Christian Home & Bible School
Serving and caring for children and families since 1945. 1
that Keeps On
The “Energizer Bunny” is one of the best known icons of American advertising – bringing to mind unending energy and service, never failing in times of emergency. Endowment is also like that. The uninterrupted services and ministry of Christian Home & Bible School are dependent upon a solid endowment – permanent funds set aside to provide a stream of income in perpetuity. This financial foundation allows us to meet the needs of future generations of children; to undergird the expansion of services; and, to create a viable maintenance plan for our facilities. Like the ancient children of God, who inhabited the Promised Land, our children will enjoy the fruit and shade of trees they did not plant, and water from wells they did not dig. But what about our future? While twenty-first century needs will change, our dreams remain unchanged. The numbers of displaced, homeless, and victimized children continues to grow astronomically. These young people experience exceptional challenges in terms of education, health, self image, support, and daily care. CH&BS will still be there – ready to offer positive Christian alternatives. Currently, CH&BS enjoys a healthy, growing endowment due to several generous and thoughtful friends. However, the demands of the future are unrelenting as more and more children need our help. A timely and permanent endowment will be the foundation of gifts that will transform future generations for service. The combination of large and small gifts will assure the future for our children. Your part is essential. CH&BS would likely not exist in its present state except for the willingness and generosity of kind, normal, everyday friends willing to give
anything from a few dollars a month to gifts of estates for our endowment. Our policies allow us to use the interest earned from our endowment, while principal continues to grow in order to meet future financial requirements. Our Planned Giving Office is prepared to assist you in realizing two goals: faithful stewardship of all God has given you to bless hurting children; and, providing for your future, your family, and other philanthropy. We stand on the threshold of fulfilling your desires to change the lives of children whose names you may never know, while taking care of those you love, all for the glory of God.
How is Endowment Accomplished? There are many roads to endowment, such as current gifts, deferred gifts, or testamentary gifts. Letâ€™s consider three examples.
Current Gift Claude and Rachel Donor want to make a gift of $50,000 to the permanent endowment of CH&BS. Their gift will be designated to honor Rachel’s parents and will be restricted to the general operating budget (it could as easily be restricted to other specific purposes of your choosing). The tax considerations for the Donor’s gift will be determined by the asset used. Cash will allow a full income tax deduction, while appreciated assets (stock or other real property, etc.) have the additional appeal of bypassing capital gains taxes. The Donor’s gift will begin earning income immediately, and will contribute to the needs of CH&BS one year from the date of the gift. How would that look? • Transfer $50,000 cash or appreciated asset to CH&BS • Receive current income tax deduction of $50,000, possibly saving $14,000 if donors are at the 28% rate. (Cash is deductible up to 50% of Adjusted Gross Income [AGI]; appreciated assets up to 30% of AGI. Either may be carried over.) • Bypass capital gains tax of approximately $6000 if appreciated asset is used ($10,000 cost basis). Christian Home & Bible School immediately begins earning income from the gift.
Deferred Gift Albert and Ima Farmer (ages 70 and 68) are retiring from their 200 acre farm. The Farmers have worked their land for a lifetime and want to use it as a significant element in both their retirement and to build a legacy at CH&BS. Because they have other resources, the Farmers can convert the farm to an asset that will pay a better stream of income and have it become endowment for CH&BS at their deaths. Their basis in the farm is $30,000 and the current value is approximately $300,000. The appreciation is significant.
The Benefits of a Charitable Remainder Trust The Farmers, Ages 70 & 68 Fair Market Value: $300,000 Original Cost: $30,000 Current Yield: $8,500
1. No Capital Gain: Saves $40,000 2. Current Income Tax Deduction: $102,582 3. Current Tax Savings: $28,723
First Year Income $18,000 (Based on 6% Payment) Lifetime Income $500,000 For 23 Year Life Expectancy
Estimate Future Endowment Gift to CHBS: $450,000+*
Charitable Trust 6% Annual Income
(assumes 8% total return with 6% payout)
The planning tool the Farmers chose is a Charitable Remainder Trust (CRT). By placing the farm in a CRT, they will receive a current income tax deduction. It can be sold tax-free, and they will receive a stream of income for both of their lives. Upon termination of the trust, the corpus will be added to the endowment fund for CH&BS. How would that look? • Create a Charitable Remainder Trust funded by the farm. • Receive a current income tax deduction in the amount of $102,582 saving an estimated $28,273 in taxes. • Receive a 6% stream of income over two lifetimes (actuarially 22.7 years). $18,000 per year X 22.7 years = $500,000 with growth of trust principal. • At termination of the trust, CH&BS will receive approximately $451,801 for endowment. *Assumes 8% total return with a 6% annual payout to the Farmers. Other satisfying choices for the Farmers would include a Charitable Gift Annuity or a Life Estate Retained arrangement.
Testamentary Gift Hardy and Ella Planner do not feel they can make a current gift commitment to CH&BS. There is some uncertainty regarding their future financial needs. Still, they want to endow their regular gifts in order to create a legacy through this ministry. The Planners have chosen to designate CH&BS as the residual beneficiary of their estate, after other specific bequests to family and friends have been fulfilled. The estimated value of this gift will be $100,000. The Planners further direct that this bequest is to be used for an endowment to be named for them – The Hardy and Ella Planner Endowed Fund. How will that look? • Write their wills, with the assistance of an attorney, outlining their wishes. They may always add a Codicil to existing wills to accomplish the same purpose. • Retain control and use of all assets throughout their lifetime. • Distribute assets upon the deaths of the Planners, according to their wills, making the final distribution of the remaining estate to CH&BS
• Add to CH&BS’s endowment the Hardy and Ella Planner Endowed Fund from liquidated real property and proceeds. Should the Planners have a taxable estate, the value of the remainder distributed to CH&BS will be excluded. The Office of Planned Giving of Christian Home & Bible School would like to help you plan for the future. Please complete and return the enclosed reply card if we can assist you. If the card has been removed, or you would prefer a more personal conversation, please use the contact information below. Tim Deem, Vice President of Development Christian Home & Bible School 301 W. 13th Avenue • Mount Dora, FL 32757 Phone: 352-383-2155 • Email: email@example.com
The material in this newsletter is presented by Christian Home & Bible School as an educational service. It is not intended to replace the advice and counsel provided by professional planning advisors. ©2011 The Garrett Group.
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The topic for this issue of Whispers is endowment. Simply put, an endowment Tim Deem program VP of Development raises money for an organization to invest rather than spend. Gifts to endowment are placed in an Endowment Fund and the interest generated is used to meet ongoing expenses, cover capital expenditures, or fund special projects and programs (such as scholarships). It’s been said that there will be two kinds of non-profit organizations in the future – those that are no longer in existence and those that are endowed. A strong endowment fund will insure that CH&BS has a secure and stable future, built upon our 67 year heritage. As you read through this issue, be thinking about ways that you may be able to influence the children who call Mount Dora their home. Please contact us if we may assist you in developing financial plans for you and your family.
Christian Home & Bible School 301 West 13th Avenue • Mount Dora, FL 32757 • 352.383.2155 • www.chbs.org
Published on Mar 4, 2012