Creative Ways to Give

Below are tax-wise ways to help you plan your best gift. Please consult an accountant to get professional advice for your specific situation.

RETIREMENT PLAN

Are you 70 ½ or older? You may be able to make gifts using your qualified retirement plan.

SCENARIO
Ron and Jean are in their mid 70s and want to make a significant gift to Nativity Lutheran Church. They’ve accumulated much of their retirement savings in their IRA, and are now at the age when they must take their required minimum distributions. They have other sources of income, and don’t currently need the entirety of their required minimum distribution to support their lifestyle.

OUTCOME
Ron and Jean request a $25,000 qualified charitable distribution (QCD) from their IRA and direct it to Nativity Lutheran Church. They avoid the payment of income tax on this portion of their withdrawal. They also name Nativity Lutheran Church as the death beneficiary of any remaining retirement funds, leaving other assets with lesser tax consequences to heirs.

STOCK

Do you have appreciated stock? You can make a larger gift at a lower cost to you.

SCENARIO
Bob and Mary are in their early 60s with two independent adult children who have completed their education. They both want to make their best possible gift to Nativity’s capital campaign.

OUTCOME
Bob and Mary decide to gift $10,000 of appreciated stock to Nativity’s campaign. Since the stock was inherited at a cost basis of $4,000, they will avoid paying $900 in taxes on the $6,000 of capital gain. They also qualify for a charitable tax deduction and have an income tax savings of $2,800. After both tax benefits, the net cost of the gift to Bob and Mary is only $6,300. Bob and Mary also decide to make this gift 3 years in a row – a total $30,000 commitment to the campaign with gifts that will actually cost them only $18,900.

GIFT WITH INCOME

Do you have assets like CDs you’re not using? Replace or even increase your income with certain gifts.

SCENARIO
Dorothy Johnson is 81 years old. She wants to make a significant gift to Nativity Lutheran Church, but would like to avoid reducing her current income. She has a $50,000 CD maturing, and though she’s never needed the principal, she likes the idea of receiving the guaranteed income she is getting from the CD. If renewed at the current 2.5% rate for another 24 months, she’ll receive $1250 annually. However, if she gifts the $50,000:

OUTCOME #1
$25,000 could establish a charitable gift annuity that, at her age, provides a guaranteed fixed payment of 8.3% or $2075 per year. Dorothy can take a charitable income tax deduction for her gift, and receive a portion of the annuity’s income tax free. After her death, Nativity Lutheran Church receives the charitable gift annuity’s remainder value.

OUTCOME #2
$25,000 could be given as her response to the congregation’s campaign invitation, and she is eligible for a charitable deduction, effectively reducing the gift’s cost.

CASH GIFTS

Do you itemize your tax return? You can make a larger gift than you might imagine.

SCENARIO
Karl and Kathy are in their 40s with two school-age children. It was a good year for their family business, and their income is up. They want to make a special year-end gift to Nativity Lutheran Church. Before taking a closer look, they’re imagining a gift of $7,500.

OUTCOME
Karl and Kathy consult with their accountant and confirm that a larger gift will make them eligible to itemize their deductions this year. They decide instead to give a $10,000 gift, take the charitable tax deduction, and at their income tax rate, the net cost of the gift to them will be only $7,200.

Please consult your accountant to get professional advice for your specific situation. For additional information or instructions, contact Beth Schuman at 612-781-2766, ext. 1006.