“Planned Giving” is an important concept in the world of nonprofit finances. It extends beyond our annual pledging and cash-in-the-plate to include sharing not only accumulated assets but also current income with charities we favor; nor is it only part of the disposition of our estates after we pass on. When we look at planned giving in this way, it becomes more of a “generosity plan” than part of the scary world of estates and
attorneys. Still, it can be very important to an organization like St. Margaret’s.
There are as many ways to accomplish a generosity plan as there are people who choose to do it. Some of the more common ingredients can be:
– Insurance policies
– Dedicated IRAs
– TOD (transfer on death) accounts
– Trusts
– Annuities
– Will provisions
To paraphrase Cher, the beat goes on from there. I’ve written a brief description of each of these on separate sheets which you may use to answer some of your questions on any or all of these topics.
Over the past few years, it’s been my privilege to help with a good number of these arrangements each of which is of a different size and aims to accomplish a different goal. The smallest have gotten started with less than $300, and the largest get pretty large. I’ll be happy to answer questions, either general questions in an impromptu way or more in-depth questions however you feel comfortable.
Andrew Werner, Treasurer
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Introduction
Describing the options available to any financial plan is a challenging task. There are several ways to achieve just about every goal and different balances suit different people. In laying out these broad options, I’ve tried to stay primarily with those that are flexible from the standpoint of keeping the funds available should the donor need then for an unplanned personal or family situation. If the plan works as intended, the charities will benefit while not committing the funds to a product or process that is irretrievably out of reach.
Retirement plans
Several options in a generosity plan offer the flexibility to continue to contribute to your own retirement security, while simultaneously designating a charity as the recipient of funds you don’t use for personal purposes. Many of us have company pension plans, of one kind or another. Almost all of these plans allow a participant to roll balances (all or partially) into IRA accounts. If you have a plan with a comfortable balance, you may find that splitting off a small part of that balance into a separate IRA account can benefit a generosity plan. You retain the right to use the money for yourself and designate a charity as the beneficiary instead of
your estate. The designation only applies to the specific account, not any of your other retirement funds and does not affect any of the other options available for this account.
Insurance policies
There are two common ways to make insurance a part of a generosity plan. The most familiar is donating a “paid-up” policy to the charity of choice. A paid-up policy is one that has enough cash value to pay for itself and buy more paid-up insurance or deliver cash dividends to the owner. Often a paid-up policy is relatively small and perhaps no longer plays an important part in the owner’s retirement planning. The owner can
designate a charity as a beneficiary of the policy and thus leave a legacy. Another way to use insurance is to establish a policy owned by the charity with the donor paying the premiums.
Younger donors in good health can use either method to leave a surprising amount to their charity of choice.
TOD accounts
Checking accounts, savings accounts, CDs, and investment accounts all may be designated as TOD or POD (Transfer on Death or Pay on Death) to any beneficiary. A TOD account is legally the property of the beneficiary upon the death of the owner. Often, they can be a way to ensure flexibility while the owner is alive, should the need arise, while guaranteeing that the beneficiary will benefit from the funds when the owner has no more need. In the context of generosity planning, this method applies best to something fairly steady, like a CD or an investment product.
Trusts
A trust is a very powerful entity with many, many options and long-lasting consequences. They are best used in the context of a broad estate plan. They can last for an individual’s lifetime plus 21 years, potentially a long time. In the end, however, the assets of every trust must be distributed and one of the beneficiaries can be a charity that the trust creator favors. This is a tool not to be taken off the internet, but should involve an attorney and a tax professional at the very least.
Annuities
Annuities can be a way to guarantee a stream of income to one person or entity and upon the death of the recipient, pass a lump-sum death benefit to a charity. They can also provide a sum of money periodically for a fixed period of time. Annuities can be a way to distribute a bequest to a charity, for example. Like wills and trusts, there are too many options to cover here, but an insurance or investment professional can provide guidance.
Wills
Very often, a generosity plan begins and ends with a bequest in the donor’s will. Such a bequest can be a specific sum, a particular asset, a coin collection for example, or one of many other possible options. Donors like using bequests because they are quite certain that they won’t need the money at that point, and many times they haven’t heard of other options. Advice from an estate professional can prevent accidental problems in implementing the desires of the donor, and good advice is much less expensive than fixing problems.
Andrew Werner, Treasurer
Required Minimum Distributions (RMDs)
If you are over age 72 you can save taxes by taking an IRA distribution and designating St. Margaret’s as a beneficiary. Other opportunities exist as well. If you’d like more information, please contact Dave and Kathy Leber or your attorney or accountant.
Dave Leber