Too Good to Be True?

"Put not your trust in money; put your money in trust." Benjamin Franklin had the right idea -- at least for many people. And some of those people are friends of New Hope Community Church. They have created charitable trusts that would make Ben Franklin mighty proud.

To understand how one of these trusts works, take the case of Bill and Barbara Smith (not their real names). Bill and Barbara are in their early 60s and looking forward to retirement. In reviewing their assets, needs and giving goals, they considered what to do with a piece of appreciated real estate.

Twenty years ago the property cost $25,000 and today it's worth $250,000. If they sold it, they could reinvest the proceeds in something that could produce retirement income. One problem: capital gains tax. The moment they sold the property, Uncle Sam would be there with his outstretched hand, demanding tax on the gain. The Smiths would not have as much as they thought to reinvest for income.

They also considered selling the property and giving a portion of the proceeds to NHCC. The resulting income tax charitable deduction could then be used to help offset the capital gains tax. One problem: they needed more income than the remaining funds would be able to generate.

Enter the charitable remainder unitrust. The Smiths established a charitable remainder unitrust with New Hope Community Church and placed the entire property in the trust (stock can also be used). Since the trust qualifies as a charitable trust, it sold the property without incurring any capital gains tax. The full amount of the proceeds (less closing costs) was then invested in a bal- anced portfolio of stocks and bonds -- the right mix to provide a 6 percent annual payout to the Smiths plus enough added appreciation to keep the trust growing.

Each year, in January, the trust is revalued and 6 percent of the new value is sent to Bill and Barbara in quarterly payments. This will continue all the way through their retirement years. And at the end of the trust, whatever remains will come to New Hope Community Church. Such a remainder gift will likely be far more than the original $250,000.

Just look at a few of the benefits:

1. Lifetime income.
2. Immediate income tax charitable deduction.
3. Bypass of capital gains tax.
4. Complete estate tax deduction.
5. A major deferred gift to New Hope Community Church.
   It's almost too good to be true!

Do you want to learn more about charitable remainder trusts?
Contact Pastor Jerry Schmidt, our director of planned giving at 503-659-5683 x3041 or use the handy coupon below.