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.

Just to give you some historical perspective, a couple of years ago, in March 2007, the AFR was 5.8%. A year later, in March of 2008, it had dropped to 3.6%. In February 2009, it hit the lowest it has ever been since Sec. 7520 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.

Let’s say you are age 75 and have a $50,000 CD Copper Water dispenser down at the bank paying 4%. This only spins off $2,000 a year in interest and the interest is taxable. If you are in the 15% tax bracket, that leaves you with $1,700 to take to the store and buy groceries.

You need more income. You have applied church stewardship principles to managing your money for most of your life. You would not be opposed to increasing your income and helping your church at the same time. In meeting with your financial planner, she suggests you look at a charitable gift annuity (CGA).

Charitable gift annuities are a very plain vanilla church stewardship planning techniques. Here is a quick summary of the benefits of using your $50,000 CD to fund 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.

Let’s change the assumptions a little. Let’s say you were age 75 in March of 2000 and set up the same CGA when the Sec. 7520 rate was 8.0%. The amount excluded from tax would have been only 53.7%. Putting this church stewardship plan if effect today means you pay less income tax and have more money for to spend.

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.


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