December, 2002: "Another Option for your Charitable Playbook"

by Mike Bourland
American Football Coaches Foundation

Courtesy: AFCA
Release: 12/01/2002

In our last several articles, we have introduced you to and have continued to discuss the concept of Planned Giving. We have explained its importance in meeting the goals of the American Football Coaches FoundationTM (the "Foundation"), and introduced some basic methods and some more sophisticated methods of Planned Giving. By now you are familiar with some of the basic tools of Planned Giving, which include gifts by Will, Living Trust, and life insurance beneficiary designation. In the last issue we discussed very simple ways for you to help the Foundation by making gifts of cash or appreciated property. We have also previously discussed making a gift through a Charitable Gift Annuity. In this issue we will look at another way to give to the Foundation, by a gift through a Charitable Remainder Trust ("CRT").

As a review, when a donor names the Foundation as a beneficiary of his Will or Living Trust, property passes to the Foundation at the donor's death. Because the Foundation is a publicly supported, tax-exempt charity, the estate of the donor receives an estate tax charitable deduction for the value of the property passing to the Foundation at the donor's death under a Will or through a Living Trust. Additionally, a donor can make a gift to the Foundation by designating the Foundation as the beneficiary of a life insurance policy on his life. At the donor's death, the Foundation receives the proceeds of the insurance policy, and the donor's estate receives an estate tax charitable deduction for the value of the proceeds passing to the Foundation. A Charitable Gift Annuity is part charitable gift and part purchase of an annuity. It is a contract between a donor and the Foundation, where the donor irrevocably transfers money or property to the Foundation in return for the Foundation's promise to pay a fixed, guaranteed payment to the donor, or another person that he designates, for life. Through a Charitable Gift Annuity, a donor can make an immediate gift to the Foundation and provide an income stream for himself or another, either starting immediately or at some point in the future.

As a contrast to the sophisticated techniques described above, as you learned in the last issue, a gift of cash is simple - just write a check and give it to the Foundation. You will receive an income tax charitable deduction limited by 50% of your income, thereby reducing the cost to you of the gift by the income taxes you save through the charitable deduction. Another easy way to make a contribution is by giving the Foundation property that has grown in value since you acquired it. You will normally receive an income tax charitable deduction for the full value (limited by 30% of your income), even though neither you nor the Foundation pays income tax on the stock's appreciation. Therefore, the appreciation is never taxed and the cost to you of the gift is reduced by the taxes saved from the income tax charitable deduction you achieve and the capital gain you avoid.

The next charitable giving technique for our playbook is the CRT. Let's say you are concerned over your ownership of a publicly traded stock that has grown in value significantly since you purchased it, but that pays you a very small annual dividend. You want a higher annual cash flow from the stock but are unwilling to give up 20% of the stock value as a result of the capital gain tax that occurs upon conversion of the investment. You also want to make a contribution to the Foundation and wonder if your financial and charitable goals can be combined. The answer is - Yes, they can!

You can create and fund a CRT with the highly appreciated stock. A CRT is an income tax exempt trust that makes an annual payment to you or another for life and at death distributes the remaining assets of the CRT to the Foundation. Because the CRT is income tax exempt, the stock can be sold by the CRT with no capital gain tax and the proceeds invested in assets that provide you or another an acceptable annual payment, taxed only when received by you or another. Even though the Foundation will not receive anything until the death of the CRT beneficiary(s), you receive an income tax charitable deduction in the year the CRT is created and funded.

A gift through a CRT is an additional way that you can support the Foundation and through the Foundation support the AFCA. As has been emphasized in each of the articles in this series, your participation as a donor to the Foundation is critical to the accomplishment of the mission of the Foundation and the AFCA.

Our goal in these recent articles is to present various types of Planned Giving techniques that can be utilized to make a gift to the Foundation. As you consider these techniques, please also remember to continue your support of the Foundation and the AFCA with your annual contribution (in addition to your member dues). The Foundation also needs your continued support in your community to spread the word about the Foundation to your friends, colleagues and supporters in order to meet its important goals. The Foundation thanks you for your support and requests your continued active involvement in its mission.

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“Coach George Smith is not only an influence on young people, but the influence is multiplied many times in the beliefs of the young people he helped mold into amazing human beings. George is an outstanding coach, but more importantly, he is an outstanding gentleman.” —Tina Jones, Principal of St. Thomas Aquinas High School