Charitable Giving As Part of Your Business Exit Strategy

By: Laurie Valentine- COO & Trust Counsel


     Business owners nearing retirement must consider how they will “exit” their business. While some will transfer ownership to a family member, for many the transition out of the business will be through its sale.

     A charitable gift of a portion of the business, as part of the exit plan, can provide several benefits: reduction of what may be a significant capital gains tax liability; a charitable income tax deduction based on the market value of the gift; a potential increase in your income if you use a life income charitable gift; and a means of demonstrating your love for the One who entrusted and blessed you with so much.

     Jane and Sam Jones, ages 65 and 68, have owned ABC Corporation for 40 years. They have decided it is time to retire and plan to “exit” through a sale of their business. ABC’s current market value is $5,000,000. The Jones’ cost basis is 0, which means an outright sale will result in $750,000 of capital gains taxes, leaving $4,250,000 for Jane and Sam to invest. Investing the sale proceeds to earn 5 percent a year gives them $212,500 per year in income.

     Adding a charitable gift of some of their ABC stock to their exit planning, before a deal is struck to sell the company, could be beneficial to Jane and Sam. A gift of 30% of the stock ($1,500,000) to a 5% charitable remainder unitrust reduces their capital gains tax liability. Their gift entitles them to a charitable income tax deduction of $538,635, which will provide additional income tax savings. The unitrust will pay Jane and Sam five percent of the value of the trust assets, as revalued each year, for the rest of their lifetimes ($75,000 in the first year) and the remainder of the trust will be distributed, at the survivor’s death, to the charitable organization(s) they name in the trust agreement allowing them to set up significant future support for Kingdom causes important to them. The combination of the unitrust income and the income from investing their net sale proceeds ($2,975,000) results in potentially more income for the Jones’ each year ($223,750 in first year assuming 5 percent earned on sale proceeds).

     Exiting a long-owned business provides a unique stewardship opportunity for business owners.

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.

New And Improved Connectivity

BY: Barry G. Allen- President & CEO

What a pleasure and a privilege it is to communicate to those individuals, families, churches and church-related organizations to whom we are seeking to encourage, educate and enable about solutions to the stewardship issues related to faith, family and finances.  We use a variety of communication channels because of the variety of channels used by those we seek to serve.  Those channels include personal visits, telephone, email, group presentations, direct mail, the Western Recorder, a quarterly newsletter and the internet.

            As the ways and the speed with which people communicate continue to change dramatically, we are adapting to those changes in order to stay connected with and to add to our constituents.  Did you know almost 80% of Americans have internet access in their homes?  Did you know the fastest growing group of Facebook users is people age 55 and older?

            I am excited to announce we have just launched a new website.  It is much more user friendly, more interactive, has more useful information relevant to a broader multi-generational audience and is integrated with our new Facebook presence and blog.  It was designed and will be maintained using the latest technology.

            Let me encourage you right now to click on the site at www.kybaptistfoundation.org and browse.  Whether you are seeking information for yourself or for your church or organ

ization, you will be impressed immediately with the simplicity of the home page from which you can navigate through the channel or channels in which you have an interest.

            From the website you can access easily our Facebook page, which includes regularly changing articles and updated news.  Or, you can access Facebook directly at www.facebook.com/KentuckyBaptistFoundation.  Either way, click “like” and enter your email address in the “subscribe” box so you will receive the automatic updates.  If you decide later you do not want the automatic alerts you can unsubscribe at anytime.

            Laurie and I will be writing the blogs and would welcome the opportunity to converse with you at www.kentuckybaptistfoundation.blogspot.com , or click “blog” from Facebook.

            Let’s stay connected!

Beyond Checkbook Giving

By: Barry G. Allen- President & CEO  

           Most Christians tend to support the mission of their church and other charitable organizations by writing a check and placing it in the offering plate or sending it through the mail.  Checkbook giving also tends to be giving out of one’s income without regard to certain non cash assets the Lord has entrusted to us.

            If you think about it for a moment, the noncash assets the Lord has entrusted to you likely have greater value than the cash assets He has entrusted to you. Noncash assets consist of real estate, stocks, bonds, mutual fund shares, business interests, retirement plan assets and life insurance cash surrender values. These non cash assets cannot be placed in the offering plate on Sunday morning, and may require the assistance of a professional adviser in making charitable gifts.  Using noncash assets for charitable giving typically is done as part of one’s overall estate and financial planning and may take advantage of certain tax-advantaged methods to accomplish one’s giving objectives.

            Noncash assets can be given in a variety of ways and at various times over one’s life.  They can be given outright, by bequest in a will or trust, by beneficiary designation of retirement plan survivor benefits and life insurance death benefits, and by payable on death provisions of bank and brokerage accounts.

            Since all of our possessions belong to the Lord, who has entrusted them to us to manage and to use according to His purposes, it behooves us to consider prayerfully “giving beyond our checkbooks.”  Furthermore, the financial resources required to advance the Kingdom in the future depends upon it.

            There are two ways the KBF can be helpful in educating and enabling you to move beyond checkbook giving.  First, Laurie Valentine is available to you by telephone or a personal visit to provide helpful information and to answer your questions.  Second, Laurie and I are available to conduct a seminar in your church or older adult group.  Please call us; we want to help.

How to Give for Building

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.

A Hybrid Giving Idea

By: Barry G. Allen- President & CEO

           You may desire to provide a perpetual stream of contributions for the benefit of your church, a favorite Baptist cause and/or other Christian ministries, but you are unable at this time to fund fully the perpetual endowment fund to make that happen.

            A flexible endowment fund, administered by the Kentucky Baptist Foundation, is an option worthy of your consideration.  It allows you to have a plan that establishes a permanent endowment fund over a defined, but flexible time period.  During this flexible funding period, you also make on-going contributions directly to the cause(s) you intend to benefit.

            A simple example would be to establish a flexible endowment to provide scholarship assistance for students to attend one of our Kentucky Baptist Christian education institutions.  To provide $1,000 of annual assistance the endowment fund would need to be $25,000 assuming a 4% annual distribution rate.  The distribution rate is not the same as the investment earnings rate.  The distribution rate takes into consideration the rate of inflation and the investment costs so the fund will have an inflation-adjusted growth to the principal over time.

Let’s assume you could establish the flexible endowment fund with a $10,000 gift, and you would agree to contribute the remaining $15,000 over the next five years.  Alongside your $15,000 pledge to fund fully the endowment, you also pledge to contribute directly to the institution during the funding period the difference in the $1,000 scholarship assistance and the distributable earnings from the invested principal in the endowment fund.  As you fund the principal of the endowment, the principal should grow in value to produce an increasing amount of distributable earnings, and therefore, your direct annual contribution to the institution should decrease.  Once the endowment has been funded fully with the $25,000, you would have no more responsibility to make contributions related to this flexible endowment.

Scholarship assistance is just one of many ideas that lend themselves to this hybrid giving idea.  Call Laurie Valentine or me toll-free for more information about how you can make a lasting difference with a flexible endowment fund.

Partners In Philanthropy- John And Kay Trisler

            John and Kay Trisler are among the finest of Kentucky Baptist couples.  They have lived their lives as ambassadors for Christ and distinguished themselves as servant leaders in a variety of ways through the Harrodsburg Baptist Church, Mercer Association and KBC-related ministries.

 John was born and reared in Harrodsburg, and Kay in Danville.  Kay lived near the FBC and was there every time the doors opened.  FBC is where Lottie Moon was a member during her years as a school teacher in Danville.

It was no coincidence that WMU would provide an important pathway for Kay’s servant leadership development and service from a GA to the Executive Director-Treasurer of Kentucky WMU.  Other servant leadership responsibilities include the Marshall Center for Christian Ministry board, Western Recorder board, KBC Committee on Nominations, Harrodsburg CLC Director, Mercer Association internship, and various roles in her church, association and Kentucky WMU.  She is a Southern Seminary graduate.

With an engineering degree from the University of Cincinnati and an MBA from Xavier, John enjoyed a successful 18-year career with IBM and another 13-year career with Lexmark.  From an IBM engineer in Danbury, CT to the VP of Manufacturing in Lexington, KY, and then to VP at Lexmark in Lexington, John distinguished himself as a servant leader in his professional life as well as in his church and community life.  He retired in 2001, only to be called two years later into public service as the Mercer County Judge Executive for six years.  He retired again July 31, 2009.

John has served as deacon chair, Sunday school teacher, and finance committee chair at Harrodsburg Baptist and on the board of the Harrodsburg Baptist Foundation and the Kentucky Baptist Foundation.

Kay and John have been married 48 years and have two married children: Stephen (Toni) and Amy Adkins (Tim), and three grandchildren: Jonathan Trisler, Kaysie and Ella Adkins. 

John Trisler served sixteen years over three different terms on the KBF board of directors.  Throughout those years of service, John shared the benefits of his wisdom, work and wealth.  He served faithfully and effectively on the executive, investment, and real estate committees of the board.  Recognizing his cool, calm, and collected leadership style his fellow board members also elected him to serve as chairperson.

               

Through the years, John and Kay have been most generous in utilizing the KBF as a fiduciary of funds they have given for the benefit of the various charitable causes in whose missions they wanted to invest for eternity, including the establishment in 1996 of the John D. & Kay H. Trisler Endowment in honor of their first grandchild, Jonathan Owen Trisler.  They established this perpetual endowment with an initial modest gift and continue to make periodic gifts to increase the principal for investment to increase the earnings for distribution to the charitable beneficiaries they designated.  Those beneficiaries are Kentucky WMU for its Heritage Fund uses, the Marshall Center for Christian Ministry and the Kentucky Baptist Foundation.

               

John and Kay have stated, “We see the mission of the KBF as a way for us to make stewardship decisions by the establishment of endowment funds that help provide perpetual financial benefits to our choice of many Kentucky Baptist causes.  We encourage others to take this opportunity to praise God and help other people and organizations in our state.”

               

May the Lord add His blessings to their lives and to the multitudes that will benefit from their generosity until Jesus comes again.  And, may more of us seek to emulate the example of the stewardship of their lives and the financial resources the Lord has entrusted to them to manage in His behalf.

               

                Contact Laurie Valentine at 502-489-3533 and 866-489-3533 (Toll-free, KY only)
or Barry Allen at 502-489-3421 or 866-489-3421 (Toll-free KY only) for assistance in how you can provide perpetual benefits to the causes which are near and dear to your heart.     

Estate Tax Roller Coaster

By: Barry G. Allen-President & CEO

     

       The 2010 Tax Act signed into law by President Obama in December represented the most significant change in the estate tax rules in more than a decade.  As a result, it is extremely important for us Christians to understand the impact of the changes in the estate tax rules on our financial circumstances and our stewardship responsibilities and plans.  After all, everything we have belongs to God, and He has entrusted it to us to manage in His behalf.  Furthermore, estate stewardship likely will be the single most significant and important act of biblical stewardship we shall ever make.  And, finally, through estate stewardship, each one of us can impact the world for Kingdom advancement, regardless of our financial station in life.

            The advice of the Apostle Paul is instructive in this context.  In 1 Timothy 5:8 Paul advised the early Christians then and advises us today to provide for our relatives, and especially our immediate family.  The correct sense of the translation “to provide” is the sense of “forethought.”  In other words, we are to take care of tomorrow today; we are to anticipate future realities and make plans for them now.  That’s what Christian estate planning is all about:  prayerfully seeking God’s will for how to steward what He has entrusted to you as it relates to your family, including your spiritual family.

            It is important to note the new estate tax rules end in 2012, and in 2013, unless there is action by Congress, the rules revert back to what they would have been in 2011, if Congress had not adopted the 2010 Tax Act.  Because of the ramifications of the 2010 Tax Act, we encourage you to review your estate plans and documents with your advisors.  We discourage any one from adopting a “wait-and-see” approach.  Do it now 

            Laurie Valentine, our trust counsel, and I are available to conduct a Christian estate planning seminar for your church or church group, which will provide helpful information about the estate tax rules.  Call us toll free.