Consider other gift plans to build financial security in retirement

Special to The Criterion

For several weeks, we have examined financial and retirement planning in relation to life stages. Planned giving opportunities combine your personal and financial goals to help meet your charitable giving aspirations.

We have discussed charitable gift annuities, deferred gift annuities and tax-advantaged ways to make gifts of real estate. This third and final article considers other gift plans for building financial security in retirement.

Charitable Remainder Trust

A charitable remainder trust is similar to a charitable gift annuity in that it is a way to make a planned gift that generates a lifetime income. Although more complex than a gift annuity, it provides more flexibility in design and implementation.

A charitable remainder trust is established by a donor with cash or property and makes fixed or variable payments for life, lifetimes or a term of years. The portion that is left in the trust after income obligations are fulfilled goes to the Church.

Like a charitable gift annuity, a charitable remainder trust is attractive when it is funded with an appreciated asset that produces little or no income. In doing so, it becomes a productive asset without paying capital gains tax on the sale of the asset.

If the remainder trust is funded with appreciated property—such as stock, mutual fund shares or real estate—you sidestep the capital gains tax at the time of the transfer, and still benefit from a current income tax charitable deduction.

Charitable Lead Trust

A charitable lead trust is established by a donor with cash or property and makes fixed or variable payments to the Church for a specified period of time. Payments are made from the trust to the Church for your life, the life of a loved one or for a period of years.

After a specific period of time, the trust then distributes the assets to the donor’s family. The assets also can be returned to the donor. Charitable lead trusts are beneficial because the donor can pass the appreciation of assets to the family and gain a gift or estate tax deduction.

This is a wonderful planned giving opportunity for a donor who wants to make a gift to the Church for a specific period and to pay as little gift or estate tax as possible.

Other gift plans to consider

Small or large, all gifts are important and their collective impact always is profound. It is important to remember that many gifts do not require an immediate out-of-pocket transfer. Examples are life insurance policies, retirement accounts and appreciated stock.

Life insurance policies and retirement accounts require beneficiary designations. You can specify that the Catholic Community Foundation receive a percentage of the benefits or name it as a primary beneficiary or contingent beneficiary. Naming an archdiocesan parish, school or agency as a beneficiary costs you nothing, and it is a meaningful way to make certain your assets ultimately serve the people and organizations most important to you. If your goals change in the future, beneficiary designations can be changed.

A large percentage of tax-qualified retirement accounts can be lost to estate and income taxes when distributed to heirs. The combined taxes can deplete a retirement account up to two-thirds of its value. Establishing a charitable gift annuity or charitable remainder trust with a retirement account may reduce or eliminate taxes.

As you adjust your investment portfolio, you also may want to consider a gift of appreciated stock. A highly appreciated but low-dividend paying stock can be an ideal gift. You receive an income tax charitable deduction for the full value of the stock, and pay no capital gains tax on the transfer of the stock to the Church. Low-dividend paying stock is a great way to fund a charitable gift annuity.

What is the next step?

After a donor has formalized a personal financial and retirement gift plan, the next step is to establish the gift designation.

Although the foundation offers a variety of gift designations, we encourage our donors to choose the ministry area closest to their hearts. Examples are:

• Unrestricted gifts are gifts of cash, securities, real estate, insurance and/or personal property that are applied to the ministry areas of the greatest need.
• Outright gifts are gifts of cash, securities, real estate, insurance and/or personal property. These gifts can be unrestricted or restricted.
• Legacy gifts can be made in the name of your favorite parish, school or agency, or in memory of or in honor of an individual, family or in your own name.

Existing endowments

The Catholic Community Foundation has more than 380 existing endowment funds that benefit specific Catholic parishes, schools and agencies throughout central and southern Indiana. A donor may choose to direct a gift to one of the foundation’s existing funds.

Endowments are an attractive option for people who wish to establish large current gifts, bequests, charitable gift annuities or other forms of giving. Endowments are permanent funds established to be used for specific purposes. Funds provide long-term, sustainable income for parishes, schools or agencies.

New endowments

Each year, new endowment funds are established in honor of or in memory of individuals, families, parish, schools and/or agencies.

Donor-advised funds

A donor-advised fund can be established with the Catholic Community Foundation to distribute charitable donations on behalf of an individual or family. It is an easy to establish, flexible vehicle that allows the donor(s) to provide gifts to a list of recommended charitable organizations.

About the Catholic Community Foundation Inc.

The Catholic Community Foundation exists to provide long-term financial stability for charitable, religious and educational organizations. Guided by archdiocesan spiritual leadership, the nonprofit foundation is managed by a board of trustees comprised of lay professionals.

If you would like more information or are interested in scheduling a confidential conversation regarding your planning goals, contact Ellen Brunner, director of planned giving, Catholic Community Foundation Inc., Office of Stewardship and Development, at 800-382-9836, ext. 1427, or 317-236-1427 or e-mail her at ebrunner@archindy.org.

You may also visit the foundation’s Web site at www.archindy.org/ccf. The first two articles from this series can be found online here and here. †