Every cloud has a silver lining. There are two sides to every coin. The knife cuts both ways. The dire state of the economy has given rise to some of the best church stewardship opportunities seen in decades.
Many gifts in the planned giving arena use the IRS’s current “Section 7520″ rate, commonly referred to as the AFR, in the calculation of the income tax deduction you receive because of your gift.
In March 2007, the AFR was 5.8%. It dropped to 3.6% in March 2008. In February 2009, it reached the lowest rate since it first went into effect in 1989: 2.0%.
What does this have to do with church stewardship you say? Let me give you a couple of examples.
If you are 75 years of age, and you have a $50,000 CD which pays 4%, you earn interest of $2000 per year. But that interest is taxable. Let’s assume that you are in the 15% tax bracket. Your tax will be $300, leaving you net earnings of $1,700. This is what you can take to the store to buy groceries.
You probably need more income than that. And, as a person who has practiced good church stewardship in managing your money for most of your life, you would be delighted to increase your income and help the church at the same time. When you meet with your financial planner, she could suggest another option that would help you and the church. It is called a charitable gift annuity (CGA).
Church stewardship planning with a charitable gift annuity is a very simple, but effective way to plan. Here are the benefits of moving the $50,000 from a CD to a CGA:
1. Your income will increase from $2,000 a year to $3,150.
2. 78.7% of the $3,150 is not subject to tax. Bottom line: More money for groceries.
3. When you die, your church receives $50,000. This allows you to achieve one of your life’s major church stewardship goals of making a substantial gift to your church.
Now, let’s change things for another example. Let’s say you were age 75 in March of 2000 and set up a CGA. At that time the Section 7520 rate was 8.0%. The amount excluded from tax would have been only 53.7%. The bottom line here is that by creating a CGA today you pay less in income taxes and you have more money in your pocket.
The take-a-way from this is that if you are interested in increasing your income, reducing your taxes, preserving your estate from undo taxation while simultaneously helping your church, it would be prudent to examine the various church stewardship techniques which may apply to your situation.
If you represent a church and are interested in raising more money for your ministries, it would be wise to communicate and publicize the church stewardship charitable plans that currently have high value due to the low AFR.
This is just one example of how your church stewardship program can actually benefit from a down economy.