Willing Friends: This is a term you may have heard when learning about the Pulaski Heights UMC’s Foundation. Willing Friends are members of the PHUMC congregation who have made an indication they plan to remember either the Church, the Foundation, or both in their legacy planning either now, later, or when their time on earth comes to an end.
Morbid, huh? Well, not really. In the early 2000s, when the PHUMC Foundation was under development by the late Rev. Vic Nixon and the late Rev. Lynn Lindsey and their committee, they decided to establish the Willing Fiends Society. This group was made of a core group of congregants who believed in the mission of both PHUMC AND the Foundation – to strengthen the ministries and mission of PHUMC through planned giving.
So, it’s all about planning how you will make gifts now and in the future? Yes. Planning giving is simply what it sounds like. You plan what gift you want to make AND you plan when that gift is made. This gives you the opportunity to tell your assets where they will go instead of someone later asking where they went. Honestly, it is one of the best gifts you can give to your family, or if you have no family, the person you have asked to help manage your estate
There are several phases of planned gifts. The most basis are those gifts committed to in a gift agreement. Those gifts can be made now, next week, next year, in five or ten years, when you retire, or when YOU decide. The process is easy and you can design your gift to make it the most advantageous to you and your family.
Step 1 – Decide that you wan to make a gift to the Foundation. If you want to make a large commitment (for example $12,000) you could make it as a single gift or over 36 months. Gifts of that magnitude are often designated as an endowment in someone’s honor or memory. The earnings are then used to fund a specific purpose (3rd grade bible, older adult activities, alter guild, caring ministries, etc.). If the donor desires, the gift can remain unrestricted. These gifts are grouped with other gifts, and they produce income that helps support PHUMC and the Foundation’s operating budget. The process of making the gift is the same regardless of the ultimate use of the earnings from the gift.
Step 2 – Decide how to fund the gift now or in the future. As mentioned previously, a cash gift is a very simple way to make an impact through an endowment. Other ways you can fund an endowment are through the Required Minimum Distributions related to IRAs or Qualified Charitable Distributions, a life insurance annuity, or with an insurance policy.
Required Minimum Distributions (RMDs) are just that. Depending on your birth year, (age 73 if born in 1959 or earlier of age 75 if born in 1960 or later), the Internal Revenue Service requires minimum withdrawals each year from tax-deferred retirement accounts like IRAs, 401(k)s and 403(b)s. RMDs are considered ordinary taxable income and can potentially push you into a higher tax bracket.
A Qualified Charitable Distribution (QCD) allows persons aged 70 ½ or older to donate funds, tax-free from a traditional IRA to an eligible charity. This type of gift can serve two purposes – first, it satisfies the Required Minimum Distribution and, second, it excludes the amount of the gift from your taxable income.
Another way to fund a planned gift is through a Charitable Gift Annuity (CGA) which is a contract directly between the donor and the PHUMC Foundation. In this situation, the donor would elect to make a large, irrevocable gift to the Foundation. With the Methodist Foundation for Arkansas, the PHUMC Foundation would invest the lumps sum and pay either the donor and/or your spouse a fixed income stream for the rest of your life. Upon the death of the donor, the remaining value becomes a gift to the Foundation when the estate is settled.
This tool allows the donor to receive an immediate, partial income tax charitable deduction in the year the gift is made. A portion of the fixed payments paid to the donor over their lifetime is also considered a tax-free return of principal.
The final tool to fund an endowment presented here is a straightforward designation of the Foundation as the beneficiary of a life insurance policy. For some donors, it is their plan to fund an endowment upon their death, outside the estate settlement process and thereby maintaining privacy. By naming the Foundation the primary or secondary recipient for all or a specific percentage of the death benefit, a donor can retain flexibility and control of the policy and control the payout of the benefit.
A donor can also transfer the ownership of beneficiary interest to the Foundation. In this situation, consider your income from surrendering the policy for its cash value along with its tax implications. If you transfer the ownership of the policy to the Foundation, the policy can be surrendered at the full cash value, of our tax-exempt status. This is a wonderful way to maximize the impact of your contribution.
As with every and all investment and donor strategies, you should contact your tax advisor and/or your estate planning attorney.