'Tis the season for charitable giving

What is planned giving?
Planned giving is a method of supporting nonprofits.  You can use estate planning techniques to create a gift during your lifetime that will take effect after you die.  Or, you can give a gift during your lifetime.   Contact Matrium Law Group by calling (406) 552-7814 or by sending us an email to discuss the planned giving technique that best accomplishes your goals. 

1.     Charitable Bequests.  A charitable bequest is one of the easiest and most flexible ways that you can leave a gift to a nonprofit.  With the help of an attorney, you can include language in your will or trust specifying a gift to be made to a nonprofit as part of your estate plan.  You can designate the nonprofit as a beneficiary of your retirement account, or you can name the nonprofit as a beneficiary of your life insurance policy.  You can add a Transfer on Death or a Payable on Death designation to your bank account, investment account, and even your real property using a beneficiary deed.

2.     Life Income Gifts.  There are several types of gifts that provide income to you during your lifetime. With the charitable gift annuity, in exchange for cash or stock, the nonprofit will make fixed payments to you for life.  Once the annuity payments end, the remaining funds are used to support the nonprofit.  With the charitable remainder trust, you sign a trust document and then transfer cash, stock or real estate into the trust.  The trust then makes payments to you for life or for a period of years.  After the trust payments end, the remaining trust assets are used to support the nonprofit.

What is the Montana Endowment Tax Credit? Since 1997, Montana law has provided for the Montana Endowment Tax Credit.  This credit is available to individuals and businesses who pay income tax in Montana and make a planned gift that supports a qualified endowment to benefit a tax-exempt charitable 501(c)(3) nonprofit organization.

What is the maximum tax credit I can claim?  The credit is 40% of the planned gift’s federal charitable deduction value, up to a maximum of $10,000 per individual or $20,000 per couple.  For businesses, the credit is calculated at 20% of the value of the gift, up to a maximum of $10,000. 

What endowments currently exist in Montana? There are many qualified endowments benefiting nonprofits across the state.  Check with your favorite nonprofit to find out if they have an endowment. 

What planned gifts qualify?

a.      Charitable gift annuity. This is the transfer of cash or property to a charity in exchange for the charity’s promise to pay the donor and, if applicable, the surviving annuitant, a lifetime annuity. This type of annuity is considered a bargain sale that results in part taxable gain and a charitable deduction. The annuity agreement must provide that the interest of the annuitant(s) in the gift annuity may not be assigned to the qualified endowment sooner than the earlier of the date of death of the annuitant(s) or five years after the date of the contribution. The charitable organization issuing the annuity must also meet additional requirements imposed in 33-20-701, MCA that are administered by the Montana Commissioner of Insurance.

b.     Deferred charitable gift annuity. This is an annuity in which payments to the donor do not begin until a future date. Deferred charitable gift annuities are subject to the same requirements as charitable gift annuities. In addition, the first partial or full-year payment of the annuity has to begin within the life expectancy of the annuitant or of the joint life expectancies of multiple annuitants, and the annuity rate to be paid must be at least 5%.

c.      Charitable remainder unitrust. This is a trust in which property is transferred and invested by the trustee who each year pays a fixed percent of the unitrust value, revalued annually, to one or more private income beneficiaries for the life of beneficiaries, a term of years, or both, with the remainder interest in the trust transferring to, or for the use of the charity, or retained by the trust for the use of the charity. The trust agreement must provide that the trust may not terminate and the beneficiaries’ interest in the trust may not be assigned or contributed to the qualified endowment sooner than the earlier of the date of death of the beneficiaries or five years from the date of the contribution.

d.     Charitable remainder annuity trust. This is a trust in which property is transferred and invested by the trustee who each year pays a fixed dollar amount to one or more private income beneficiaries for the life of the beneficiaries, a term of years, or both, with the remainder interest in the trust then transferring to, or for the use of the charity, or retained by the trust for the use of the charity. The trust agreement must provide that the trust may not terminate and the beneficiaries’ interest in the trust may not be assigned or contributed to the qualified endowment sooner than the earlier of the date of death of the beneficiaries or five years from the date of the contribution.

e.      Pooled income fund trust. This is a trust in which property contributed by donors is pooled together with other investors. All the assets transferred to the fund are added together and invested. This pooled fund creates a diversified portfolio in which all participants receive a share of the earnings.

f.       Charitable lead unitrust. This is a trust in which property is transferred and invested by the trustee who each year pays a fixed percentage of the unitrust value, revalued annually, to the charity for a term of years or during the lives of specified linear descendants, with the remainder interest then transferring to private beneficiaries named by the donor.

g.     Charitable lead annuity trust. This is a trust in which property is transferred and invested by the trustee who each year pays a fixed dollar amount to the charity for a term of years or lifetime(s), with the remainder interest then transferring to private beneficiaries named by the donor.

h.     Charitable life estate agreement. This is a gift to a charity of a personal residence that is subject to a reserved life estate.

i.      Paid-up life insurance policy. This is a life insurance policy in which all the premiums have been paid that usually entitles the donor to a current deduction equal to the cost of replacing the policy with a single premium life insurance policy at the donor’s current age.