Campaign Update

Benefits of Deferred Charitable Gift Plans

Steve Scholer, JD’79
Director of Estate & Trust Services

Declining interest rates have many people scrambling to bring their financial pictures back into focus. While many view this situation negatively, lower rates can have a positive impact upon the immediate benefits donors receive from several deferred charitable gift plans.

The declining interest rates have a direct impact on an IRS factor called the applicable federal rate (AFR). Each month the IRS determines a new AFR, which is used in the calculation that determines the deductible portion of your deferred gift. Right now, this rate is the lowest it’s been since 2003, thus making the charitable gift annuity, charitable lead trust and a retained life interest in your personal residence, vacation property or farm very attractive.

A charitable gift annuity is a contractual agreement between Creighton University and you in which the University agrees to pay you, or you and another individual, a fixed annual sum for your lifetime or lifetimes. (The fixed rate is based upon your age at date of funding. For example, currently a 65-year-old would receive 5.7 percent and a 75-year-old 6.7 percent for life.) A portion of your quarterly lifetime payments is taxable and a portion is tax-free. If your gift is completed in a month with a low AFR you will receive more tax-free income. You also receive an immediate charitable income tax deduction for a portion of the assets transferred to Creighton.

A charitable lead trust is an arrangement that permits you to first direct income from assets placed into the trust to Creighton for a period of time and then direct the trust’s remainder back to you or to your heirs. This trust is ideal for people who want to support Creighton but also want to have funds available for their children or grandchildren. The historically low AFR produces an increased charitable deduction, which can significantly decrease the taxes on the trust assets ultimately transferred to your heirs. With careful planning, it is possible to completely eliminate all estate and gift taxes on the trust funds that will ultimately go to your heirs.

You also may donate your personal residence, vacation property or farm to Creighton and retain the right to live there for your lifetime. In exchange for your gift, you receive a charitable income tax deduction for a portion of the fair market value of the property donated. The current low AFR will provide you with a significantly higher income tax deduction when compared with prior months. The retained life estate is a wonderful way to support Creighton by converting the appreciation in your property to an immediate charitable deduction that you can use to offset taxable income … without having to write a check.

These are but three of the myriad ways in which you can benefit while helping to transform Creighton University’s future. If you would like further information or a personalized no-obligation illustration of how these, or other, charitable gifts can fit into your financial picture, please contact the Office of Estate and Trust Services at (800) 334-8794, (402) 280-1143 or by e-mail at giftplanning@creighton.edu. You also can find us on the web at giftplanning.creighton.edu.