There is a wealth of options available when considering different ways to support the organization you love. Sometimes it can be hard to know where to start! Depending on your situation, certain giving options may make more sense for you than others.
Here is a categorized listing of common questions about the estate planning and planned giving processes that can help you get started.
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What kind of gifts make an immediate impact?
Several options are available to you that can directly benefit your organization of choice right away. These are most commonly:
- Gifts of cash
- Gifts of financial assets (stocks, bonds, investment accounts, etc.)
- Gifts of real estate
- Gifts from an Individual Retirement Account (IRA)
- Gifts to a Donor Advised Fund
- Gifts of insurance policies
- Gifts of personal property
What is a Donor Advised Fund?
This is like a savings account created by you for the benefit the organization of your choice. Many donors find this to be a more feasible option than setting up a private foundation for their contributions.
You open this account through a sponsoring organization or public foundation, and you can use cash or other financial assets, like stock or real estate or personal property.
Opening a DAF will allow you to receive an immediate tax deduction and specifically recommend which entities, initiatives or departments benefit from your gifts. You can also add family members to your account to make these recommendations.
Each sponsoring organization has its own regulations and procedures when it comes to opening a DAF. It is best to use discretion, selecting a sponsoring organization that will support your interests and values. Your local PGTS representative can help you navigate the process and possibly recommend sponsoring organizations that work well with Seventh-day Adventist ministries.
What kinds of things can I give as personal property?
Even if you don’t have a significant amount of extra cash, perhaps you have valuables you can donate, such as artwork, antiques, a coin collection, or a car or boat. Almost anything that can be used or sold for by the organization you wish to support.
What kind of gifts make an impact in the future?
Even if you are not able to make a significant charitable donation right away, you can make a future impact that greatly helps further the mission of the organization you support. This can be accomplished through:
- Bequests through your will
- Gifts through your trust
- Gifts of real estate
- Gifts through retirement accounts
- Gifts through insurance
- Gifts through financial assets
- Gifts through investment accounts
Can I get a tax benefit now for gifts given at my death?
You can receive tax deductions for end-of-life gifts as long as the ownership of the money or asset is transferred to the organization you support.
Many choose to do this through charitable gift annuities or charitable remainder trusts, because you receive a tax deduction right away even though the gift isn’t given to the charity until you pass away. You can also receive income streams from these types of gifts.
You can also up a life insurance policy owned by the organization and also listing the organization as the beneficiary. You, however, are the one who is covered through the policy and the one who pays the premiums. This is a way to leverage your charitable gift so it is affordable during your lifetime and benefits the charity significantly even after you’re gone.
What kind of giving options provide regular payouts?
Yes, you can make a sizeable gift to the organization of your choice and receive an income stream based on the value of that gift for the rest of your life. You may even designate a second lifetime for the income to be received, such as adding a spouse or child. The most common options for gifts that provide income are:
- Charitable Gift Annuities
- Charitable Remainder Trusts
What is a charitable gift annuity (CGA)?
A CGA allows you to make a gift of cash, assets or valuable personal property. The organization you support then provides you with an income stream you receive throughout your lifetime, and also the lifetime of a spouse or child, if you choose to include that. (Most CGAs allow two “lifetimes” to be applied.)
A CGA is a smart choice if you want to liquidate a noncash asset and receive income while also benefiting an organization you believe in. CGAs also have a lower minimum contribution, and your payments are in fixed amounts based on the starting value of the gift. This can eliminate risk of volatile market conditions.
What is a charitable remainder trust (CRT)?
A CRT also allows you to make a gift of cash, assets or valuable personal property and receive regular lifetime payouts and an immediate tax deduction. This option can better suit those who can make a higher minimum contribution and whose gifted assets are appreciating in value. The income payments of a CRT are variable, not fixed.
Varying payment amounts can grow with inflation, as the trust is revalued every year. There is risk involved, however, as payments can also go down based on market performance.
Does everyone need an estate plan? Where do I start? What does it entail?
In short, yes. If you own anything at all, you need an estate plan. And even if you don’t, there are several other factors to consider. Otherwise probate decides what happens to anything you leave behind at your death—even your children if they are minors.
An estate plan doesn’t have to be complicated. You can find a PGTS professional near you to help you get started.
Do I really need a will? I am not wealthy and I don’t own anything significantly valuable.
A will is not as much about wealth as it is about ownership, management, and continuing your legacy.
Even if you don’t own property, you still have belongings. You may own a vehicle, or maybe your employer provides stock options or retirement benefits. You also have bank accounts!
Everything that has your name on it will need to be distributed. Having a will ensures that someone you trust will be the executor of your estate (this includes managing debts), and the people you care about are the ones to receive any benefits of what you leave behind. Otherwise the court system, depending on your state’s laws, will make all the decisions. And if you do have any charitable intentions, keep in mind that probate will not consider this an option.
If you have children who are minors, your will also designates who will take over their guardianship.
What are the different kinds of powers of attorney?
This is an important part of estate planning that is best to set up as early as possible, just in case. There are many types of powers of attorney, but these are the most commonly dealt with in estate planning.
General power of attorney is a comprehensive designation that gives someone you trust the right to sign documents, pay bills, and conduct financial transactions on your behalf. This power of attorney can be springing, or become effective at a certain time or at a time you are declared incapacitated. It can also be durable, taking full effect as soon as papers are signed.
Medical power of attorney allows the one you designate to sign medical papers and request or decline procedures. This is an important part of drafting a “living will,” or a declaration of your wishes should you become incapacitated while still living. You want someone who knows you, your priorities and your values to be making these important decisions.
How can I make a gift while taking care of the needs of myself and my family?
Of course, this is a question each person/family must answer for themselves. However, the best thing you can do to help you figure out the answer is to consider what your past needs have been, what your present needs are, and what needs you and your family are likely to have in the future.
If you are well insured and have a reasonable savings for emergencies, you are in a better position to give than if you are lacking those things, or if you have high premiums or significant debt. However, there are many options for both financial planning and charitable giving that can work with almost any budget. For example, a lifelong income gift can use one of your assets to provide you with regular income while you also leave part of that asset to the organization of your choice.
It’s worth it to see what might work for you, and a PGTS representative can help.
What is the difference between a will and a trust?
A “last will and testament” is a document prepared for probate that states their wishes for their possessions. An attorney must officially draft the document and oversee the probate process.
A trust can have higher preparation costs and can be slightly more complicated to maintain, but it can completely bypass the probate process. A trust owns your assets as if it is a legal entity and distributes them in the same way you would designate in your will.
A trust also allows you more privacy when it comes to your financial information. By avoiding the probate process you can keep your financial information from becoming public record, and each of your beneficiaries will not be able to see exactly what you are giving to whom. Keep in mind, however, that if you need to revise your trust, there may be fees involved.
Not everyone needs a trust, but everyone does need a will! If you’re trying to figure out which is best for you, a PGTS representative can help walk you through the pros and cons of each, according to your situation.
Will I have to pay taxes after I die?
There are two separate types of taxes that can come into play after your death: income tax and estate tax. This is how your final tax return will be divided up.
Any income you receive before your death is taxed as it normally would be. Any income received after death up through the end of the tax year (i.e., interest or from termination of your retirement accounts) is considered estate tax.
Most won’t have to worry about estate tax. Unless the income after death is a significant amount that surpasses a government-set minimum, there is no balance due. Income tax, however, can make a big difference on the final amount awarded to beneficiaries.
One way to avoid this income tax is to make a nonprofit a beneficiary to these accounts, as they pay no tax. This creates a considerable gift to the organization you care about and allows that money to be used to its full potential. You can then leave other assets, such as bank accounts, stocks, property, etc., to your loved ones without them having to worry about these taxes.