Impact Investing

Legacy/Estate/Tax Smart Gifting

We asked our favorite Certified Financial Planner, someone who brings extensive knowledge and a heart for impactful philanthropy, to share some scenarios in which donors can be great stewards of God’s resources and make a real difference now and in the future through what he calls “Legacy/Estate/Tax Smart Gifting”: * 

1. A donor has an asset (real estate, stocks, collectibles….) that they are not using and will not need for their personal financial needs, however they would like to leave an inheritance for their kids/grandkids or perhaps they would like to turn into an income stream for themselves (this asset has usually appreciated and if they were to sell it would have significant capital gains taxes). In this example, a donor would gift the asset into a CRT (Charitable Remainder Trust) with Forever Families as the beneficiary (a lawyer sets this up) the asset is sold inside of this CRT without accruing any taxable gains to the donor, then an annuity is purchased to provide a defined amount of income over a defined amount of time back to the donor with the proceeds from the gifted asset. These funds are used to purchase a life insurance policy on the donor payable to their heirs as a tax-free death benefit, thus ensuring their legacy. The remaining funds not needed to purchase the annuity become a charitable gift to Forever Families (available for immediate use) that the donor may right off on their taxes.

2. A donor has a highly appreciated asset and a big tax bill coming up, they can simply gift the asset to Forever Families, the donor writes off the full market value (with guidance from their CPA) and Forever Families liquidates the asset for immediate use and pays no taxes (taxes follow the gift, however Forever Families is a tax-exempt entity).

3. A donor has a large 401k/IRA that is tax-deferred (non-Roth) that will be passed down to their kids. Due to the new SECURE Act, their kids will have to distribute that money as taxable income to themselves within a few years of inheriting it, losing approximately 1/3 of the value to taxes. To avoid this and benefit Forever Families, a donor can buy an insurance policy to fund the legacy they want to leave to their family (life insurance proceeds are tax free), pay for it with distributions from their IRA/401k, then leave the balance of the IRA/401k to Forever Families as a gift. In this scenario the federal government is dis-inherited completely, and their family and Forever Families benefit.

4. A donor has RMD (required minimum distributions) from their 401k/IRA that they do not need as income. They can gift those RMD’s directly from an IRA to Forever Families via a QCD (Qualified Charitable Distribution). The donor benefits because they fulfill the distribution requirements, however they never receive the funds as income, therefore are never taxed on it. Under current tax law, most senior citizens cannot deduct charitable donations because they do not have enough deductions to itemize, therefore they are saving on taxes and magnifying their gift.

Text Box: Lynn Metler of the Trinity Health Foundation presents the grant certificate to Debby & Jeff.

* Note: You should consult your own financial advisor regarding your particular situation. If you have questions about any of these scenarios, we would be happy to connect you for further discussion. Contact Michele at 865-769-2611 or at