Assistance with Estate Planning
If estate planning is something you are thinking about for the first time, or if you need to update an older estate plan, we have resource material available to assist you. To help get you started, the PFCN Foundation has an “Estate Planning Guide” and an “Estate Inventory Form” that are free for the asking.
In addition, we have a professional consultant available to work with you who is well-versed in the technical aspects of business transition, retirement, and estate planning, serving the church without cost or obligation to you. The Foundation has created a program that ensures that no one will be sold investments, insurance or any other products. This program has been established truly as a service to members and regular attenders of Portland First Church of the Nazarene.
While the PFCN Foundation cannot serve as your legal counsel, our representative is trained to help in areas such as:
- Wills and Living Trusts
- Selling Your Business While Minimizing Taxation
- Protecting Inheritance for Loved Ones
- Minimizing Taxation on Retirement Plans
- Reducing or Eliminating Estates Taxes
…all while helping you appropriately think about stewardship opportunities in the planning decisions you make! If you would like to learn more about these unique services, please contact us at Foundation@pfcn.org.
Various Ways to Give
If you have publicly traded stock that has appreciated in value, it may be most advantageous to give the stock rather than cash. Why? Because any capital gains tax that you would have incurred if you sold the stock will be avoided when you give it instead. Then, if you happen to like that particular stock, you can use your available cash to repurchase the stock at a new, higher cost basis.
While cash, CDs, and marketable securities are thought of most often when making a gift to a charitable organization, real estate is sometimes the best gift of all. Many people reach a stage in life when they simply do not want the management responsibility that accompanies property ownership.
For those who have rental apartments or commercial buildings, farms, or vacation homes, not only can they avoid capital gains taxes, but they can avoid depreciation recapture tax as well.
Gifts of real estate are most often used when funding a life-income arrangement. Information on life-income arrangements can be found in the section “Gifts that Provide Income Back to You.”
The PFCN Foundation is able to receive life insurance gifts in two ways. First, people often have what is called a “paid up” policy. In other words, they have owned the life insurance for so long, that cash value has grown inside the contract. Sometimes the cash is significant enough that the earnings on that cash are enough to pay the premiums.
In those instances, the life insurance is deemed to be “paid up.” So, whether a person has 1) a “paid up” policy or 2) a policy with significant cash surrender value, the Foundation is pleased to receive these kind of life insurance gifts.
NOTE: The PFCN Foundation does not participate in start up life insurance programs where the goal is for members of the church to make donations with the expectation that the Foundation will use those proceeds to pay insurance premiums.
Recently Congress changed the rules on retirement plans. Today, the payout rate requirement after age 70.5 is much lower than it used to be. Consequently, as people get into their 80’s and 90’s it is more likely that their IRA, KEOGH, or 401k balances will remain higher. That is good news for most older Americans!
However, there is a looming…and often large…tax on retirement plans that people often do not consider while doing their estate planning. Here’s how it works:
Congress allows each of us to put money into a retirement account during our working years tax-free. In other words, we don’t have to pay income tax on the amount of money we place in IRAs, KEOGHs, or 401ks. Additionally, our retirement accounts get to compound in value tax-free, as well, in order that they can grow as quickly and consistently as possible to support us during our retirement years.
However, the IRS doesn’t forget that those very same retirement plans have never been subject to tax. If a person passes away while holding the retirement plan in their estate, income AND possibly estate taxes will be due.
To avoid this scenario, it is often advisable for people simply to name their favorite charitable organization(s) as the remainder beneficiary of their retirement plan(s). This can be done easily by calling the retirement plan administrator and filling out a new beneficiary designation form. Charitable organizations are not subject to estate or income tax, so the full value of the retirement plan can become a gift.
Often referred to as “bequests”, a person or couple can name PFCN, or the PFCN Foundation, as a beneficiary in their estate documents, regardless of whether they use a will or living trust. If you have been touched in some way by the work that PFCN is doing, this is one of the most meaningful ways you can support its work. And it’s easy to do! You can call our offices at 503-297-6100 and our Executive Administrator will be happy to provide language you can give your attorney as you update, or complete, your estate plan.
Gifts that Provide Income Back to You
One of the most popular forms of life income arrangement, a gift annuity offers many advantages. First and foremost, the payout rates for gift annuities are generally quite attractive to people in their 70’s, 80’s and 90’s. The rates typically range from 6-11%. So if a person or couple is currently experiencing a low return on their CDs, money market accounts, treasury notes, or bond funds, a gift annuity can be a nice alternative. The payout rates are determined by a person’s age and, once established, are fixed for life.
Second, the donor receives a generous income tax deduction for the year in which they create a gift annuity. Often the tax deduction is 20-50% of the amount that they placed into the agreement.
And finally, depending upon how the gift annuity is funded, the donor can enjoy a significant portion of the income they receive from a gift annuity on a tax-free basis.
There are many forms of gift annuities. Some offer an immediate payout option, while others allow the donor to fund the agreement and get an income tax deduction now, but delay the beginning of payments until some point in the future of their choosing.
Call Karen Garrison if you are interested to learn more about gift annuities. A confidential illustration can be prepared specifically for you, which will reveal what your payout rate would be, how large your income tax deduction amount is, and what portion of your payments would be tax-free. There is no cost, expectation, or obligation to inquire. The PFCN Foundation simply wants to be sure you have current and accurate information that will allow you to make an informed decision about whether a gift annuity might be right in your particular situation.
Charitable Remainder Trusts (CRTs) can be one of the most powerful planning tools available as people do retirement and estate planning.
CRTs afford the donor potentially five favorable tax outcomes by virtue of one financial transaction. They are: 1) capital gain tax avoidance 2) income tax deduction, 3) tax free compounding 4) income payments taxed favorably, and 5) estate tax elimination (for those people with larger estates).
- Capital Gain Tax Avoidance allows people to place assets in a CRT and avoid paying initial capital gain tax in the process. For example, if you paid $100,000 for some property that is now worth $500,000 you can sell the property through a CRT without having to report the $400,000 of capital gain as income.
- Income Tax Deductions are available to those who create CRTs. Through a series of complicated math computations, people are able to receive a significant income tax deduction based upon the market value of the asset they place in a CRT.
- Tax Free Compounding occurs on the assets that are put in a CRT. For example, if you place an appreciated piece of real estate in a CRT and then sell it, the proceeds are placed in an investment portfolio. Any growth on the investment will occur inside the CRT tax-free for as long as the trust is in existence.
- Income Payments Taxed Favorably occurs as people receive their payments from a CRT. Often, if invested carefully, the person(s) receiving income from a CRT may receive portions of that income taxed at long-term capital gain rates. For many people, the long-term capital gain of 15% is less than their ordinary income tax bracket.
- Estate Tax Elimination can be accomplished for those with large estates. Effectively, the value of the asset placed in a CRT comes out of the donor’s estate, thereby lowering the donor’s taxable estate. As an example, if a couple has an estate valued at $4,500,000, and they place a $500,000 asset in a CRT, the taxable value of their estate would drop to $4,000,000.
Finally, life insurance can sometimes be a viable part of a CRT plan. If the donor(s) want their loved ones to participate in the full value of their estate, then creating a life insurance trust with some of the CRT tax savings and additional cash flow can allow loved ones to “remain whole” as it relates to their inheritance.
Leaving a Legacy of Stewardship
Every once in a while you may stop to consider the impact your life has on the people around you. Many people can look at their family and friends — knowing they have had a positive influence. Still they yearn to do something more…something deeper for the Kingdom…something positive that will survive the challenge of time.
Often our cash resources are limited. We would like to give more money to the church and its programs, but there simply aren’t enough cash resources to do so.
What if you could make a lasting and permanent gift…one that was bigger than you ever dreamed possible? And what if you could do it in a way that honored and protected your loved one’s inheritance at the same time?
If you would like to create this kind of permanent legacy, the PFCN Foundation was initiated to help you do just that. Establishing a permanent endowment fund in your name, or the name of a loved one, is a wonderful way to create permanent stewardship legacy, as well as provide ongoing funds to the church. With this type of fund, a percentage of the earned income is used each year to carry out the purpose of the endowment. The principle (aka corpus) that you gave remains intact. A contribution or bequest of any amount can establish a named endowment within the PFCN Foundation. You can even specify where you would like the annual earnings from your endowment fund to go. Possible examples are:
- Fulfilling the mission of Portland First Church of the Nazarene
- Building an endowment for property repair & maintenance, expansion, technology improvements, etc.
- Compassionate Ministries and scholarships
- Community Outreach