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Two-Step Giving

Did you know you can arrange a charitable gift now but defer completion of the gift until later? For example, when you include “ABC Charity” in your will, you make a two-step, or “deferred” gift.

The first step occurs when you create your will.  Here, you name your favorite charity to receive a future bequest from your estate. The second step takes place when your will “matures” and the charity receives your bequest.

Other two-step gifts occur when you name ABC Charity as a beneficiary in a life insurance policy or when you designate ABC to receive what’s left in your retirement fund.

These two-step gifts have one important thing in common: They can be cancelled, or revoked, prior to completion. For example, a person can always write a new will or change the beneficiary designation on a policy or brokerage account. Because these deferred gifts can be reversed, they are called “revocable” gifts.

Because they are incomplete, these gifts appeal to those who may not want to lock up a major gift at this time. They provide donors with the satisfaction that a gift plan is in place, while adding the assurance that the asset can be retrieved should an emergency occur. The down side is that revocable gifts do not qualify for a charitable income tax deduction.

Such is not the case with “irrevocable” deferred gifts. Once initiated, these two-step gifts cannot be undone. Consequently, the IRS does allow a charitable income tax deduction in the year the gift is made.

An example of an irrevocable deferred gift is the charitable gift annuity. Suppose you give $25,000 to your favorite charity for a gift annuity. Every year for the rest of your life, you will receive a set amount from the charity paid quarterly, semi-annually or annually.

There are other irrevocable deferred gifts as well, such as charitable remainder trusts and contributions to a pooled income fund. Though these gift arrangements differ in various respects, they all provide tax, as well as other, benefits to the donor.

To learn more about “two-step” giving – revocable and irrevocable – feel free to contact me, with no obligation, at jjacobs@tcjf.org or (614) 338-2365.

Article appears as originally published in the Ohio Jewish Chronicle, September 17, 2015.

Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.

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