Making a gift or tithing to Trinity through your will is as simple, and inexpensive to you, as executing a codicil to your will, or executing a new will. The gift to Trinity through your will would be deductible as a charitable contribution for federal estate tax purposes and have the potential for reducing (or even eliminating) any estate tax that might be due. For example, before any other dispositive provisions in your will, you might prepare a codicil saying:

“Should my spouse not survive me, or should she/he and I die in a common accident or disaster, I give, devise and bequeath to Trinity Methodist Church, Inc. of Huntsville, Alabama, doing the ministry of Christ as Trinity United Methodist Church, 10% (or more) of my gross estate as the same is finally determined for federal estate tax purposes”.

If you have chosen to utilize a revocable trust (sometimes referred to as a “living trust”) in your estate plan, you may amend it to provide for a similar disposition. Of course, each spouse’s will or trust should contain the same provision to insure the same disposition upon the death of the surviving spouse.

In general, the greatest tax benefits from lifetime gifts come from gifts of stock and real estate that have increased or appreciated in value. The reasons are economic. Whereas a gift of cash only produces ONE income tax benefit (a charitable deduction), a gift of appreciated stock or real estate produces TWO: a charitable deduction for the full fair market value of the stock or real estate plus avoidance of capital gain tax that would have been paid had the stock or real estate been sold. This is the case even though the donor may be satisfying a legally binding pledge. Thus, a single charitable gift of $10,000 of stock can reduce a person’s taxable income by up to $20,000.

Congress passed a series of laws that limit these double benefits to only a few types of assets, principally appreciated stock and real estate. Donors receive reduced tax benefits from gifts of other types of appreciated property, such as inventory and equipment and tangible personal property (paintings, diamonds, etc.).

Note that the opposite strategy applies to a gift of investment or business property (including stock or real estate) that is worth less than its adjusted basis. The donor will usually be better off selling such property for a loss and contributing the sales proceeds. This will permit the donor to recognize a tax loss which would NOT be deductible if the property had been given directly to Trinity.

Even if a donor has made a completed gift to Trinity, the IRS can disallow a charitable tax deduction if certain procedural requirements have not been met. Generally, the donor

must receive a certain type of receipt for every gift of $250 or more, and gifts of property valued at over $5,000 (except marketable stocks and other securities) must be substantiated with a qualified appraisal.

Another great and wonderful way to help your Church financially at your death is to name Trinity as a beneficiary in your Individual Retirement Account (IRA) and/or

401(K). This process is very simple and is explained in greater detail below. The first step is to contact your IRA Financial Advisor and ask for a “Change of Beneficiary” form. On the document designate Trinity United Methodist Church as a beneficiary and designate the percentage of your account you would like to leave to the church (1% to 100%). YOU MAY DESIGNATE MORE THAN ONE BENEFICIARY ON AN IRA OR 401(K). Each beneficiary has their own election on how they would like to receive their distribution. The Church would elect a lump-sum distribution while an individual may choose another option.

The document may ask for your relationship to your beneficiary, if so, write in “organization” or “charity”. There is no need to list a tax identification number or date of birth. Your IRA Financial Advisor can assist you with the specifics about their needed information. If it is a 401(K) Plan you are updating, ask your Human Resource Director for a “Change of Beneficiary” form and follow the same instructions as described above.

Remember to keep a copy of the beneficiary change form on file with your personal estate planning records. And if you deem appropriate, give a copy to the Church for their records.

Making a gift of life insurance to the Church is an appealing planning strategy as it is flexible, cost effective, and in many cases, a TAX-EFFICIENT way of leaving a legacy that will benefit the Church after your death. For a comparatively small premium contribution, the ultimate gift (the death benefit) is generally many times larger than the total payments. Life insurance can allow you, the donor, to make a significant gift without reducing your estate and depriving your surviving spouse or family of an inheritance.

FOUR WAYS TO SUPPORT THE CHURCH USING LIFE INSURANCE:

One: Make a gift of an existing policy-

You may choose to make an outright gift of an existing policy to the Church. TO GAIN A CURRENT INCOME TAX CHARITABLE DEDUCTION, you must be certain to transfer all rights of ownership in the policy to the Church, i. e. the Church is made the OWNER and POLICY BENEFICIARY. As a general rule, the value of the tax deductible gift (subject to general limitations placed on charitable contributions) you make is equal to the fair market value of the policy at the time of transfer. If the value of the policy exceeds the premiums paid to the date of transfer, a donor may only deduct their cost basis in the policy.

Two: Make the Church the beneficiary of an existing policy-

As a donor, you can maintain ownership of an existing policy and simply change the beneficiary designation to benefit the Church. The Church can be named a sole beneficiary or only receive a part of the policy proceeds. The Church could also be listed as a contingent beneficiary.

Three: Help the Church purchase a new policy-

The Church could purchase a new policy on your life – subject to state insurable interest laws. The majority of states now have laws in place that give charitable organizations an insurable interest in your life as a donor; however, the laws vary according to the applicable state statutes. Under this approach, the Church purchases the policy, naming itself as owner and beneficiary and is responsible for making the premium payments. Of course, the Church would normally expect you to make cash contributions equal to or greater than the needed premium dollars as long as the policy is in force.  For instance, a forty (40) year old male in good health can purchase a $100,000 term policy in the Church's name with a maximum lifetime age of 100 years, for less than sixty ($60) per month.  If properly structured, the premiums paid could be TAX DEDUCTIBLE as a CHARITABLE CONTRIBUTION.  For more information, please contact Jill Gardner, Church Administrator at the Church office 256.883.3200 x209 or call your life insurance advisor.

Four: Gift assets to the Church and replace family wealth through a wealth replacement trust-

Sometimes life insurance is not the gift, but becomes the solution. As a potential donor, you may be inclined to make a substantial gift to the Church, but you are hesitating, wondering if you will deprive family members of assets they might need in the future. However, by directing your tax savings generated by your charitable gift to the purchase of a life insurance policy, you can donate your assets to the Church and still send a benefit to your heirs. The life insurance should be owned by your children or be an irrevocable life insurance trust (ILIT) to ensure that upon your death, the policy proceeds will not be included in your estate and your heirs will receive full benefit from the policy proceeds.

A gift of life insurance can provide substantial benefits to both the donor and the Church. A licensed financial professional can help guide you in choosing the right life insurance strategy – one that allows you to achieve your personal goals while helping you to support your Church in a very significant way. You should also consult your personal tax advisor and/or legal counsel as to the particular statutes that apply in your particular situation.

Endowments (or endowed gifts) differ from other contributions in that they are truly the gift that keeps giving. This means the full amount of your gift is never spent. The total amount you give is invested and only the interest earned each year will be used by the Church for its intended purpose. Thus an endowment is a great way to link your legacy with Trinity’s future forever.

Trinity’s General Endowment Fund

The intended purpose of this general endowment fund is to provide funds to support the goals and missions of Trinity UMC. This fund would be used to provide for Trinity’s facility maintenance, repairs and replacement,( i.e., stain glass window care, heating/cooling system, carpet/flooring, etc.); missions project both local or abroad; and current or future programs for Children, Youth or Adults. The initial fund was created by an individual gift of $10,000. Future contributions may be made to this fund.

The charitable gift annuity is a wonderful way to make meaningful gifts while enjoying income and tax benefits that can also help enhance your future financial well-being.

How does it work?

Under the terms of a gift annuity, you make a charitable gift of cash or other property. You and/or others, if you desire, then receive generous fixed payments for life. The frequency and amount of payments are determined at the time the gift annuity is funded. The payments will never change and will continue regardless of how long you and/or other recipients live.

Welcomed tax benefits

Because a portion of your gift annuity will be used for charitable purposes, under current tax regulations, you are entitled to an income tax deduction in the year of your gift. In addition, for a period of time, a portion of each payment may be free of income tax or taxed at capital gains tax rates that are lower than tax rates on other income.

The amount used to fund your gift annuity may also be free of gift and estate taxes. You thus enjoy income and tax benefits today for a gift that you might otherwise have planned to make in the future through your will or other long-range plans.  For instance, currently a 75 year old locks in a guaranteed lifetime rate of 6.3% and receives a charitable gift tax deduction of over $4000 on a $10,000 gift annuity.  A 90 year old could lock into a rate as high as 9.5% guaranteed for life.

Trinity’s gift annuity program is administered by the North Alabama United Methodist Foundation. This means that all documentation, legal matters and the administration of gift payments will be handled by the Foundation, for the benefit of Trinity.  For more information please call Charlie Charlton, Executive Director at 205.503.5650.

Making a gift to Trinity using a Charitable Remainder Trust is a great way to help the Church while reducing the size of your estate and reducing subsequent estate taxes.  A remainder trust is an arrangement in which property or money is donated to a charity, but the donor continues to use the property and/or receive income from it while living.  The beneficiaries receive the income and the charity receives the principal after a period of time.  The grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned.  In addition, the asset is removed from the estate, reducing the subsequent estate taxzes.  FOR EXAMPLE, John Doe owns stock valued at $100,000 that John purchased for $10,000.  If sold, John would pay long-term capital gains tax on $90,000.  John considers a charitable remainder trust (CRT) to benefit himself and Trinity.  John transfers the $100,000 stock to a CRT, pays no long-term capital gain, receives a generous charitable tax deduction of $30,000, and locks into a 5% annual CRT income.

The North Alabama United Methodist Foundation, Inc. assists Trinity in administering charitable remainder trusts.  Please call Charlie Carlton, 205.503.5650 for an illustration of how CRT's can benefit you.

A charitable lead trust can be used to transfer assets to children or others at a significantly reduced tax liability. The trust makes a fixed payment to Trinity for a specified term, measured either by someone’s life or a selected number of years. After the trust term ends, the assets of the trust are either returned to you or passed on to children or other loved ones. If the assets are to be returned to you, you receive an income tax deduction when the trust is created. If the assets are passed on to heirs, applicable estate or gift taxes on the value of the gift are reduced or completely eliminated. The tax savings from a charitable lead trust may allow you to provide significant support for Trinity at little or no costs to heirs in terms of ultimate inheritance.

A charitable lead trust may provide either a fixed “annuity” payment or a variable “unitrust” payment to Trinity. Low interest rates make the annuity payment option attractive for donors as more assets may be passed on to heirs with reduced or eliminated transfer tax liability.

A charitable lead trust can be a powerful tool in gift and estate tax planning, but the technical complexities require careful consideration. An estate planning professional can work with you and your financial advisors to see if a charitable lead trust is the right plan for you.

EXAMPLE

Mr. Jones puts $1,000,000 in a twenty-year lead trust to benefit Trinity. The trust agreement stipulates that Trinity is to receive $50,000 in income annually for the purposes spelled out in the trust agreement. At the end of the twenty-year term, Mr. Jones’ son, Joe, is to receive the trust principal.

For gift tax purposes, only the present value of the remainder interest (what the IRS estimates the value to be at the end of the trust period, is subject to tax.) In this case, Treasury tables project the value of the remainder to be about $213,000. The trust principal, however, actually grows to about $1,280,500 (assuming a 6% annual return), and this is what Joe receives. The difference between the value of the remainder interest under the Treasury tables and the actual trust value at the end of the trust term (about $1,067,300) passes to Joe free of transfer taxes. Mr. Jones’ tax liability is based only on the present value of the remainder interest ($213,000), and even this could be offset by Mr. Jones’ available estate and gift tax unified credit.