Charitable Remainder Trusts that Provide Life Income & Charitable Allowances
First mentions in the Bible cue the reader to the importance of what God is saying. For example, the first thing that God wants us to know about himself is that he is the creator of the universe who has not only made the universe, but has also filled it with beauty, goodness and truth.
In that setting we find another first, the first mention of stewardship. When God created the world he planted a garden and placed within it a man named Adam. Adam’s function in the garden was to steward, or manage, all things according to God’s wishes. His responsibilities included tending the garden, ruling and naming the fish, animals and birds, and managing the food sources of the garden for all of the living creatures. He was given a partner, named Eve, suggesting that Adam had responsibility for stewarding his marital relationship. Stewardship is seldom conducted in isolation.
But Adam and Eve’s job was more than keeping the plates spinning on God’s behalf. They were also responsible to “be fruitful and multiply, filling the earth and governing it” (Genesis 2:28). In other words, they were to facilitate the growth of the garden and its inhabitants. Accountability was established as God came and walked with them in the cool of the day.
Unfortunately, the responsibilities of stewardship can be abused and misused, causing chaos and producing loss. As the story unfolds in Genesis chapter 3, we discover that Adam and Eve ate from the one tree forbidden for food, the tree of knowledge of good and evil. Stewardship, it seems, calls for wisdom to know what to do as well as what not to do. When Adam and Eve violated their role as stewards, they lost their home. Their marriage became filled with strife. Work became a struggle. The chaos continued as sibling rivalry got the best of Cain, who killed his brother Abel over, you guessed it, stewardship. Adam and Eve lost their home, then lost their two sons. All because they forgot they were managers, not owners.
That appears to be a lot of drama over one piece of fruit. But it is more than just one bad decision they impulsively made. There was a paradigm shift from steward to owner. And that shift from servant leader to owner cost Adam and Eve far more than their home. It impacted lives for the generations that followed. But their story doesn’t have to become your story.
As life long people of faith, Dave and Carrie Fletcher took the responsibility of stewardship seriously. They were devoted members of their church and raised their children with a Christian world view. Let me introduce you to them.
Dave and Carrie Fletcher, both age 72, have owned and operated a dairy farm for 40 years. They have lived comfortably thanks to a generous inheritance of land early in their marriage, a series of shrewd land purchases, and years of hard work. Anticipating retirement, they plan to increase their cash flow by selling a parcel of land they rent to a friend. The Fletchers bought this parcel 10 years ago for $65,000, and it is currently worth $250,000.
While meeting with their financial planner, she explains that the Fletchers will pay $36,000 in capital gains tax on the sale of the land if they sell it themselves. The advisor suggests a better plan that will allow the Fletchers to sell the property, avoid capital gains tax and make a philanthropic gift by using a charitable remainder trust (CRT). Further, under their advisor's plan, the Fletchers will supplement their retirement income, provide an inheritance to their children and make a gift to their church.
To achieve these goals, the Fletchers create a CRT, name themselves as trustees, and transfer the chosen parcel of land to the CRT. They name themselves as lifetime income beneficiaries of the CRT and list their church as the charitable remainder beneficiary. After the CRT sells the land, it will invest the sales proceeds in a portfolio of stocks and bonds to facilitate distributions to the Fletchers.
The Fletchers receive an immediate $72,000 income tax deduction, and, as the CRT's income beneficiaries, they begin receiving a variable lifetime cash flow that starts after the land is sold and averages about $19,000 per year. During each of the next 10 years, they use $6,000 of their cash flow to pay the premiums on a life insurance policy held by an irrevocable life insurance trust (ILIT). The ILIT is set up so that, after the Fletchers' deaths, their children will receive an inheritance of $150,000 that will not be subject to estate tax. At the same time, their church will receive the assets remaining in the CRT.
By using a CRT, the Fletchers were able to supplement their own retirement income while leaving an inheritance to their children and the work of God’s Kingdom.
The Fletcher’s understood the importance of biblical stewardship. While they lived comfortably, they also lived contentedly. As they began to consider the sunset of their lives they wanted to make a transformational gift that would continue their legacy of stewardship long after their respective deaths. With wisdom they were able to avoid unnecessary taxes, provide a source of retirement income, provide their children with an untaxed inheritance, and most importantly, leave a legacy gift to their church.
Their story is not unusual. In fact, more and more people are embracing the joy of generous stewardship. They are growing beyond the constraints of being income givers toward becoming balance sheet givers.
Your church has made it possible for you to join families like the Fletcher’s in leaving a significant gift to your church. The expertise we offer can help you accomplish each one of your end of life goals. You can create additional income, diminish taxes, leave an inheritance to your children, and leave a gift to your church that will impact generations to come for the Kingdom of God. It is possible to take the money that would otherwise be consumed through taxes and give it to God’s work, without impacting the inheritance you have planned to leave to your children.
Your legacy of generosity can mimic the words of King David, who wrote, “Our children will also serve him. Future generations will hear about the wonders of the Lord. His righteous acts will be told to those not yet born. They will hear about everything he has done” (Psalm 22:30-31).
