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Gift Planning

A Charitable Gift Annuity: A Gift to Charity and Income to You

A charitable gift annuity is a simple and easy way to give to charity, and Nina Alexander should know. In fact, she was the first person to enter into such a contract with Children's Mercy when the hospital began its gift annuity program in 1996.

Having worked for Westport Bank in Kansas City for 15 years, Mrs. Alexander understood investments and was an astute manager of her personal assets. When she decided to support Children's Mercy, she knew she wanted to make a gift in exchange for a charitable gift annuity—and she waited for the program to be initiated at the hospital. She appreciated the fact that the annuity payments she would receive for the remainder of her life were substantially more than she earned from her CDs, and she also preferred the simplicity of a gift annuity over other forms of life income agreements.

Her support of the hospital through additional gift annuities has given Mrs. Alexander much pleasure over the past 10 years. She has enjoyed the security that gift annuities offer while achieving her philanthropic goals.

A charitable gift annuity is a contract between the donor and the Children's Mercy Hospital Foundation under which the foundation guarantees payment of the annuity in return for donated cash or appreciated property from the donor. Simply put, in Nina Alexander's case, she donates assets to us and we reinvest. The foundation then makes fixed payments to Mrs. Alexander for life. After her lifetime, the funds are available for our use. She is making her assets work for her and Children's Mercy at the same time.

Donors like Mrs. Alexander are particularly attracted to the charitable gift annuity because the rates, based on the donor's age, typically produce higher yields than the stock and bond market. For senior persons, annuity rates may be as much as 11.3%. The higher rates combined with partially tax-free funds make this type of charitable support very attractive.

The benefits of a gift annuity include: 1) Lifetime payments for yourself and possibly another person; 2) Charitable deduction for a portion of the value of the gift; 3) Part of the annual payments is considered a tax-free return of capital; and 4) Capital gains tax savings when you contribute appreciated securities. Additionally, if the charitable deduction exceeds the maximum amount allowable, the remainder may be carried over for an additional five years.

Gift annuities are most attractive to senior persons, and our donors like Nina Alexander are secure in knowing that the annuity amount is fixed and will not change regardless of current investment or market conditions. And best of all, they, like Mrs. Alexander, are helping countless children by giving to Children's Mercy.

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A charitable bequest is one or two sentences in your will or living trust that leave to Children's Mercy a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

"I give to Children's Mercy, a nonprofit corporation currently located at Kansas City, MO, or its successor thereto, ______________ [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to Children's Mercy or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the potential tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to Children's Mercy as a lump sum.

You fund this trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to Children's Mercy as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and Children's Mercy where you agree to make a gift to Children's Mercy and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.

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