5 years. (After that time, the full $1,400 would be taxable.) In addition, you would be entitled to an immediate charitable deduction of approximately $7,100.

Charitable Remainder Trusts

A charitable remainder trust allows you and/or other designated beneficiaries to receive income from a trust for your lifetime(s), or for a period of years not to exceed 20. At the end of that time, the balance of the trust is transferred to a charity that you have selected. You can take a charitable deduction for a portion of the gift you make to the trust in the year the trust is formed. (In some cases, additional funds may be added in later years.) The two most common types of chariable remainder trusts are annuity trusts and unitrusts, which differ in how the income you receive from the trust in calculated and distributed.

A charitable remainder annuity trust provides a fixed dollar amount with each payment to the beneficiary. This amount corresponds to a percentage of the original investment paid out annually.

Example: A charitable remainder unitrust might pay out 5.5% annually. If the assets were valued at $100,000, the beneficiary would receive $5,500 that year (5.5% of $100,000). If the assets were valued at $125,000 the next year, the beneficiary would receive $6,875 (5.5% of $125,000). As with a charitable remainder annuity trust, the payments may be made in one lump sum each year, or in several installments throughout the year.

The amount paid annually to the beneficiary of a charitable remainder unitrust is a fixed percentage of the fair market value of the assets, as determined each year.

Example: A charitable remainder unitrust might pay out 5.5% annually. If the assets were valued at $100,000, the beneficiary would receive $5,500 that year (5.5% of $100,000). If the assets were valued at $125,000 the next year, the beneficiary would receive $6,875 (5.5% of $125,000). As with a charitable remainder annuity trust, the payments may be made in one lump sum each year, or in several installments throughout the year.

Charitable Bequests

The term "charitable bequest" is used to describe anything you give or leave to charity from your estate through a will or a revocable inter vivos ("living") trust. An "estate" is any property, money or personal belongings that you may have at the time of your death. Most people leave an estate when they die, even though they may not have a great deal of wealth. Even an individual with a small estate can arrange to leave a charitable bequest.

You can arrange to bequeath a gift from your estate in several different ways. You can set aside a specific dollar amount, leave a percentage of your estate, or leave any assets left over after your family has been provided for. Some people sue a bequest to give a charity something they own, such as a car, home, art or jewelry. Others leave a paid life insurance policy or other financial investments, such as stocks, bonds or CDs. Contact your tax advisor to determine if these gifts provide tax savings.

Beneficiary Designation

By designating a charity as the beneficiary of your life insurance or retirement assets, you can enjoy some flexibility in your charitable giving as well as certain tax advantages. The designated charity will receive the specified assets upon your death, and you have the option of changing the eventual recipient throughout your life.

All figures are for illustration purposed only. Current annuity rates may differ.

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CHEYENNE LITTLE THEATRE PLAYERS
PO BOX 20087
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