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Prospect Capability Matrix: Who can give how much?
There are three ways that a donor can make a bequest to your church. They may leave a percentage of their estate; they may leave a stated dollar amount or specific property and assets; or they may leave some or all of their estate’s residue after other specific legacies have been paid.
Whether a donor is making a will for the first time or revising an existing will, an attorney should be consulted.
Generally, appropriate language for a bequest to your church is as follows: “I devise _______________ (insert a dollar amount, percentage or property) to the {name} United Methodist Church’s Endowment Fund for the church’s future use according to its charitable needs.” Another possibility exists, namely to create a trust in one’s will, so that effective on the donor’s death the trust becomes the vehicle for providing income or other benefits to spouse or children or other heirs.
A gift annuity is a contract between a local church, the UM Foundation and the individual or couple making the donation. The individual or couple transfers property to the UM Foundation and the Foundation promises to pay a given amount at the end of each selected payment period to one annuitant for life or two annuitants for both lives. The residue of the annuity (what's left over) goes to the local church specified by the donor in the contract. Part of the payment to the donor is interest earned and is taxable as ordinary income. Part of each payment is return of principal and is tax free. However, if an annuitant (or spouse) survives past life expectancy, all later annuity payments will be ordinary income.
For more details on how to set up this kind of gift, call the UM Foundation Executive Director, John Fike at 734-484-2166.
First, a policy the donor has that is in force, paid up, but is no longer needed. For a transfer of ownership of the policy and change of beneficiary to the local church, the donor receives an income tax deduction for approximately the value of any cash that has been built up on the policy.
Second, a policy the donor has that is in force and is no longer needed, but on which the donor is still making, or plans to make, payments, In this case, transferring ownership to the local church is again necessary, as is changing the beneficiary to be the local church. But the tax deduction will be for any cash built up on the policy plus any premiums paid by the donor following the transfer of the policy. Again, for further information, contact John Fike at 734-484-2166 or email to him at johnfike@msn.com.
The main advantages of trusts are that they provide a means whereby the donor’s estate may largely escape the probate process and thus remain private proceedings. Probate, of course, is a public matter and the assets of the deceased are available to anyone who cares to take a look. Revocable trusts, also called Living Trusts, are becoming more and more popular. They provide the maker of the trust a certain measure of control and continuity in one’s affairs, yet can provide a professional or institutional trustee when the time comes. All aspects of these trusts may be changed by the grantor at any time until the death of the grantor.
CHARITABLE REMAINDER TRUSTS
Irrevocable trusts are very handy to use when a person wishes to benefit a church or charity and has a serious or sizeable tax problem that needs a charitable gift to solve it. One would not, after all, become involved in an unchangeable arrangment if it weren’t financially necessary to do that.
What’s called a “charitable remainder trust” is quite a popular vehicle these days because it gives a certainflexibility to design a trust to meet a donor’s needs and individual goals. A donor can receive retirement or other income fo self and for spouse, and even for children or other heirs. It is also possible that assetstransferred to a trust will produce significantly more income than those assets have produced outside the trust. So the life-income trust can be a means of transferring assets from a less producive class to a more productive one.
The essential aspect of these irrevocable trusts, however, is that their residue goes to charity, and that’s where your local church and the church’s endowment fund come in. You can urge your members to consider if a life-income trust is something they could use. Then you want to ask them to name your church’s endowment fund to receive the remainder of the trust.
The ways of naming your church in a charitable trust are essentially the same as for a will: a specific amount, a percentage, or the whole residue.
One type of life-income trust is called the Annuity Trust, and gives as income a straight percentage of the assets valued the day they are put in the trust. The amount of money paid out never varies.
Another kind of trust is called the Unitrust, which gives as income a percentage of the assets as valued at the end of each calendar year. This enables the income to grow as the trust assets grow.
