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NON-CASH ASSETS – YOUR “OTHER 90%”
Scientists tell us that only about 10% of an iceberg is visible above the water’s surface. The great mass—some 90% of the iceberg—is below the surface and hidden from view. Quite often, the Christian steward’s assets (or estate) are similar to an iceberg with approximately 10% in cash (liquid assets) and the remaining 90% being non-cash, non-liquid assets.
For generous stewards, this can lead to the highly frustrating, “I’d really like to give more, but I just don’t have any more money” syndrome.
Regardless of income, nearly everyone reaches the point of, “I can’t give away any more cash."
Are there options for the giver who has reached their personal “cash limit?” Yes! For many, “the other 90%” of their financial assets holds the key to giving to their heart’s desire.
COMMON NON-CASH GENEROSITY OPTIONS
As a general rule, if the asset has an ascertainable value and is commonly bought and sold, it may be possible to use it to fulfill your generosity desires. However, some assets have complicated tax and ownership rules that make their use as a charitable gift less desirable or are prohibited.
Here is a partial list of non-cash assets that are commonly used to make generous charitable gifts.
Securities (Stocks, Bonds, Mutual Funds): Simplest to give are those traded on a public stock exchange or market.
When you make a gift of appreciated stock to ministry, you will receive an income tax charitable deduction for the value of the stock on the date of transfer. In addition, if the stock has appreciated in value, you pay no capital gains tax on the appreciation (as you would if you sold the stock).
Contact Doug Miller at [email protected] or 417.626.1215 for information needed for your broker to transfer shares to OCC.
Individual Retirement Accounts: Commonly referred to as an IRA
If you are at least 70.5 years of age, you can make a Qualified Charitable Distribution (QCD) from your individual retirement account (IRA) to your favorite ministry. You request that your IRA custodian send the distribution directly to the ministry. Since you do not receive the distribution, you will not have to claim it as income. The qualified charitable distribution can be up to $100,000 and can be used to meet your required minimum distribution for the year.
Real Estate: Buildings and Land
Real estate gifts can be of houses, land, condominiums, vacation homes, commercial buildings, or most any type of real property. Transfer of real estate is made by deed to the ministry. You receive an income tax charitable deduction for the fair market value at the time of transfer (determined by independent appraisal), and there will be no capital gains tax implications to the transfer. If you are considering a gift of real estate, please contact us to discuss condition, marketability and any conditions for acceptance.
Life Insurance: Policies can be gifted to ministry during lifetime or name ministry a beneficiary
If you have life insurance that you no longer need, you can gift your policy to ministry. To make a gift during lifetime, you transfer ownership, making the ministry irrevocable owner and beneficiary. The ministry can choose to hold the policy until death or surrender it and put the cash to work doing its mission today. To make a gift of life insurance through your estate, you can name the ministry as beneficiary of the policy. If you have life insurance policies that are no longer needed for their original purpose, consider the possibility of making a gift to ministry. You may find your policy is a perfect tool for increasing your generosity to your heart’s desire.
When you wish to make a gift to ministry but need to maintain the use of the property for current income, there are charitable options that allow you to receive income and make a generous gift.
The CGA provides income based upon the age(s) of the annuitant(s). The older you are, the higher the income paid.
Benefits of the CGA include fixed income for life (a portion may be tax-free), a charitable tax deduction, partial avoidance of any capital gains tax, and the joy of knowing you are making an important contribution to kingdom ministry.
The charitable gift annuity is an agreement between you and a specific charity, funded with cash and/or appreciated securities. Click here to view the sample chart of current CGA rates for one and two life annuities.
If you have appreciated property that you would like to sell to receive more income, consider transferring that property to a charitable remainder trust. The trustee will sell the property and invest the proceeds—without payment of capital gains tax—to provide you income. You receive an income tax charitable deduction for the value of your future gift to ministry, income for a term of years or for life, and you do not have the worries of management.
As Christian stewards, our first estate planning task is to determine how God wants us to use his resources during our lifetime. Then we must also consider his plan for asset transfers at death. God’s word contains principles that give us guidance, and by following them, we can often avoid unnecessary costs, delays, and potential family conflict.
Principle #1: God is the owner of all, not just one-tenth or “the small portion we return back” to him in the weekly offering. The Scripture is plain that God created this earth and all that it contains (Psalm 24:1-2) and as the creator and sustainer. He is also the owner (Psalm 50:10-12). In the New Testament we read that we have been “bought with a price” (1 Corinthians 6:19-20) and that the price was the blood of Jesus Christ (1 Peter 1:17-19).
Principle #2: Since we cannot be owners, our role is that of manager, caretaker, trustee, and steward. God willingly places his assets into our care expecting that we will seek his best interest (Matthew 5:16) through the prudent use of our time (Ephesians 5:15-17), our abilities (Romans 12:1-8), and our financial resources (1 Timothy 6:17-19).
Principle #3: Our blessings are intended to be shared, both during this lifetime and at the time of our death (2 Corinthians 8-9; Galatians 6:3, 9-10; Ephesians 4:28). Planned giving and estate design help us maximize the use of God’s resources to benefit ourselves and others during lifetime and our personal beneficiaries and beloved ministries at the time of death. They can also help us pay fewer dollars in taxes, instead directing those dollars to our church and favorite ministries.
May we help you review or create an estate plan that can meet your needs, provide for your family and favorite ministries, and honor the principles God has given in his word?
Wills and Revocable Living Trusts are often considered the foundational documents for estate planning and distribution.
A will is a document that expresses the final distribution desires of an individual. Wills are subject to state law and nearly always require the involvement of the probate court, where they become public documents. A will distributes only property that was titled solely in the name of the deceased.
A revocable living trust is a confidential document that can be established by an individual or a couple. The trust provides management of assets during lifetime and final distributions at death. It avoids the probate process on assets that are titled to the trust during lifetime.
Powers of Attorney give another individual the legal ability to make decisions on your behalf. They are important when an individual is disabled and cannot manage their business and/or medical affairs. You may establish a separate power for property decisions, as well as one for medical and health care decisions.
Titling must be coordinated with your other legal documents to assure that your planning desires are accomplished. Titling can be a very useful way to transfer assets or it can be the “fly in the ointment” that creates havoc in your plans.
Beneficiary Designations can often be used to transfer assets to desired beneficiaries with minimal cost and delay. Some assets, like life insurance and qualified retirement accounts, have built-in beneficiary arrangements. Many other financial instruments and tangible assets can also be transferred, without probate, by beneficiary arrangement.