 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
U.S. Savings Bonds... The Final Chapter
(Part of a series of articles on charitable giving and the Union County Foundation
by David Vollrath - Executive Director)
I’ve yet to find anyone who enjoys paying income tax. Today’s article suggests a way to offset most of the federal
tax (savings bonds are state and local tax exempt) on maturing savings bonds. As pointed out in our last article
transferring savings bonds during life to charity in exchange for a gift annuity is not allowable. One can minimize
taxes though by using the proceeds from your matured savings bond to purchase a charitable gift annuity.
Here’s how it might work. Jim redeems at maturity his $10,000 savings bond at his local bank. You will recall that
this redemption process is easily accomplished, fee free, at any of thousands of bank locations throughout the
country. Once Jim has the $10,000 of proceeds from the matured savings bond he need simply contact a charity such
as the Union County Foundation and obtain a $10,000 charitable gift annuity. The Union County Foundation uniquely
allows annuitants to name the Union County charity(s) of their choosing to be the ultimate beneficiaries of the
gift annuity.
The tax consequences of this simple plan are as follows: After redeeming the savings bond Jim will be responsible
this year for $5000 of interest income. This represents the untaxed accumulated interest income from the savings
bond. However Jim will receive a $4000 charitable income tax deduction this year from the purchase of his charitable
gift annuity. This means effectively Jim has only $1000 left of taxable income from the savings bond. If Jim and
his wife are in the 15% tax bracket (up to $58100 of adjusted gross income) then Jim’s tax liability will only
be $150. Jim being 70 years old is earning 6.5% annual payout on his newly purchased Union County Foundation charitable
gift annuity, which will annually pay him more than 4 times the one time $150 tax liability.
The above example shows how "Jim" might use a charitable gift annuity to specifically minimize the tax
liabilities from a maturing savings bond. The same tax advantages resulting from the purchase of a charitable gift
annuity can help minimize your tax burden from all other forms of income as well. Charitable gift annuities "pay
out" at above market interest rates, result in significant charitable tax deductions, and ultimately benefit
the Union County charity(s) of your choice. Truly a win/win situation.
The Union County Foundation is equipped to help you achieve your charitable goals by providing as a free service:
resource information, charitable gift annuities/life income plans, and assistance with planned giving and estate
planning. Please call us at 937-642-9618, email us at info@UnionCountyFoundation.org, or stop by our Marysville office at 126 N. Main St. We are committed to helping you…. "preserve
your footprint in time." |
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