Frequently Asked Questions about Planned Giving
- Q: What is “planned giving”?
Planned giving involves making current arrangements for a future charitable gift. If you have a desire to provide future financial support for Bethesda Mission in the form of a gift of cash or other property there are numerous planned giving techniques available to accomplish your goals.
- Q: What are the most common forms of planned gifts?
The most common form of planned gift is the charitable bequest. A bequest is a simple means of making a charitable gift out of your estate and may be done with very little to no expense. Other common means of making a planned gift include gift annuities, charitable remainder trusts, donor advised funds, gifts of life insurance, naming a charity as beneficiary of a retirement plan, and life estates. Each of these is described in more detail in our Planned Giving Selection Guide.
- Q: Who should consider a planned gift to Bethesda Mission?
There is a common misconception that planned giving is only for the very wealthy. Regardless of the size of your estate and regardless of your charitable goals there is a planned giving alternative that is right for you.
- Q: How do I include Bethesda Mission in my will?
There are many different ways to make a charitable bequest:
● You can make a general bequest to charity by simply stating in your will that a certain charity or charities will receive a bequest. The bequest may be a percentage of the estate or may be defined as a specific dollar amount. Click here for sample general bequest language for your will.
● Your will may specify which asset is to be given to the charity or the gift may come out of the residuary of the estate (everything left over after specific bequests are made to family members, etc.). Click here for sample specific bequest language for your will.
● If you want to make sure certain heirs are taken care of before leaving money to charity you can make a contingent bequest by stating that your favorite charity receives a bequest only if those certain heirs do not survive you. Click here for sample contingent bequest language for your will.
● Another option you have is to make a restricted charitable bequest by placing a restriction on how the charity may use the bequest. Click here for sample restricted bequest language for your will.
- Q: What type of assets are best suited for planned gifts?
Many planned gifts are made with assets other than cash. Gifts of real estate, artwork, personal property and even stock in closely held businesses are often made via planned gifts. One of the assets that is often used to make charitable donations is appreciated stock. When appreciated stock is donated the donor receives an income tax deduction for the gift and they avoid paying any capital gains tax when the charity sells the stock.
- Q: I have an old life insurance policy that I no longer need. Are there ways I can use the policy to make a planned gift?
At one point in your life it may have been prudent to purchase a life insurance policy to protect the financial interests of your family. If the need for that policy is no longer there it may be donated to Bethesda Mission. You will receive an income tax deduction in the year of the gift equal to the fair market value of the policy (depends on type of policy gifted, term, whole life, universal life, etc.). Upon your death Bethesda Mission will receive the death benefits from the insurance company.
An alternative would be to retain ownership of the policy and change the beneficiary to Bethesda Mission. There would be no income tax deduction for changing the beneficiary but you would retain the flexibility to change the beneficiary back if the need arose.
- Q: I have an asset in mind that I would like Bethesda Mission to receive in the future but I still need the income generated from the asset. What planned giving techniques are available to accomplish this?
One option would be a charitable gift annuity. A charitable gift annuity is a contract between the donor and Bethesda Mission in which the donor makes a gift to Bethesda Mission in return for a contractual promise to make income payments back to the donor. The income payments are to be made for the life of the donor (annuitant). Annuity payments may be made based on a joint-life basis whereby payments continue until the death of the last survivor of the annuitants. The donor(s) may also decide to defer the initial annuity payment until some time in the future. The annuity payment to the annuitant is calculated based upon life expectancy and assumed interest rates (rates recommended by the American Council on Gift Annuities). The donor will receive an income tax deduction based upon the difference between the fair market value of the property gifted and the present value of the annuity stream.
Another option would be a charitable remainder annuity trust. In a charitable remainder annuity trust the donor(s) makes a contribution to the trust and receives income at least annually for a term of years (not to exceed 20 years) or for the life of the donor(s). Upon the death of the donor(s), or the expiration of the term of years, the trustee distributes the remaining trust property to Bethesda Mission. In a CRAT, the income payments are determined at the time of the contribution and are a fixed amount based on a percentage of the total value of the contribution. The payout percentage may range from 5% to 50% of the initial fair market value of the property placed in the trust (as long as the projected remainder to Bethesda Mission is at least 10% of the fair market value of the property donated).
- Q: What are the advantages of naming Bethesda Mission beneficiary of my retirement plan?
Qualified retirement plans such as 401(k) plans, profits sharing plans and defined benefit pension plans are excellent vehicles for saving for retirement. The tax advantages of qualified retirement plans make them very attractive as a means of accumulating assets.
Qualified retirement plans are not however very tax-efficient assets to pass on to your heirs. The IRS considers your retirement plan to be “income in respect of a decedent” which means that the beneficiaries will need to pay income tax on the amounts they receive. Retirement plan balances are also included in your gross estate for federal estate tax purposes creating a double shot of federal taxation upon death. The result for high net worth individuals is that as little as 25-35% of your qualified plan balance will be passed on to your heirs.
If you have accumulated funds in a qualified retirement plan and have a desire to support Bethesda Mission this may be an effective asset to donate. The simplest way to accomplish this is to name Bethesda Mission as the beneficiary of your qualified plan. See your plan administrator for the appropriate beneficiary change forms. Upon your death the funds will be transferred directly from your retirement plan to Bethesda Mission and your estate will avoid paying any income and / or federal estate taxes on the balance.
- Q: Is there a way for me to make a future gift of my personal residence while retaining the right to live in it during my life?
Yes, through a retained life estate arrangement. In a retained life estate arrangement the owner(s) of real property (personal residence, vacation home, farmland, etc.) irrevocably gifts the property to Bethesda Mission while retaining the right to use the property for the duration of their lives or for a defined period of years. The donors receive an immediate tax deduction based on a number of factors.
- Q: Are planned gifts private?
It depends on how the gift is made. Certain planned giving vehicles will available to the public while others are private. Your last will and testament will be private while you are alive but will go through probate and become public after your death so any charitable bequests will not be private. Private foundations are required to disclose certain information which becomes public so if you make a charitable gift through your own private foundation that information may not be private. Many planned giving vehicles do remain private. Charitable gift annuities, charitable remainder trusts, retained life estates, gifts of life insurance, and qualified plan beneficiary designations are all private.