The following tools are listed, because they can serve you in accomplishing your estate-planning goals. This information is provided for general information only and is not provided as legal or financial-planning advice. Your attorney or financial planner can offer specific direction that fits your personal situation and is consistent with the current laws.

To discuss a planned gift to KML, contact your KML Estate Plan/Deferred Gift Counselor, Mr. Paul Snamiska (262-677-4051 x1116; paul.snamiska@kmlhs.org).

Give appreciated assets to KML and escape the capital gain tax while receiving an income tax deduction. You also remove that asset from your estate, thereby reducing your potential estate tax burden.

Examples of appreciated assets include land, stock, artwork and other personal property that is worth more now than it was when you purchased it.

Appreciated assets are investments or personal property that have a current value that is higher than the price you paid for it. Assets such as stocks, mutual funds, land, and collectables can gain value over time. The owner of appreciated assets could face tax consequences when selling those assets for a profit.

Using appreciated assets as charitable contributions is a great option for those who wish to support ministry and receive some great tax benefits. The donor of appreciated assets avoids capital gains taxes and also could be eligible for a tax deduction for the charitable gift.

Here are some examples:

Example 1: Billy inherited some undeveloped land from his uncle, and would like to donate it to KML. Since the land has appreciated in value, he is concerned about the taxes he will have to pay if he sells it. To avoid the tax consequences, he donated it to KML and asked that the money be used for capital improvements. By making this decision, Billy avoids some significant taxes and gives a sizable gift to KML for ministry.

Example 2: Jay and Laura own some rental property, but they are ready to sell it before they die. Their children don’t want to continue operating it, and Jay doesn’t want the property to be part of the estate settlement. They are also concerned that the property has increased in value over the years and might cause a major tax burden for the family. They decide to donate the property to their church and let the church leaders handle the sale. This approach gives Jay and Laura an opportunity to make a donation to their church for the full value of the property and also remove the asset from their estate without the concerns of capital gains and the related taxes.

Donating appreciated assets can be a great opportunity for both the donor and the charity, but there are issues to address before the final decision should be made. Contact your financial or estate-planning professional before making a final decision regarding the donation of appreciated assets.

This simple option allows you to designate the recipient(s) of your various funds without the cost or delays of probate. You can name more than one beneficiary on your accounts which allows you to split the assets among loved ones as well as KML or other charities.

Examples of these assets include life insurance, IRAs, bank accounts and other investment accounts.

You have the option of naming one or more beneficiaries on many of your assets including bank accounts, insurance policies, retirement plans, and other personal property.

With some assets, such as bank accounts, you can create a Payable on Death (POD) designation. A POD authorizes the transfer of specific assets to another person after you die. One advantage of a POD is that the transfer occurs without going through probate.

Other assets, such as insurance policies and retirement accounts, allow you to name one or more beneficiaries who will receive the remaining assets after you die. Again, the beneficiary listing is valuable because the transfer occurs without going through probate.

Those who wish to make a charitable contribution through their estate plan can use a POD or beneficiary listing as a way to designate a gift for charity. There are three benefits to such designations: (1) you do not have to change your will to make these designations; (2) beneficiary designations can easily be changed if you wish to designate a different charity in the future; and (3) your designated charity will receive the donation quickly without the delays of probate.

Here are some examples:

Example 1: Pete doesn’t have a lot of wealth, he doesn’t own a home, and no longer owns a car. He has a number of CDs at the bank along with a checking account and savings account. Since Pete has no heirs, he wants to leave his assets to his church. To make things easy, he goes to his bank and creates Payable on Death designations for each account. By doing this, he maintains total control of his assets while alive, and then those assets will transfer smoothly to his church after he dies.

Example 2: Randy and Jean are not rich, but they have accumulated some assets over the years. They want to create an estate plan that provides for their three children, and they also want to give a charitable gift for their area Lutheran high school. One problem, however, is that Randy’s job requires him to move frequently. Since they want to give their charitable gift to the school in the area in which they live, they are fearful that they will have to modify their will every time they move. After discussing this concern with their professional advisors, they decide to use their retirement plans as their charitable gift, and split the rest of their estate among their children. Each time they move, Randy and Jean simply change their beneficiary designations on their IRAs so they list the school in their area. This does not cost them any money, and the Change in Beneficiary form is easy to complete.

Example 3: Joe and Betty are living on a fixed income and are very frugal with their money. They have a fairly small estate, but they still hope to leave a nice inheritance for their grandchildren and a gift for KML. Since the death benefits from their life insurance policies are tax free, they name their grandchildren as beneficiaries on those policies. They list KML as the beneficiaries on their IRAs for two reasons: (1) those are taxable benefits, but designating KML as the beneficiary, there will be no tax consequence on that gift; and (2) this decision allows them to make a charitable gift and still leave a nice inheritance for each grandchild.

Beneficiary listings are easy to designate, they provide direct distribution of assets without going through probate, and they are handled without the need to modify your will. As with all estate planning decisions, consult with your financial or estate-planning professional before making any significant decisions regarding beneficiary designations.

Policies can be purchased that name KML as a beneficiary. You donate the yearly premiums to maintain the policy. The gift of the premiums is much smaller than the possible gift after death. You would be surprised how big a gift can be given for a small yearly premium! One example is a donor who wishes to donate $1,000 annually to KML. She purchases a life insurance policy that requires a yearly premium of $1,000 and donates it to KML. Her gift every year is accepted by KML as a charitable donation and is applied to the insurance policy. Upon death, the full value of the policy is given to KML with no additional cost and no need for probate.

Life insurance is not typically promoted as a vehicle for charitable giving, but there are some wonderful benefits for those who have the interest and ability to make charitable gifts through life insurance policies.

There are a variety of ways in which a life insurance policy can be used as a charitable donation.  Here are a few options:

• Designate a charity as the beneficiary of an existing policy. By doing this, the death benefit is paid directly to the charity after you pass away.
• Donate an existing life insurance policy to a charity. The charity can continue making premium payments on the policy and receive the full death benefit when you pass away, or they can redeem the policy for the current cash value.
• Give your policy, either existing or new, to a charity, and agree to make contributions in the amount of the annual premiums. This option allows you to possibly claim a charitable deduction for your contribution, and when you pass away, the charity receives the full death benefit.

Here are some examples regarding the use of life insurance policies for charitable donations:

Example 1: George and Janet purchased insurance policies for each other in the amount of $100,000. Now in retirement, they realize they don’t need that level of coverage anymore. They worked with a financial planner to create a plan that ensures financial stability for the remainder of their lives. After years of paying premiums on their insurance policies, they don’t really want to take the cash value at this point in their lives.

George and Janet meet with their insurance agent and change the beneficiaries on their policies. They both agree to designate KML as the recipient of the funds, but they disagree as to how the money should be used. Janet wants to support a major project and feels that the money should be used right away. George is committed to long-term support and likes the concept of endowment funds. So Janet designates KML as her beneficiary, and George choose the KML Foundation as his beneficiary. By making this decision, George and Janet make very generous gifts to the ministry of KML, and yet their overall investment is very affordable.

Example 2: Sam and Joyce don’t make a lot of money, but they always appreciated the tuition assistance they received when they sent their two children to KML. They also want to give a large gift to their church. Their concern is that they don’t have the cash at this point in their lives to make those larger gifts, and they really want to leave a nice estate gift to their children and grandchildren.

After some consultation, Sam and Joyce decide to take out two insurance policies and donate one to their church and the other to KML. Each year, Sam and Joyce make contributions to their church and KML that cover the cost of the premium payments. For Sam and Joyce, those contributions qualify as deductions on their tax return. This plan allows the two of them to make generous gifts to their favorite ministries and also designate a sizable inheritance for their heirs.

If using life insurance as a charitable donation seems appealing to you, consult with your insurance agent and your financial planner to ensure this is a wise decision for you.

These types of transactions are easy to make. It may offer even more benefits to you and to KML than a cash gift. In some cases, making a charitable contribution using an appreciated asset can help you accomplish your personal goals as well as exercise your charitable spirit. A transaction can be done electronically directly to KML.

These are charitable gifts that are made during a donor’s lifetime. The gift is made to KML and the donor receives an annual payment in return to help supplement their other income. There are different types of Life Income Gifts, but all of them are designed to benefit the donor during their lifetime as well as provide a nice gift for KML when the donor goes to heaven. One example is the Charitable Gift Annuity (CGA). A gift of $10,000 or more qualifies the donor to receive annual income at a rate that is higher than savings or money market rates, an immediate tax deduction, and ultimately a gift to KML.

Charitable Gift Annuity

An annuity is a financial product that you can use in your retirement or estate planning. You can purchase an annuity in advance of retirement, and then receive a steady stream of income from the annuity after you retire. There are many types of annuities, and many opinions regarding annuities, so discuss this option with your financial planner and/or insurance agent before investing.

There is one unique option in which you can use an annuity as a tool for making a charitable donation. This option is called a Charitable Gift Annuity (CGA). A CGA is established when you fund the annuity with your own assets, but give the annuity to a charitable organization. As with other annuities, a stream of income is paid to you, your spouse, or other designated person, but in the end, the remainder of the fund’s value is given to your designated charity instead of going to the insurance company. In short, this is an annuity that provides a charitable gift in the end. CGAs can be particularly appealing to people who have appreciated assets and want to avoid capital gains taxes.

Here are a couple of examples:

Example 1: When they were younger, John and Susan purchased stock in ABC Company for $10,000. That stock has now grown to a value of $40,000. They realize if they sell the stock, they will be faced with some substantial capital gains. They decide to transfer the stock to a Charitable Gift Annuity. The charitable donation qualifies John and Susan for a tax deduction, and they avoid paying capital gains taxes.

The annuity is designed to provide quarterly payments which will continue throughout the lives of both John and Susan. After both of them die, they have designated the remaining value of the annuity to be split between their church and KML. This arrangement could help reduce probate costs and estate taxes, and is a wonderful way to support the Lord’s work.

Example 2: James is a widower with one adult daughter, Sharon. James is ready to retire and wants to sell his farm to a local developer. The value of his land has increased dramatically, so he expects a large windfall of cash. James lives fairly modestly, and doesn’t really need additional income to sustain his current lifestyle. He also wants to provide a continuous income for Sharon in her later years rather than leaving it all to her at his death.

James works with an attorney and the KML Foundation to set up a Charitable Gift Annuity. He designates Sharon as the sole annuitant with annual payments starting when she turns 60 years old. With this arrangement Sharon will receive regular payments from age 60 until she dies. Upon her death, the remaining assets go to the KML Foundation. That money will become part of the Foundation’s endowment, and the interest that is earned will be used to support tuition assistance and other Foundation projects.

Charitable Remainder Trust (CRT)

A trust is a financial tool that allows some unique investment benefits. In simple terms, a trust is a fund into which you place assets, and then determine the way in which you want those assets distributed. Trusts can be used to fund future costs for education, for holding inherited assets for a minor until the recipient reaches a designated age, for providing income in retirement, or many other uses. Trusts can be funded while the owner is alive, or can be funded after death through their estate plan.

A certain type of trust, called a Charitable Remainder Trust (CRT) can also serve as an option for making a charitable donation. A CRT is established when you make an irrevocable gift into the trust. Once the trust is created and funded, you have options as to who receives the payments from the trust, and the timing of those payments. At a predetermined time, the payments end and the charity receives the remainder of the trust’s funds. This is a great option for those who wish to receive a steady income, and also make a substantial gift to ministry.

Here are some examples:

Example 1: Kevin has accumulated a variety of assets over his lifetime, and now must decide on his retirement and estate plans. He needs some supplemental income at this stage of his life, but he doesn’t have children who could benefit from inheriting his estate. Kevin irrevocably transfers his funds into a Charitable Remainder Trust and names his church and KML as the recipients of the balance after he dies. During his years of life, the trustee of the fund invests the money and pays a fixed percentage to Kevin on a regular basis. Upon Kevin’s death, the remainder is given to his church and KML. This approach provides the dual benefit of helping support Kevin in his retirement years, and also supports two of his treasured ministries.

Example 2: Jeff and Nancy have been very successful with their family business. They made a lot of money and are ready to sell the business and retire. Jeff and Nancy want to share some of their wealth with their children, but they also want to make some donations to their church and KML. Jeff and Nancy establish a Charitable Remainder Trust. They decide that their children will receive payments from the trust for the next ten years. That income will help each of their children get established in their lives and provide some income in advance of their eventual inheritance. The other blessing is that the children will receive that income while Jeff and Nancy are still alive. At the end of ten years, the balance of the funds will be split as Jeff and Nancy had determined – 75% of the funds will go to their church and 25% will go to KML.

Charitable Remainder Trusts can be powerful and beneficial tools within your estate plan, but they also require the drafting of a legal document by an attorney and a rather large financial investment. Consult with your financial or estate-planning professional before making a decision regarding a CRT.

As with any investment option, it is always wise to consult with professionals who can advise you and design a plan that meets your financial and philanthropic goals.

Charitable Lead Trust (CLT)

Example 1: Karen recently became a widow and received a large payment from her husband’s life insurance policy. She also has some stock that has performed very well over the years. Karen doesn’t need all of that money at this point in her life, but she wants to support KML and also leave a generous inheritance to her children. To accomplish her goals, Karen establishes a charitable lead trust. According to her wishes, KML will have use of the income from the trust for the years in which she lives, and upon her death, the remaining funds will return to her estate and become part of the inheritance for her heirs. With this arrangement, Karen can see her gifts in action at KML, and she also provides a wonderful financial blessing for her children.

Example 2: Chuck and Betty have been faithful supporters of the church, but never had the money to support other ministries, like KML, as fully as they wanted. Although they aren’t rich, they set aside some funds and built and nice nest egg for retirement. Now they are ready to retire, and suddenly received a windfall from an unexpected inheritance. They see this as an opportunity to support KML in a special way without reducing their church offerings. At the same time, they want to keep a substantial amount in their estate for their children. To accomplish their goals, Chuck and Betty create a charitable lead trust, and authorize KML to receive a percentage of the funds for special projects. Upon the death of both Chuck and Betty, the balance of this trust will return to the estate and be included in the inheritance.

The information that is provided on this site is for educational purposes only. Consult your personal tax consultant, attorney, or financial planner for specifics that apply to your personal situation.