Dictionary

Advance Directive

The directive to physicians (sometimes called a living will) and the power of attorney for health care are used to direct how health care decisions will be made for you and who will make them if you become incapable of making them yourself.

Agent under Advance Directive / Health Care Power of Attorney

An agent is the person you designate to act on your behalf under a power of attorney. In this case, the agents abilities are limited to the powers (rights) authorized in the advanced directive.

Agent under Power of Attorney

An agent is the person you designate to act on your behalf under a power of attorney. The agents abilities are limited to the powers (rights) authorized in the power of attorney. A power of attorney may be general or limited.

Bequest Through Will or Trust

You can support your favorite Baptist cause or other charity by naming the charity as a beneficiary in your will or living trust.  Some ideas on how to do this are explained in the Estate Planning page.

There are a number of ways to leave gifts to ministries through beneficiary designations too. Naming ministries the direct beneficiary of IRAs, annuities and retirement plans can avoid income taxes as well as reduce estate taxes.

Various types of Beneficiary Designations:

• Life Insurance is payable to a named beneficiary(s).

• IRA, Pension Plan, or commercial annuities go to named beneficiary(s) (Income tax considerations with these assets).

• P.O.D. Pay on Death designation is used on bank accounts.

• T.O.D. Transfer on Death designation is used on securities, cars, trucks, and boats.

Charitable Gift Annuities

A Charitable Gift Annuity is an arrangement where an individual makes a gift to a charitable organization, such as the Northwest Baptist Foundation, in exchange for a life income that usually begins within three months.  The annuity rate is based on age with higher rates for older ages, and can currently be as high as 11.3%.  The rate is fixed for one or two lives and the Foundation guarantees payment.  The minimum amount for creating a Charitable Gift Annuity with the Foundation is $5,000.

Unlike a Charitable Remainder Trust, there is no trust created by a Charitable Gift Annuity.  The payments are made from the unrestricted assets of the Foundation.  In order to make sure that sufficient funds are available to make all of the required annuity payments, the states of Oregon and Washington require that segregated reserve funds be established.  The Foundation has consistently maintained larger reserve funds than the states require.

If a person wants to lock in a higher rate and can wait to receive the payout, Deferred Gift Annuities may be attractive. The Deferred Gift Annuity appeals to people planning for retirement or wanting additional future retirement income and also desire to give to ministry.

At the end of the annuitant's lifetime, the annuity account is distributed as designated by the donor to the Baptist Causes chosen by the donor.  Because it is the responsibility of the Foundation to guarantee payment of the annuity from its reserves, the Foundation requires that it be named as one of the Baptist Causes to receive at least 25% of the account balance when the annuity ends.

In addition to guaranteed life income, the Gift Annuity provides:

• An income tax charitable deduction equal to the gift portion of the annuity.

• A part of each payment is tax-free return of principal for the life expectancy of the annuitant.

• The capital gain is reduced and spread over the donor's life expectancy when appreciated stock is contributed.

Charitable Lead Trust

A charitable lead trust is a trust that the estate owner establishes either during life (an inter vivos trust) or at death (a testamentary trust). The income from the trust flows to a charitable organization, for a stated number of years. After that period, the assets inside the trust are then distributed, usually either back to the donor or to family members. 

Of all the charitable vehicles available to donors, the charitable lead trust is among the most complex. However, a lead trust does offer the advantage of providing excellent tax benefits to the estate owner.  A charitable deduction may be available if the grantor is treated as the owner of the trust.  Unlike Charitable Remainder Trusts, Charitable Lead Trusts are not tax exempt.  The income received by the trust will either be taxed to the trust or to the donor (if the donor is treated as the owner of the trust).  In addition, gift and/or estate taxes may be reduced related to the assets transferred to family members at the termination of the Lead Trust.  The estate and/or gift tax benefits are often the most significant tax benefit realized from the creation of a Charitable Lead Trust.

Charitable Remainder Trust

A Charitable Remainder can be created at your death by naming the trust as the beneficiary of your will or living trust. This type of Charitable Remainder trust would provide income for your beneficiaries for a stated period of time and then would distribute the remaining assets to your named charitable beneficiary(ies).

When you create a Charitable Remainder Trust during your life, you irrevocably transfer money, securities, or other assets to a trust that will then pay you an income for life or for a period of years. If you wish, the trust also can pay an income to another beneficiary of your choice. At the death of the surviving beneficiary, the remaining principal in the trust goes to the Baptist Cause(s) or other charities that you choose.

You can design your trust to fit your own special needs.

1. Decide how much you would like to put into the trust.

2. Determine the income you would like to receive from the donated assets. The rate of income return you select must be at least 5 percent. Usually, the rate selected is 5 percent to 7 percent. The best rate for you will depend upon the number of beneficiaries you select and their ages.

3. Decide which type of charitable remainder trust will work best for you.

Five types of Charitable Remainder Trusts are available:

• Annuity trust: Pays you a fixed dollar amount.

• Standard unitrust: Pays you an amount equal to a fixed percentage of the net fair market value of the trust assets as recalculated yearly.

• Net income with makeup unitrust: The trust pays the lesser of the fixed percentage specified by the trust agreement or the actual trust income. Such trusts provide, however, that in any year the trust income exceeds the fixed percentage payout, the excess must be used to make up any prior deficiencies. It offers great flexibility in retirement planning, because income can effectively be deferred until later years.

• Net income with no makeup unitrust: Pays you the trust's actual income or a fixed percentage of market value (as recalculated yearly), whichever is less. Deficiencies are not made up. This type is used by donors who want to maximize the benefits to the charitable organization.

• Flip unitrust: Set up as either of the last two types, this trust converts to a standard unitrust on a triggering event, such as the sale of an "unmarketable" asset used to fund the trust.

Whether you choose an annuity trust or a unitrust depends primarily on your economic outlook. With an annuity trust, you receive the same fixed amount each year that you choose at the beginning. This is advantageous when you want to be certain of the dollars you will receive. If you're concerned about the possibility of recessionary times and falling market values, the annuity trust has greater appeal. Although you cannot add to this annuity trust later in order to increase your income, you can always create a new trust for that purpose.

In comparison, a unitrust may be a hedge against inflation. If you foresee economic growth resulting in appreciation of the trust's assets, you will favor a unitrust. The valuation can rise or fall, but over time a well-managed unitrust may offer better protection of your purchasing power than fixed dollar payments. A further advantage is that if you want to enlarge the trust later, you can make additional contributions without the cost of creating and administering more than one trust.

You can also realize major and wide-ranging tax savings when you create a charitable remainder trust.

• First, when you fund the trust, you immediately obtain the benefit of a sizable income tax charitable deduction. This is equal to the present value of the remainder interest ultimately payable to charity, based on Internal Revenue Service tables of life expectancy factors. The older the beneficiary, the greater the charitable deduction.
  

• You can fund your charitable remainder trust with cash, securities or other property. Highly appreciated assets that generate low current income are an ideal funding medium. While you would be reluctant to sell such assets directly because of the tax you would pay on the gain, you can transfer them to the trust without incurring the capital gains tax. The trust could sell the assets without incurring any tax and then reinvest the proceeds in order to secure a higher current income yield.

Conservator

Donor-Advised Fund

A Donor Advised Fund is a named, charitable fund of the Foundation. One or more individuals, usually the donor(s), are named as the fund advisor(s), and actively participate in the process of determining the Baptist Causes to be supported by the fund.

A Donor Advised Fund offers a personalized approach to philanthropy. An Advised Fund creates an opportunity for people like you to support Baptist Causes in an informed and active way.

Endowment Fund

Give it Twice

Giving to children and to charity sounds attractive, but is it possible to leave a significant legacy for ministry and at the same time leave an adequate inheritance for family? A "Give It Twice" arrangement allows people to do both. "Give It Twice" is a three-step process accomplished through a unique trust arrangement.

1. You designate certain assets, or a certain percentage of your probate estate, to a "Give It Twice" trust arrangement during your lifetime through a will, revocable living trust, or beneficiary designations of retirement accounts. Your estate remains fully available for your use during your lifetime and, if married, the life of your spouse.

2. Children or other beneficiaries receive the net earnings from a "Give It Twice" trust. They receive the earnings for a specified period of years or until they receive a specified sum, such as an amount equal to or greater than the original trust value.

3. Upon completion of the payment of the earnings to children or other beneficiaries, the designated charity(ies) then receives the trust, which converts to an endowment fund or an outright gift benefiting your chosen Baptist cause or other charities.

"Give It Twice" Benefits include

• Double impact of estate.

• Avoid possible disadvantages of "lump-sum" inheritance.

• Offers advantage of spreading inheritance over period of years.

• Even modest estate can leave significant legacy to ministry.

• Assets can be available for use during lifetime.

If income, gift or estate tax benefits are important, a “Give it Twice” plan can be structured using either Charitable Remainder Trusts or Charitable Lead Trusts as appropriate.

Life Insurance

One of the simplest ways to support your favorite Baptist cause or other charity through your estate plan is to name them as a beneficiary of your life insurance policy. Naming the charity as a beneficiary of even a small portion (i.e.2% or 5%) can have a significant impact on their ability to carry out their ministry.

The use of life insurance policies as a way to support Baptist causes or other charities is often overlooked even though substantial tax benefits may result. 

Merely naming a charity as beneficiary of a life insurance policy, while providing meaningful support to the charity, will not result in an income tax deduction.  This is because the donor has not yielded all of the incidents of ownership in the policy, and can still change the named beneficiary at any time.  A charitable deduction is available for estate tax purposes. 

An income tax charitable deduction will be allowed for a gift of a life insurance policy to charity when a donor relinquishes all incidents of ownership in the policy.  Limitations exist on the amount of the charitable deduction depending upon factors such as the type of policy and whether or not it is paid up.

Living Trust

A living trust is an arrangement in which you transfer property to a trustee while you are still alive. The trustee will manage the property and administer the trust according to the instruction provided in the document. This can also be used to dispose of property at death.

Memorial Funds

Many times individuals desire to support their favorite Baptist cause or other charity in a way that will last forever.  To accomplish this, you can provide this support by using a special type of trust fund known as an Endowment or Memorial Fund.  A Memorial Fund operates by distributing the income of the trust, at least annually, to the charity that it has been created to support.  The principal or “corpus” of the fund is held in perpetuity and will earn income to be distributed to the charitable beneficiary forever. 

The Foundation has established several Memorial Funds that support the Baptist Causes most commonly chosen by our constituency.  You can name one of these Memorial Funds as the beneficiary of your plan, or if needed, you can create a new Memorial Fund to support the charity(ies) of your choice. 

Memorial Funds can be the charitable beneficiary of any of the charitable giving techniques available through the Foundation.

Personal Representative

Power Of Attorney

A power of attorney is a document that you sign authorizing someone else to act as your agent. It can be used as a planning tool for incapacity; allowing your agent to act for you in the event you become disabled or incompetent. A power of attorney may be general or limited.

Remainder Interest in Real Estate

One of your valued possessions, your home, can become a valued gift to your favorite Baptist Cause or other charity even while you are still living in it, and even if you want your spouse or other person to live there for life. This arrangement is called a retained life estate.

By deeding your home to charity now, you can obtain a sizable income tax deduction this year. The amount depends on the value of the property and your age (and the age of any person given life use). In addition, you retain the right to rent your home or make improvements to it. You continue to have responsibility for maintenance, insurance and property taxes.

Any personal residence qualifies for this tax deduction: a farm (with or without the house), vacation home, condominium, even stock in a cooperative housing corporation.

Your gift must be an irrevocable remainder interest. In other words, after your life use and that of any survivor, your chosen charity receives the property outright.

If you do not want to live in your un-mortgaged home any longer, consider transferring it to a charitable remainder trust. The trustee can then sell the property and invest the proceeds in income-producing securities. You will receive an income for life—and so can a survivor you name. The trust principal goes to your chosen charity, without exposure to estate taxes when spouses are the only income beneficiaries.

When you transfer appreciated property that has been held long-term, you will not pay any tax on the capital gain. And you will benefit from a substantial current income tax deduction.

Tithing Your Estate

Tithing is a basic Christian tenant of stewardship. Tithing your estate at the end of a lifetime devoted to Christian stewardship and service is an appropriate testimony for believers. Even the faithful lifetime tither may never have tithed on an appreciated asset such as real estate, securities, or retirement accounts.

The concept of Tithing Your Estate offers a simple formula for honoring God with our estate stewardship. Here is how it works: leave a percentage of your estate, typically ten percent, to the ministry of your choice. You may contact the Foundation for appropriate bequest language to ensure that your wishes are accomplished through your will or trust distribution.

Trust

Trustee

Will

A will is a document that is used to dispose of your property at death and direct who will be in charge of settling your estate.