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Types of Gifts
Planned Giving is the art and science of making a donation to the school when it best meets the needs of the giver. It provides maximum benefit for the school but will decrease the income tax burden to the donor. In the case of planned giving, it is wise to consult a financial planner who specializes in planned giving. These gifts can be planned along the way in life or planned as “Bequests” at the end of life. They need not take away from funds planned for children or the next generation of children in the family but provide predetermined decisions out of funds determined to be taxable if not designated to charity.
These gifts are usually planned during a lifetime or as a gift to limit the amount allocated to taxes included in a last will and testament. Bequests that include Northland Christian School are usually easy to establish within a will or revocable trusts. You might want to consider this possibilities when thinking through the future of current wills, living trusts, life insurance, real estate, stock market assets, charitable remainder annuity trusts, charitable remainder unitrust and charitable lead trusts.
These options can be very effective for the donor and the donor’s beneficiaries because they qualify for certain tax deductions. When consulting an attorney, ask about the benefits of designating the following assets to Northland Christian School either before or after death.
Gifts of Securities
The best stocks to donate are those that have increased greatly in value, particularly those producing a low yield. In order to preserve tax advantages, it is critical that you transfer the physical securities to the school or foundation rather than the proceeds from a sale. The business Office working with the Development Office will know how to proceed from the new ownership to the new one in a way that will yield maximum benefits by consulting financial experts.
- Appreciated Securities
If a donor gives stock that has risen in value and that has been held for more than one year, the donor pays no capital gains tax on the transaction and are entitled to a charitable deduction for the full fair market value of the stock. (Your income tax deduction is limited to thirty-percent of your adjusted gross income. Any excess can be carried forward for five additional years.) If the donor wishes to continue investing in a specific stock, the stock could be donated to the Foundation and then use cash to purchase shares with the same company, thus increasing your cost basis to current fair market value.
- Depreciated Securities
If a donor has stock losses, generally one should should not contribute the stock, but rather sell the stock yourself to realize the loss for tax purposes. The donor can then contribute the cash and take a charitable deduction.
Gifts of Life Insurance
A donor can contribute a life insurance policy to Northland Christian School Foundation by naming the Foundation either as the owner of the policy or simply as the beneficiary. If you name the Foundation as the owner and beneficiary, the donor will be entitled to an income tax deduction limited to the lower of the value of the policy or your cost basis in the contract. In addition, if the donor continues to pay premiums on a policy that the Foundation owns, the donor can deduct the premium payments.
Ten Advantages of Donating Life Insurance
- A donor’s gift may be maximized. Life insurance policies often offer a major gift that might otherwise be unaffordable.
- An individual’s legacy lives on beyond an individual. In the case of a school that will continue to educate children year after year, students will continue to benefit. A large gift may maximize an endowment for the future based on interest earned.
- The donor’s personal assets may remain intact. Since there is no large invasion of cash, the family does not lose capital. In addition, the donor no longer needs to pay the premiums to the keep the policy in force.
- The school receives the proceeds of the gift promptly with no probate delays or estate settlement costs.
- The donor premiums paid for life insurance owned by a qualifying charity—the school---is income tax deductible to the extent allowed by law.
- The school receives the gift free of taxes and the proceeds paid do not increase your taxable estate.
- Cash values can be borrowed against the policy to help the school if an emergency occurs and the funds are needed.
- The donor’s privacy can be protected and the gift kept confidential.
- Arrangement to change ownership to the school can be easy to arrange.
- There is peace of mind and assurance to have arrangements for good use predetermined without the stress of unplanned for circumstances.
A charitable contribution of mutual fund shares can provide the same tax advantages as a gift of appreciated stock. Due to the complexities involved in the transfer of mutual fund shares, the Foundation Board encourages the giver to begin the transfer process well before the end of the calendar year.
Life Income Gifts
Life income gifts allow the donor to receive an income as a result of making a charitable gift. Depending upon the plan selected, the income can be fixed or variable and can be for you as the donor or other beneficiaries you choose. For example, a donor might create a charitable remainder trust to pay income to the donor for life and contribute money, stock or other property to it. Once placed in the trust, the assets can be sold (without capital gains tax) and the proceeds reinvested to produce a higher yield. Life income gifts entitle the donor to an immediate income tax deduction, which is based upon the present value of the donor’s gift to the school or Foundation.
Gifts of Real Estate
If a donor owns property that is not subject to a mortgage and has appreciated in value, a charitable gift may be an attractive option. An individual can claim an income tax deduction based upon the fair market value of the property, avoid all capital gains taxes and remove that asset from the givers taxable estate. Or, the donor can transfer the home or farm to the Foundation now and continue to use the property for life. Due to the complexities involved, we encourage you to contact the NCS Development Office to discuss any gift of real estate.