SMART MONEY

by Bill Evans, Director, Free Will Baptist Foundation

People who support Free Will Baptist ministries do so out of a spirit of generosity and concern for God’s work across the world. Nonetheless, charitable contributions often can be planned to blend with personal goals and objectives donors have for themselves and their families. Charitable remainder trusts are a remarkable tool for achieving these objectives.

Rather than make a bequest to assist a Free Will Baptist ministry, you may find it advantageous to create a charitable remainder unitrust from which you will be paid annual benefits for life; the trust property will later benefit Free Will Baptist ministries.

Just what is a charitable remainder unitrust? Basically, it is a trust in which you irrevocably place cash, securities, or other property, but keep a specified income—usually for life. When the trust ends, the property in the trust passes to the Free Will Baptist ministry of your choice, much as if you had left it in your will. But because you chose to “accelerate” your bequest by means of a trust, Congress says you are entitled to a substantial income tax charitable deduction. Depending on how you arrange your trust, many other advantages are possible:

• Increased income for your family

• Capital gains tax avoidance

• Favorably taxed income

• Diverting of income to a family member in a low tax bracket

• Estate tax savings

• Avoidance of gift tax

• Professional investment of your funds

• A hedge against inflation

• Reduced estate settlement costs

• Meaningful support for our ministries

The unitrust provides that a specific percentage (minimum 5%) of the value of the property in trust be paid annually. If the value of the trust increases, the payout will increase, too. Decreases are also possible.

Consider the benefits:

* An immediate income tax deduction is available when you create a qualified charitable remainder unitrust during your life. The amount of the deduction will depend on your age and the amount of the benefits you want to receive each year.

* You can transfer stocks or other appreciated property to the trust without paying any capital gains tax on your paper profit.

* You can decide the amount of income you will receive each year. Further, in some cases, your lifetime benefits will be favorably taxed.

* The cost of settling your estate will be minimized and there may be valuable estate tax advantages.

* The trust you establish to benefit Free Will Baptists generally can be tailored to meet your individual financial needs and objectives. Here are some possibilities:

Escape from a “Locked-In” Position

Phil has had phenomenal success in the stock market in recent years, but he hesitates to sell because of capital gains taxes on his profits. Solution? Phil transfers highly appreciated stock (that he has owned more than one year) to a tax-exempt unitrust. The trustee sells the stock, avoids all capital gains taxes, and pays income for life to Phil and his wife. Phil earmarks his gift for important programs and receives a substantial charitable deduction this year.

Save for Retirement

You can make contributions to a unitrust that will pay you income during retirement and then distribute the trust assets to a Free Will Baptist ministry after your death. Advantages? A part of every contribution to the trust will be tax deductible, based on your current age and the amount of income you retain from the trust. Your retirement savings can grow within the trust, tax free, with substantial income after you retire. Your retirement trust is not subject to most of the restrictions that affect IRAs and pension plans.

So maybe you can’t have your cake and eat it too. But you can enjoy the benefits of smart money—money that benefits you and benefits Free Will Baptist ministries as well. For more information about charitable unitrusts, contact Bill Evans at The Free Will Baptist Foundation (800) 336-7575.