Give Through a Special Gift Donation

A gift of appreciated securities such as stocks, mutual funds and bonds can provide attractive benefits. An outright gift of long-term appreciated securities (securities held for more than a year) avoids capital gains taxes and, in most cases, the donor may claim a charitable income tax deduction equal to the market value of the securities. For gifts of appreciated securities, a gift is fully deductible up to 30% of the donor’s adjusted gross income and, like gifts of cash, may be carried forward for five additional years.

Closely held corporations are corporations whose stock is owned by family members and/or by business associates.  The stock is private in that it is not publicly traded and, in most cases, there are restrictions on the transfer of the stock to third parties.

With an outright gift of closely held stock, the donor typically transfers the stock to UMCH Family Services.  To determine value, the donor has the stock appraised and obtains a charitable income tax deduction equal to the appraised value of the stock.  An appraiser who is knowledgeable in establishing the value of closely held stock must conduct the appraisal.  UMCH Family Services then redeems the stock to the corporation or one of its trustees and receives a check for the redemption price.

Gifts can be made from mutual fund accounts to UMCH Family Services.  The donor must write a letter of instruction stating the number of shares being given to UMCH, the timing of the gift, the name of the account from which the shares are coming and a contact name at UMCH Family Services.  This process may take several weeks to complete.

Gifts of mutual fund shares are deductible up to 30% of the donor’s adjusted gross income and allow the donor to avoid capital gains taxes.

A donor can make a gift to UMCH Family Services and receive immediate financial benefits, including a lifetime stream of income and a charitable income tax deduction.  There are several gift vehicles to choose from, such as charitable gift annuities, deferred gift annuities and charitable remainder trusts.  Life income gifts may be designated to benefit any department or program at UMCH Family Services.

A stream of income for the lifetime of the donor and a second beneficiary (often a spouse)

A charitable income tax deduction

Relief from capital gains taxes on gifts of appreciated property

A reduction in federal estate taxes

Will the gift be based on one or two beneficiaries?

What is the age of the donor and/or the donor’s spouse, or the age of the second beneficiary?

What asset will the gift be funded with—cash, securities, mutual funds, real estate or other assets?

A charitable gift annuity is a contract between the donor and UMCH Family Services that provides advantages for both. Charitable gift annuities are an important investment in UMCH Family Services’ future as they form a valuable part of our growing endowment.  Charitable gift annuities may be funded with cash, securities or property.  The minimum gift amount to create a charitable gift annuity is $5,000. The payout rate on a charitable gift annuity is based on the age of the donor at the time the gift is made.  The rates are suggested by the American Council on Gift Annuities (ACGA), a volunteer organization comprised of representatives from charitable and for-profit organizations.  UMCH Family Services follows the rates suggested by the ACGA.

Guaranteed fixed payments for life, a portion of which is nontaxable

Charitable income tax deduction for a portion of the gift

Reduced capital gains taxes

A deferred charitable gift annuity is similar to a charitable gift annuity except that the payments are deferred to a future date.  A donor may defer payments to years when income is needed more, such as retirement.  The donor obtains a substantial charitable income tax deduction in the year the gift is made.  Because payments are deferred, allowing the principal to grow, the donor enjoys a high payout rate later.

A deferred gift annuity is an excellent way to make a gift and receive a charitable income tax deduction while providing income for the future.  Like the charitable gift annuity, the minimum gift amount is $5,000.

Lifetime income stream – payments are fixed and a portion is nontaxable

Charitable income tax deduction for a portion of the gift

Reduced capital gains taxes

A charitable remainder trust is a personal management plan that provides both a lifetime income and a charitable income tax deduction to the donor.  The donor selects the payout rate, usually between 5% and 7%, which gives the donor, and perhaps the donor’s spouse or other beneficiary, an income every year for life.  The higher the payout rate, the lower the charitable income tax deduction. If the trust is funded with appreciated securities, capital gains taxes are avoided.  The trust may be designated to benefit a particular department or program at UMCH Family Services or it may be unrestricted.

There are two types of charitable remainder trusts: the annuity trust and the unitrust.

The charitable remainder annuity trust pays a fixed, guaranteed dollar amount, regardless of the trust’s investment performance.  The income rate is determined at the time the trust is funded. The annuity trust is best for donors who seek a regular, fixed income and prefer to have the satisfaction of knowing the exact amount of the payment in advance.  No additional gifts may be added to an annuity trust.

The charitable remainder unitrust pays the donor a predetermined percentage of the fair market value of the trust’s assets as re-valued annually.  If the trust’s assets increase, the donor receives a larger payment, providing a hedge against inflation.  Additional contributions may be made to a unitrust.

Lifetime income stream—payments can be fixed or variable, depending on the type of trust

Charitable income tax deduction for a portion of the gift

Avoidance of capital gains taxes on the transfer of appreciated property

Possible estate tax benefits

Charitable lead trusts are the reverse of charitable remainder trusts in that a stream of income is first paid to UMCH Family Services for a number of years (based on a term or a lifetime), after which the remainder goes back to the donor or passes to another non-charitable beneficiary designated by the donor.  The stream of income that flows to UMCH Family Services is either a fixed amount or a percentage of the value of the trust property, as revalued annually.

A charitable lead trust is a taxable trust; the trust pays both income and capital gains taxes, unlike the charitable remainder trust that is tax-exempt.  A donor is entitled to a charitable income tax deduction if the donor continues to be taxed on the trust income.

Many donors use a charitable lead trust to reduce or eliminate the gift tax cost of transferring wealth to children or grandchildren and to give appreciated property to heirs without further gift or estate tax liability. A charitable lead trust can be established during a donor’s lifetime or by a provision in the donor’s will.

You can make a gift of commercial or residential real estate to UMCH Family Services and receive substantial financial benefits.  Property may be given outright to support the purposes of UMCH Family Services, and you can take a charitable income tax deduction based on the appraised value of the property.  Or, you may use a home or land that is no longer wanted or needed to fund a life income gift.  As with other types of gifts, you may designate a gift of real estate to a particular department or program at UMCH Family Services.  Another option for a gift of real estate is a retained life estate.

Through a retained life estate, you can make a gift of a personal residence to UMCH Family Services and retains the right to live in your home for life.  Making a gift of property while retaining a life estate gives you a charitable income tax deduction based on the value of the property, the age of the donor and his/her life expectancy.  For a gift of appreciated property, you may take a charitable income tax deduction for up to 30% of the donor’s adjusted gross income.

You are responsible for maintenance costs, insurance and real estate taxes.  To substantiate the value of the property, you must obtain an appraisal from an independent qualified appraiser.  The cost of the appraisal is borne by the donor and is a miscellaneous tax deduction.

Making a gift of a qualified retirement plan asset such as a 401(K), 403(b), IRA, Keogh or pension plan is another way to benefit UMCH Family Services and receive significant tax savings.  Retirement plan assets are often subject to extremely high estate taxes, and the income is taxable when received by an individual beneficiary.

By naming UMCH Family Services as the beneficiary of a retirement plan, you maintain complete control over the assets during his/her lifetime, but at your death, the plan passes to UMCH Family Services free of both estate and income taxes.  When creating an estate plan, you may wish to consider leaving your heirs other assets, such as cash and securities, which are not as highly taxed.

You can use life insurance to make a gift to UMCH Family Services by naming UMCH Family Services as the owner and beneficiary of a life insurance policy. You receive a charitable income tax deduction based on the lesser of the policy’s fair market value or the net premiums paid. You may also wish to make gifts of paid-up policies, resulting in a charitable income tax deduction for the policy’s cash surrender value.

An important use of life insurance is its ability to replace the value of an asset that has been given to UMCH Family Services. You can use the tax savings produced by the charitable income tax deduction to purchase and pay premiums on life insurance policies whose proceeds equal the value of the gifted property. This arrangement can serve to protect the interests of family members.

You can make gifts of tangible personal property, such as art, books, antiques and collections to UMCH Family Services.  Your charitable income tax deduction is based on the “related use” of the property, which means that if the property is related to UMCH Family Services’ exempt purposes you can take a charitable income tax deduction for the full fair market value of the property, up to 30% of your adjusted gross income.  If the property is unrelated to the exempt purposes of the charity, you can deduct the cost basis of the property.  All gifts of tangible personal property must first be approved and accepted by UMCH Family Services.

One of the most meaningful ways to memorialize a loved one or pay tribute to a special person or caregiver is by making a gift in his/her name to UMCH Family Services.  Gifts can be designated for a specific specialty or program.

UMCH Family Services can help establish a memorial for a family member or loved one who has recently passed away.  We will notify a family representative when gifts are received, as well as individually thank those who have given.  Please contact us if we may be of assistance.

When making a gift to UMCH Family Services, you may be able to maximize their giving by taking advantage of an employer’s corporate matching gift program.  Many corporations have matching gift programs, which allow employees to direct corporate gift money to UMCH Family Services.

You should contact their employer’s human resources or benefits office to learn if there is a matching gift program.  You may also qualify under the matching gift program of a company from which you retired, at which your spouse works, or where you serve as a member of the board.

All of us at UMCH Family Services are blessed and privileged to be called to this special ministry.  We are deeply grateful for your support, and we are pleased to provide additional information on ways to give to donors and their professional advisors.  Please contact us at (614)885-5020 or contactus@umchohio.org.