University Lutheran Church retreat - College Station, Texas
Endowments for Individuals and Families
- How to Create an Endowment
- How an Endowment Might Work for You
- What is an Endowment?
- Creating a Legacy
- Funding
- Donor Advised Fund
- Let Us Help
How an Endowment Might Work for You
Each year, George and Martha Schmidt (not their real names) give gifts totaling $1,500 to their congregation's building fund, scholarships for church-work students, and special mission programs in the Texas District. They understand the importance of their support to these ministries, and want to ensure that their annual giving will continue in perpetuity.
Through the Lutheran Foundation of Texas, George and Martha started the Schmidt Family Endowment with a modest gift, and each year they contribute $1,500 to the endowment. They encourage friends and family to add gifts to the endowment honoring family members on special occasions such as birthdays, anniversaries and baptisms. When the principal of the endowment reaches $30,000, the earnings will be sufficient to provide $1,500 annually to the ministries selected by the Schmidts.
In addition to their cash gifts, the Schmidts have made a bequest in their wills designating a percentage of their estate for the endowment. Should they choose to do so, they could also designate the endowment as an insurance policy beneficiary, or gift stocks or real estate with proceeds benefiting the endowment. They have the satisfaction of seeing the endowment grow now, and knowing that the ministries will receive gifts from the endowment in the Schmidt Family name for generations to come.
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What is an Endowment?
It is simply the donation of funds to the Lutheran Foundation of Texas to provide an ongoing source of income for the care and financing of a congregation, school or Lutheran ministry that is close to your heart (see Lutheran Beneficiaries/Links). The donated funds are invested and only the income or growth is distributed annually to one or more ministries according to your choice.
How to Get Started
The legacy of your wise philanthropy can be an ongoing blessing to God's people. We'll help you create an endowment that will be recognized by each generation. We'll explain your tax savings, too.
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Creating a Legacy Through an Endowment
Lutherans in Texas are helping to bring others to Christ through their gifts. While current gifts are always appreciated by any ministry, perpetual gifts provide the most valuable long-term support for ministries, and they help perpetuate and expand those ministries.
Would you like to do something lasting for a particular Lutheran ministry or for several ministries? You need look no further than our endowment program. This is the ideal way to create a legacy for yourself and for your family.
Endowments can carry the name of the donors or the name of someone a donor wants to honor or memorialize. Endowments can provide annual 'gifts' for the general purposes of a ministry, or for more specific things.
Endowments can be created with cash, securities, real estate or other assets of value. Endowments may be funded during life or at death, or by a combination of the two.
The principal of an endowment fund is held in a permanent pool of invested funds. An amount is distributed annually to the ministries, as specified in the endowment agreement. The balance is reinvested so the amount available to grow and distribute in future years will likely increase.
This means your endowment funds will continue in perpetuity. And every name associated with every endowment will endure as well.
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Funding
I. Funding an Endowment During My Lifetime
- A. Gift of Cash - the ultimate planned gift because it is immediate.
- Benefits
- 1. Deductible on itemized income tax returns
- 2. Maximum deduction of 50% of adjusted gross income
- 3. Additional five-year carryover, if necessary
- B. Gift of Appreciated Assets or Property - converted to cash for the endowment.
- Gift Types
- 1. Stocks
- 2. Mutual Funds
- 3. Municipal Bonds
- 4. Life Insurance Cash Value
- 5. Coin Collections
- 6. Stamp Collections
- 7. Art Collections
- 8. Gun Collections
- 9. Jewelry
- Benefits
- 1. Deductible on itemized income tax returns
- 2. Debt-free, readily saleable real estate
- 3. Maximum deduction of 30% of adjusted gross income
- 4. Additional five-year carryover, if necessary
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II. Funding an Endowment After My Death
- A. Bequest in My Last Will and Testament - Bequests are "planned gifts" that benefit the endowment at death after the completion of the probate process.
- Gift Types
- 1. A specific asset or amount
- 2. A percentage of the residue of the estate
- Benefits
- 1. Unlimited estate tax charitable gift deduction
- 2. Revocable until death
- 3. A percentage bequest grows as the estate is blessed during the lifetime of the donor
- B. Gift of Beneficiary Interest
- 1. "Payable on Death" note through Texas CEF or LCEF
- a. Simple
- b. No Cost
- c. Revocable until death
- 2. It is simple to name an endowment fund to be the remainder beneficiary of your CD, investment account, IRA, 403B, TSA or KEOGH, if you or other beneficiaries do not use all the funds during your lifetimes. The ministry can be listed as a beneficiary or a partial beneficiary.
- 1. "Payable on Death" note through Texas CEF or LCEF
Such gifts avoid probate and are tax wise. When designated for the Lord's work, they provide a witness of your love for His work after you have gone to heaven.
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- C. Gift of Life Insurance
- 1. "Life Share"--name the endowment fund as primary or secondary beneficiary of life insurance policy
- 2. Name the endowment fund as owner and beneficiary of paid-up insurance policy on your life
- 3. Name the endowment fund as owner and beneficiary of insurance policy on your life and make tax-deductible gifts to the endowment fund in amount of insurance premium
- D. Charitable Remainder Trust (funded with any or all items in Section I above)
- 1. Charitable Remainder Unitrust (Irrevocable)
- a. Best for gifts of stocks or real estate which have increased in value
- b. Income tax deduction
- c. Avoids capital gains tax on initial gifting of assets
- d. Tax-free appreciation
- e. Variable payout accounts
- 2. Charitable Remainder Annuity Trust (Irrevocable)
- a. Gifts of cash and/or securities
- b. Income tax deduction
- c. Avoids capital gains tax on initial gifting of assets
- d. Fixed payout amount
- 1. Charitable Remainder Unitrust (Irrevocable)
- E. Charitable Lead Trust
- 1. Provides income stream to the endowment fund for a specific number of years
- 2. Provides tax advantages (income tax deductions, gift tax deductions, or estate tax deductions, depending on the trust arrangement) to the donor
- 3. At the end of the trust period, the trust assets return to the family
- F. Charitable Revocable Living Trust
- 1. Produces income for one or two lifetimes
- 2. May produce income for additional period of years for loved ones
- 3. Remainder to the endowment fund
- 4. Avoids probate
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Donor Advised Fund
Many times, donors like the concept of establishing an individual or family endowment to benefit their congregation or other Lutheran ministries. However, they do not want to put one in place and then be "locked in" to supporting only one area of ministry.
As an example, they might like the income or growth from an endowment to be distributed as follows:
- Year 1: Provide assistance to a seminary student from their congregation to complete his last year.
- Year 2: Help send youngsters from their church to the National Youth Gathering.
- Year 3: Provide support for a building project at a Lutheran university.
- Year 4: Help send children from their congregation to Lutheran summer camp.
If you would like to establish an endowment, but would like the flexibility to support different programs each year, a "Donor Advised Fund" with the Lutheran Foundation of Texas may be the answer.
A Donor Advised Fund provides several advantages:
- It functions the same as an endowment fund for tax, growth and distribution purposes.
- You can advise the Foundation where you would like gift(s) to be designated each year
- If you wish, you can direct that gifts from the fund be given anonymously to your congregation or a charity.
- Should you move (even out of Texas), LFOT can still manage the fund and you continue to advise where gifts are to be directed (even out of state).
- A portion of the distribution can be directed to a ministry/charity outside the church, if you would like this to serve as an instrument to support other charities of interest.
In addition, since decisions are made annually on where funds are to be distributed, a Donor Advised Fund can be an excellent way to involve other family members in supporting the work of the church. If you so wish, a Donor Advised Fund can also be named after your family or in memory of a loved one.
It should be noted that both IRS and Foundation policies require that final decisions about distributions from Donor Advised Funds be made by the LFOT Board of Directors. Input is sought annually from donors during this process.
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Let Us Help
To learn more about endowments benefiting Lutheran congregations and ministries and how easily you can establish one, please contact us today.
You can get started now with a current endowment, or you can activate one later through a deferred gift. Or you can do both. We will be pleased to provide a detailed illustration for the endowment you desire.