Planning Ahead
Deborah Miller, JD, Director of Planned Giving, West Virginia University Foundation, Inc.
While you may have
already heard of charitable
gifts that can provide income
to those you designate, along
with income and estate tax
savings, you may be more
concerned about family
economic considerations as
you do your estate planning. You may think that
such an income-producing gift doesn’t apply
in your case because you want your spouse and
children to have it all.
However, there is a way to do both: get more
income today and provide a significant inheritance
tomorrow, along with making a gift to a favorite
charitable or educational organization that brings
you satisfaction.
a new insurance policy. The policy will legally be
owned by a separate life insurance trust set up for
that purpose. At your death, the policy’s proceeds
can be paid to your children or other heirs and no
federal estate taxes will be owed because the trust
is not part of your estate. (Otherwise, 40% tax
rates would be applicable if the total taxable estate
exceeds $5,250,000 in 2013.)
So you can, using a creative two-step method,
receive income today, make a tax-saving gift
to help your favorite charitable or educational
organization, and provide a full inheritance for
loved ones.
That’s good planning.
To learn how well it could work for you, the
first step is to contact your financial advisor or the
organization you wish to benefit.
To narrow the choices based on your financial
needs, you can request projections which illustrate
the economic benefits in “black and white.”
It works like this: you establish a charitable
trust that pays you (and your spouse, if
appropriate) at least 5% of the trust’s value as
income. You, the charity, or a bank can serve as
the trustee. The trustee is needed to administer and
invest the donated asset, to take care of recordkeeping, and to pay the income to you and others
you choose.
You receive an income tax charitable deduction
to lower current taxable income and, if appreciated
assets are donated, no immediate capital gain taxes
are owed. Stocks, bonds, mutual funds and even
real estate are smart choices; cash works well too.
To derive the maximum benefit from this
method, you can use some of the income received
from the charitable trust to pay the premiums on
Learn how
gifts of land
can help students
attend WVU
For details, contact the
WVU Foundation
304-284-4000
[email protected]
West Virginia Farm Bureau News 13