Types of Donations

There are a wide variety of ways to make a donation. All gifts are tax deductible to the fullest extent allowed by law. Since each gift is individual, you should consult with your personal tax advisor to determine your deductibility and which type of donation is best for you.

Appreciated Property

Property that is presently worth more than its original cost is called “appreciated property.” The gift property must be held for more than twelve months or more to qualify as “long term” appreciated property. Appreciated property donors qualify for an income tax charitable contribution deduction for the property’s full fair market value at the time of the gift. In addition, you avoids any tax on the amount of the gain which would become due at the time of a sale of the property. Real property, mortgages, life insurance, tangible personal property, future or partial interests, and planned deferred gift arrangements are all considered appreciated property.

Bequests

Charitable bequests are provisions in your will that benefit the organization you name. Having a will prepared ensures that upon your death, your property is distributed in the manner of your choosing, rather than under formulas determined by law. A bequest provision allows you to name a dollar amount or a percentage of the total value of your estate to be donated to the charitable organization of your choice. A bequest may be general or restricted to a certain program or service offered by the organization.

Cash

There is no easier way to support the United Methodist Homes and receive a charitable deduction than by simply writing a check. If you itemize your taxes, outright gifts of cash are fully deductible for Federal income tax purposes up to 50% of your adjusted gross income.

Gift Annuities

A charitable gift annuity is a contractual agreement between a donor and a nonprofit organization whereby the nonprofit organization agrees to pay a fixed annual income for life in exchange for money or assets transferred to the nonprofit organization. The amount of the annuity (annual income) is determined by the amount of the gift and the age or life expectancy of the individual or individuals who are to receive the annual income. The life income is guaranteed by the total assets of the nonprofit organization and is not limited to the extent of the original assets transferred for the annuity. For an illustration of a charitable gift annuity, see our Planned Giving Examples.

Life Insurance

If you own a life insurance policy that is no longer needed, simply name United Methodist Homes as both the owner and beneficiary of the policy. If the policy has a cash value, you can take a charitable deduction approximately equal to the cash value at the time of the gifts. In addition, if annual premiums are still to be made and you continue to pay them, those premiums will become tax deductible each year. If a gift of life insurance is an option that you would like to pursue, please consult with your life insurance agent for details on which forms to complete.

Real Estate 

The largest single component of the average estate value is real property. A gift of real estate could provide a charitable deduction for income tax purposes, thereby reducing the capital gains that would be realized on the sale of real property if it were sold outright. There are a number of different types of real property gifts, including:

• Gifts subject to life estate and split interest arrangements that reserve income to the donor and/or others.
• Transfers to a trust. A transfer to a revocable trust is not considered a complete gift until subsequent events make the transfer irrevocable.
• Outright gifts of real property come in a variety of forms and include: gifts of all of one’s interest in property; gifts of an undivided interest in property (for example, a one-half interest); gifts subject to a life estate or gifts of a remainder interest in a personal residence or farm; or a bargain sale of an interest in property.

Retirement Plan Designation

Individuals over the age of 70½ can make tax-free gifts to charity, up to $100,000 per donor per year. To qualify, the distribution must be made directly from the trustee of an IRA to the charitable recipient. You should check with your IRA trustees or your advisor for details on how to distribute the gifts. (Note: Donors should not take the distribution themselves and subsequently write a check to charity.)

Stocks, Bonds or Other Securities

Gifts of long-term appreciated stock to the United Methodist Homes offers a two-fold tax saving. The first is the avoidance of paying capital gains on the increase in value of your stock. In addition, you receive a tax deduction for the full fair market value of the stock on the date of the gift. For income tax purposes the value of such gifts may be deducted up to 30% of adjusted gross income, with an additional five-year carry forward.

Trusts

There are two types of irrevocable trusts that are popular giving vehicles -- a Charitable Remainder Annuity Trust (CRAT) and a Charitable Remainder Unitrust (CRUT). Both types are created when an individual transfers property such as cash, stock, real estate, etc. to a trustee under the terms of a legal document that describes the purpose and manner under which the trustee administers the property to fulfill the objectives established by the trustor (the donor). The trustee manages, administers, and makes disposition of both the income and the principal under whatever terms are specified by the trust. The trustee may pay income to the trustor and/or someone designated for life or a specified number of years, and then the remainder may be paid over to a charitable institution. Trusts may be modified in a variety of ways to suit the objectives of a donor. The Tax Reform Act of 1969 limits income, estate, and gift tax benefits both types of trusts.

Charitable Remainder Annuity Trust (CRAT)
An annuity trust specifies in a fixed number of dollars the amount of the annuity to be paid annually to the income beneficiaries. This must be an amount equal to at least 5% of the fair market value of the property transferred into the trust. The remainder, after the life income interests have terminated, is paid over to the charitable institution. An annuity trust provides a fixed income for life, income tax benefits, freedom from management concern, and estate tax benefits.

Charitable Remainder Unitrust (CRUT)
A unitrust specifies a fixed percentage of the net fair market value of the trust assets as appraised annually to be paid over to the donor or anyone designated by the donor as income beneficiary. This must be an amount equal to at least 5% per year. The unitrust provides an income related to the total value of assets including growth and appreciation. The unitrust provides an inflationary hedge. The trust provides income tax benefits in the form of contribution deduction and avoidance of capital gains tax liability, freedom from management concern, estate tax benefits, and avoidance of probate problems. Unitrusts may also be written with the option:

1. To pay out actual income or a specific percentage (not less than 5%), whichever is lower, with make-up payments in future years when income exceeds the specific percentage.

2. To pay out actual income or a specified percentage (not less than 5%), whichever is lower, without make-up payments for any deficiency.

3. As a tax exempt unitrust where principal is invested in tax exempt bonds or securities and pays out only the income if income is less than the specified percentage.

4. A unitrust (with or without makeup) is funded with illiquid assets (for example, non-income-producing real estate, closely held stock, etc.) that produce no distributable income, but the donor prefers the regular unitrust to the income-only version. The donor may create an income-only unitrust using these assets and, at a later date on the occasion of a “triggering event” convert or flip the income-only trust to a standard unitrust that will produce a regular income stream. A “triggering event” might be such as the sale of the assets, a marriage, divorce, death, birth, or a specific date as a birthday (for example for retirement, or 18 for “coming of age”).