By: Laurie Valentine-COO & Trust Counsel
Church building campaigns can provide a great opportunity for making the kind of gift you never would have dreamed possible. The challenge is to develop a plan that allows you to give “above and beyond” your tithes and offerings, without feeling you have placed yourself in a “cash crunch”.
Ben and Sally Moore were in just this situation recently. Their church was in a capital campaign to raise funds for a family life center. The Moores wanted to do all that they could to meet the stewardship challenge presented by the campaign committee. As they began to prayerfully consider what they could give they thought of the two rental houses they had owned for many years. As a result of Ben’s recent retirement, the Moores were planning to do a lot of traveling in the next few years. They had decided to sell the houses to free themselves from real estate management responsibilities and provide funds for travel. Their concern with this plan was the large capital gains tax that they would have to pay when they sold the houses.
An alternative for Ben and Sally is to combine an outright gift of a 1/10 interest in the two houses to the church for the building campaign with a gift of the remaining 9/10 interest in the houses to a Charitable Remainder Unitrust (“CRUT”) that will pay them a 10% unitrust payment each year for the next 15 years and the remainder to the church at the end of the 15-year trust term.
If the two houses have a current market value of $120,000, the Andersons will be entitled a $12,000 charitable contribution deduction for the 1/10 outright gift, a $36,700 contribution deduction for the gift to the CRUT, and they avoid the capital gains taxes they would have incurred if they sold the property. Over the next 15 years, they will receive a total of approximately $117,600 in payments from the CRUT (assuming a 7% average annual total return).
The church receives an immediate gift for the building campaign of 1/10 of the sales proceeds when the two houses are sold. It will also receive the remainder of the CRUT to fund an endowment for the upkeep and maintenance of the family life center at the end of the 15-year trust term.
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.