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The Free Methodist Foundation
8050 Spring Arbor Road
PO Box 580
Spring Arbor, Michigan 49283
phone: 517.750.2727
toll free: 800.325.8975
fax: 517.750.2752
email: info@fmfoundation.org
Giving Through Charitable Remainder Unitrusts
Many personal planning dilemmas can be solved in ways that enable you to make significant charitable gifts.
As time goes by, personal priorities change. After providing for life's basic needs, many people contemplate ways in which they might "give something back" by furthering causes in which they believe.
But even when the desire to give takes in a high priority, gifts may need to be put "on hold" until long-term family financial requirements are satisfied. Many are concerned they will outlive their resources or not be able to provide for surviving family members. They also want to be confident that their affairs will be managed properly should they become unable to do so themselves.
How Trusts Can Help
It's a common misconception that trusts are used only by the wealthy when they need to manage complex financial arrangements. While the wealthy find trusts helpful, the majority of trusts are created by people of moderate means for reasons that are as old as humanity.
Life presents many situations in which a complete and absolute ownership of property is neither necessary nor desirable. Centuries ago, trusts were developed to provide management for property in these situations. Through a trust you can:
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Provide income for yourself or someone else for a period of years or for life.
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Delay distribution of money or other property, for example, until a child reaches a certain age.
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Have property professionally managed for life or a specified number of years.
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Distribute your estate effectively, first remembering your responsibility to your family, especially dependents. You may also wish to designate a percentage or amount to one or more ministries of the Free Methodist Church.
A trust document may consist of one page or hundreds, depending on its purpose. You may choose to serve as your own trustee (manager of the trust) or engage a professional.
Advantages of Charitable Trusts
A special group of trusts (charitable trusts) combines charitable giving with other financial goals. As the donor, you transfer property to a trust. Income is paid to you or another beneficiary you name, for up to 20 years or for one or more persons' lifetimes. When the trust term ends, the property remaining in the trust becomes a gift to the organization(s) of your choice. Charitable gifts also bring you tax benefits. Income, gift, and estate tax deductions are allowed for the gift portion.
Assets that have increased in value but earn little income can be placed in a charitable trust, sold and reinvested in higher yielding assets. Since the trust is tax-exempt, the capital gains generated by the sale are thus available to generate income.
Planning for Retirement
Through a charitable trust, you can enhance retirement income and enjoy knowing that the funds remaining when the trust ends will be put to charitable use. Please see Giving Through Retirement Plans for more information.
Meeting Educational Expenses
If you are faced with rising costs of education for children or grandchildren, it can be difficult to make charitable gifts of any kind. Fortunately, a charitable trust can help. It can be created to last for only as long as circumstances dictate. The remainder then becomes a charitable gift.
Caring for Loved Ones
Many people preparing for their own retirement are also providing some sort of financial assistance to parents or other older relatives. Such expenses are non-deductible for tax purposes and can be subject to gift tax if they exceed certain amounts.
Again, charitable trusts can offer a solution. You can transfer assets to a charitable trust that will pay income for life to an older relative or friend. A charitable deduction based on the life expectancy of the relative is allowed. The older the income beneficiary, the shorter the trust will be presumed to last. Therefore, tax savings can be significant because the expected shortened payout period results in a larger charitable gift.