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File folder may hold key to charitable giving

Have you wanting to give to charity?

Are you wondering how to begin your planned giving?

You may have already have what you need sitting in that file folder in your office.

Life insurance makes it possible for virtually everyone to make a meaningful gift. Policies that are no longer needed for their original purpose can make excellent gifts when given to the New Braunfels Area Community Foundation. You can either designate NBACF as the beneficiary, or you can gift the policy during your life and likely receive an immediate income tax deduction.

It might be time to pull out that file and take a look at your existing policy. Life insurance provides a simple way for you to give a significant gift to charity, while providing tax benefits that you can enjoy during your lifetime.

How it works:

  • You make New Braunfels Area Community Foundation the owner and irrevocable beneficiary of your life insurance policy. You can either give a paid-up policy or continue to pay premiums.
  • You receive a tax credit for the fair market value of your policy. If the policy is paid up, you may receive an immediate tax credit. If it is not, you can claim continuing tax credits on premium payments you make directly or through gifts to NBACF.
  • Upon your death, we set up a special fund in your name, in the name of your family, or in honor of any person or organization you choose.
  • Our professional staff considers your charitable wishes and determines the community needs that would benefit the most through grants from your gift.
  • Our board issues grants in the name of your fund (if you prefer, your awards can be made anonymously).
  • We handle all the administrative details.
  • Your gift is placed into an endowment that is invested over time. Earnings from your fund are used to make grants addressing community needs. Your gift – and all future earnings from your gift – is a permanent source of community capital, helping to do good work forever.

Examples:

Charity is designated owner and beneficiary

Mr. Playew gives a charity a paid-up policy with a face value of $100,000 
and a policy value of $48,000. His adjusted cost base in the policy is $20,000.
 Donation receipt:                                       $48,000
 Tax credit (assuming 45%)                       	 $21,600
 Taxable income ($48,000 - $20,000)        		 $28,000
 Tax on income                                           $12,600
 Tax savings ($21,600 - $12,600)                          $9,000

 
Charity is designated as beneficiary

Ms. Aziz would like to make a significant gift to her favorite charity 
and has a $100,000 life insurance policy that no longer has a specific purpose 
and is evaluating whether to continue the policy and pay the annual premiums 
and gift the proceeds to the charity. Her net income in the year of her death is 
expected to be $200,000.
                                        No insurance $                  Insurance $
 Net income                             $200,000                        $200,000
 Tax (assuming 45%)                     –$90,000                        –$90,000
 Donation tax credit:                   –                                $45,000
 After-tax position of estate:          $110,000                        $155,000
 Gift to charity                        –                               $100,000
 Total value to estate and to charity   $110,000                        $255,000

 

    The donor must also consider the annual cost of the policy premiums. For illustration purposes, a combined tax rate of 45% was used. Please note that combined tax rates may vary.

 
Several other vehicles for planned giving include:

        • Retirement Assets
        • Charitable Bequest by Will or Charitable Trust Distribution
        • Charitable Lead Trust
        • Remainder Interest in Residence
        • Charitable Gift Annuity
        • Charitable Remainder Trust

If you are interested in one of the giving vehicles mentioned here, you should always consult with your tax advisor first. To learn more about the New Braunfels Area Community Foundation, contact Brit W. King, President/CEO, at (830) 606-9536 or brit@nbacf.org or visit www.nbacf.org.