CharitablePlanningto Benefit KingdomService Worldwide

•• • • • • • • • •

"Honor Jehovah withyour val uable tb ings."

- Proverbs 3:9.•••••• • • • • • • • • • • • • • • • • • • • • • • • • • • • •

How we ll those wo rds describe ou r suppo rt of the wo rldwid epreaching and teaching work!Jehovah 's people a re responding tothat invitation. Th ey give generou sly o f their time, their tal ents,and their strength-all valuable things.

As a resu lt, people of a ll nat ions are stream ing to Jehovahto receive his instruct ion. (Micah 4:1, 2) In turn, the number o fco ng regatio ns ofJehovah's Witnesses co nti nues to grow at aremarkable rat e.

Beyond giving of themselves in the preaching and teaching work,all a re privileged to support i t through monetary dona tions . Doingso is most fitting, for it is vit al that th is Christian work co ntinue.

Th e progress of thi s worldwide educationa l cam paign results inrapi d growth. Th is leads to a growing need for Kingdom Halls andAssembly Halls as well as new and renovated branch offices, printingfacilities, and Bethel homes, New and expanding territories m akesuc h projects all the more urgent and cha llenging.

Additionally, at times special needs arise. For exa mple, whenChristians suffer the effects of wars, ea rthqua kes, d roug hts, andsto rms, th e brotherhood prompt ly comes to thei r aid with relief op­erations, (2 Corin thians 8:14) How are suc h organizational expe nsesmet? By contributions that are strictly volunta ry! Never has this typeof giv ing been more im portan t than it is today.- Galati an s 6:9, to,

This brochure has been prepared in response to the numerousrequ ests received from th ose wh o want to essist fi nanci,l11y in theadvancement ofKingdom interests. It also expla ins th e role of th eCharitable Planning Office smd the services it offers. The con ten ts ofthispublication are based on Un ited States law, and th e corpora­tions mentioned are th ose used by the U.S. branch. Those living inother coun tries who wi sh to m ake charita ble planning arrange­ments should consult with th eir local branch office.

Table of Contents

Estate Plan ningAn Overview

Charitable Plan ningto Benefit KingdomService WorldwideAn Overview

Gifts That Will Benef itthe Organiza tion Now

Gifts That Will Be nefitthe Organizati on LaterPlanned Gifts That WillProduce Income for theDonor

4

Introduction....... ... ..... •. •.... .. . ... .. . . . ...... 6What Is Cha ritable Plann ing? 6The Charitable Plan ning Office 7Benefits of Cha rita ble Planning 7The Cha ritable Plan ning Broch ure 8

Int roduction 9Gifts Tha t Will Ben efit t he Orga niza tio n Now 9Gifts That Will Benefit the Orga n izatio n Late r 9Th ingsto Cons ider 9

Gifts of Money 10Gifts of Secur ities 11Gifts of Real Estate 12Gifts of Ot her Per sonal Proper ty 12Conditio nal Donation Trust Arra ngemen t. 12Charitable Lead Trust 13

Gift Ann uity 16Su m mary o f Benefits -Gift Annu ity 17Char itable Remainder Trusts 17Sum maryof Beneflts- CRTs 19

Charttabte Planning to Benefit Kingdom Service Worldwide

Other Planned GiftArran gements

Planned GiftsThrough Wills

Planned Gifts ThroughRevocable Uving Trusts

Gifts of Life Insuranceand Annuities

Bank Acco unts and Other Assetsin Trust for Watchtower 21Gift of a Remainder Intere st in aPersonal Residence or a Far m 22Othe r Arrangeme nts Wit h Real Estate 23Gifts From Reti rem ent Plans 23

Wills and Thei r Preparation 24ASim ple Bequ est to the Worldwide Work 25Key Points to Remember When Completinga Will With Watch towe r as Beneficiary 25

Int roduction to Revocable Living Trusts 26Bequests to the Organization 27

Nam ing Watchtower as Beneficiary 28

How to Obtain Answers and More In formatio n 30

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Estate PlanningAn Overview.. .. .. .. ...............................................................Introduction

Every person who has money or owns property thatwill not be expended or disposed of during his or her life­time has an estate. Estate planning is simply the processof deciding how such assets will be distributed now or af­ter death. It includes taking steps to ensure that decisionsare carried out effectively and econom ically. These stepsmay involve titling assets, naming ben eficia ries, andcreating such documents as wills and trusts. In complexsituations, more is involved.

Such estate planning can be intimidatin g, bu t itneed not be. It does, however, involve time, ene rgy, anddeterm in ation. Some ser ious decisions need to be made.

Because estate planning invo lves people and causesthat a person ch erishes, it may also be a deeply emotio n­al process. For the same reason, it is well worth the effort.

What IsCharitable Pl anning?When Jehovah told Hezekiah, as recorded at 2 Kings

20:1, that he should make plan s for his family beca usehis death was imminent, God clea rly indicated that it isth e primary responsibility of family heads to care forth eir family. This Bible principle, along with the exhor­tati on to "honor Jeh ovah with your valuable things,"lays a fine foundation for charitable planning.c-Prov­erbs 3:9.

Regard less of age, hea lth, or financia l circumstances,a person needs to plan in orde r to ben efit the family asmu ch as poss ible . Estate planning is not, as many be­lieve, on ly for the elderly and the wea lthy. The fact isthat those who exceed a certa in an nual income o rwho acq uire a certa in amount of asse ts during theirlifetime can not keep all of it for th e ben efit o f th efamily. Taxes must be paid .

However, because the gove rn men t has design edtax laws with incentives to encourage charitable giv­ing , a planned charitab le gift duri ng life or at death

Chantable Plann ing to Benefit Kingdom Servi ce Worldwide

may reduce or eliminate those taxes. Such a gift can evenbe structured to create a lifetime income for the donors,the ir family, o r othe r beneficiaries.

For a Christian, t hen , the term "cha ritable planning"-or "p lanned giving," as it is oft en called- implies that aportion of his assets will be used to advance Kingdom in­terests. Many have bene fi ted by becoming better in­formed about the variety of ways in which gifts may bemade duri ng the donor' s life or through an arrangeme ntthat takes effect at his death.

The Charitable Planning OfficeOften, com plex tax laws confuse those who want to

give. They do not know how to give in the most effectiveman ner in order to minimize taxes and to maximize ben ­efi ts for their family and the worldwide Kingdom work.

The Char itab le Plannin g Office was estab lished to offera much-needed service: providing infor matio n to thosewho want to use some of their assets to support theworldwide Kingdom work. It does this by discussing op­tions with them or their professional advisers.

What the Charitabl e Planning Office DoesThe service provided by the Charitable Planni ng Office

is a personal one. Those who would like info rmation re­garding charitable giving as part o f an estate or a finan­cial plan are welcome to contact the Cha ritable PlanningOffice. If complex planning is involved, we would behappy to discuss the various cha ritable-giving optionswith an indi vidu al' s tax adviser, accountant, or attorney.

What the Charitable Planning Office Cannot DoThe Charitable Plann ing Office cannot provide legal or

tax advice or prepare an individual's legal documents.Each person sho uld consult with a qualified tax advisero r with legal counsel for a full d iscussion of the implica­tions of any gifts he desires to give o r estate planning hecares to do . The Charitable Planning Office does not pra.vide wills and othe r estate-planning forms. Any ques­tions regarding the impact of an in tended donation onMedicaid eligibility should be directed to an atto rneyspecializing in elder law in your state.

Benefits ofCharitable Planning0 000 00 0 00 00. 0 0 0 0 •• ••• • 0 0 • •

A p l anned gift wUlgenerally include one ormore of the followingbenefi ts:

• In come and gift taxsavings• Avoidanceofcapitalgains tax

• Retained-income rightsfor a period of time or forlife and the life of adonor'sspouse or otherbeneficiaries• Possible in crease in per­sonal spendable in comeas a result of certain gifts

• Eliminsnon ofgift andestate taxes (on th e vet­ue of assetspassing to theorganization before orupon a donor 'sdeath)• Significantly reducedestateprobate costs (byutilizing cer tain trusts)

• Tax laws and rateschange from time totime. A tax adviser, an ac­countant, or an arror­ney can determine whichbenefits are best suitedto individual ci rcum­stances.

• ••• 0 •• 00 . 0 •• ••• 0 ••••••• 0 •• 0 •• • 0 • • • 0 ••• 0 • • • 0 • •• 0 • • 0 0" 0 0.00 .0 000.0 0 ••• 0 • • 0 0 ••• 0 O ' 0 0 • •• 00 • • •• 00 • • 000 • • 0000.0 •• 0.0

Charitable Planning to Benefit Kingdom Service Worldw ide 7

It is neith er the inten tion nor the desire of the Chari­table Plann ing Office to sol ic it donations. Rather, wemerely provide information to those who inquire aboutestate planning in which the organi zation may be in­volved.

The Charitable Planning Brochu reThis brochure is designed to provide only an overview

of various optio ns associa ted with charitable planning.I f yo u require further details on any of the topi cs

covered in this b roch ure, please con tact the Char i tablePlanning Office (or more information.

Charitable Planningto Benefit KingdomService WorldwideAn Overview

Int roductionMany who have charitable int ent wonder how they

can make contributions to the organization in the mosteffective manner. Each person mu st consider individualcircumstances, the type o f assets involved, and a ran ge ofother factors including personal and family goals.

Cha ritable planning that will benefit Kingdom serviceworldwide falls into two basic categories.

Gifts That Will Benefit the Organization NowGifts that will benefit the o rganization now usually in­

clude money, secur ities, real estate, and other tan gibleasse ts. Such gifts provlde an o pportun ity for the organi­zation to put these assets to work im mediately i n order tofurther Kingdom interests.

Gifts That Will Benefit the Orga nization LaterGifts that will benefit the organization later include

bequests from wills or living tru sts. The organi zation alsoben efits later when named as beneficiary of bank ac­counts, life insurance policies, and reti rement plans.

There are certain types of deferred gifts that provide apresent income tax dedu ction, a flow of income to thefamily, and a future gift to the organi zation. Gift annu­ities and cha ritable remainder trusts fi t into this category.

Things to Consider

Pro fessional advice m aybe n ecessary beforemak inganygift to th eorga nization .Those deciding whichtype of gift would bemost appropriate mayneed to consider suchpoin tsas:• Isaccess to th ese assetsrequired during the do­nor's lifetime?• In personal or familyplanning, does it appearthat a fixed annual in ­come would be helpful?• Can an outrigh t gift bemade now; or is it like­ly that the assets will beneeded in the furure ?

' .Charitable Plann ing to Benefit Kingdom Service Worldwide 9

Gifts That Will Benefitthe Organization Now

Gifts of MoneyOutright gifts of money are the simplest and most

common way of making contributions. Such an unre­stricted gift provides an immediate resource that the or­ganization can use in its many theocratic endeavors. Giftsof money may be made in an y amount and at any tim e.These gifts may be sent directl y to Watchtower" in care ofthe Office of the Secretary and Treasurer. (For the addressof the Office of the Secretary and Treasurer, please seepage 29.)

• Th rou ghout th is brochure, "w atchtower" refers to the Watchtower Bibleand Tract Society of New York, [nco

Bond:A security evidencingindebtedness to the holderthat usuaffy provides forthe payment of interest atregu lar intervals.

Cap ital ga ins tax :Tax imposed upon the gainfrom the sale of suchassetsas securities or otherinvestments.

Outright Gift

AdvantagesIncome tax ded uctionNo cap ital gains tax on app recia ted propertyNo gift tax

Gifts of money may be tax deductible up to 50 percentof the donor's ad justed gross income. If the entire giftcannot be deducted in one year, the unused portion ofthe tax deduction may be carried forward for up to fiveadditional years.

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Examp le: Mary is in a 28 percenttax bracket and is try ing to de­cide whether to donate $10,000in cash or that amount in stocksthat have apprecia ted. Here is acomparative view of th e effecteach type ofgift would have onher federal taxes:

Gift of cas h Gift of sec urit ies

Amount 510 ,000 510,000

Deduction 510,000 510,000

Income tax savings 5Z,800 5Z,800 '\

<Capital ga ins tax savings None 5 I ,ZOO"

\:After-taxcost of gift 57,ZOO 56,000 )!• This assumes a cost basis of S2,000 and a fl-t.It: fal capital gainstax rate of 15 percent.

Gifts of Securi t iesStocks and/or bonds th at have appreciated (increased

in value ) make fine gifts. If assets of th is kind are sold,such a transaction would be subject to capital gains tax.However, by making a gift to th e o rgan ization of securi­t ies that have been he ld for mo re than 12 months, thedonor receives a do uble benefit :

• Taxon the appreciation or profi ts isavoided.• There is a char itable income tax deduction for the full

fair market value of the assets when gifted.

If the securit ies have declined in value, it is better tosell them to take advantage of the loss for income tax pur­poses and then donate the proceeds to the organization.

Gifts of secur ities th at have app reciated and were heldfor more than 12 months actually cost less th an a gift ofthat amount of cash, as the example above shows.

Gifts of appreciated securities may be ded uctible in anamount not to exceed 30 percent of the donor' s ad justed

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Deed:A document wh erebyownership of a propertycan be transferred from oneperson to another.

Basis:Generally. the amountrepresenting the originalcos t, w hich is used incalculating gain or foss uponsale of the asset.

Mortgage:A written instrument bywhich the borrower givesth e lender claim (lie n)common fy on real proper tyas security for the paymentof an obliga tion.

gross income. A gift in excess of that amou nt may be de­ducted o n tax returns for up to five add itiona l years.

Those interested in making gifts of securities are wel­come to con tact the Office of the Secretary and Treasurer.

Gifts of Real EstateA gift of real proper ty (real estate) offe rs benefits simi­

lar to those of a gift of securities. If real estate that has ap·preclated in value is sold, capi tal gains tax is du e.

However, if th e property is deeded directl y to Watch­tower, tax on the increased value is avoided and, at thesame time, a ch aritable income tax deduction is ava ilablefor th e proper ty 's fu ll fair market val ue . That value is de­termined at th e time of th e gift. In so me instances, how­ever, pr ior deductions for de preciation may reduce thetax bene fit.

Should you wish to give an undivided in terest in theproperty rather th an th e enti re property, call the Charita­ble Plann ing Office to di scuss thi s option.

Tho se interested in deeding proper ty to Watchtowershould first contact the Charita ble Plann in g Office tomake sure that th e gift can be accepted and to fi nd outhow best to proceed.

Gifts of Other Personal PropertyJewelry, stamp o r coin co llec tions, and othe r tangible

persona l property can be co nt ributed. In some instances,gifts of such ta ngible personal property may be eligib lefor the same tax ben efit s as securities. However, in mostcases, a person making such a gift will be entitled to a taxdeduction for the lower of the fair market va lue or th ecost o r other basis in that property.

Those interested i n making a gift o f anyperson al prop­erty should contact the Office of th e Secretary and Trea­surer to make sure th at th e gift can be accepted and i f itcan, how it may be transferred.

Cond it ional Donation Trust ArrangementThe Watch Tower Bible and Tract Society of Pennsylva­

nia cares for co nd it iona l donations on beha lf of the orga ­n ization. Durtng a person 's lifetime, he may place mo neyin trust wit h the Watch Tower Bible and Tract Society o f

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Pennsylvania under a conditio nal donation tru st arrange­ment. Upon written request, the money will be retu rned.

Such an arrangement ensures tha t in the event of thedonor 's death, the assets in trust become the property ofthe Watch Tower Bible and Tract Society of Pennsylvani a.This tru st arra ngement also enables one to avoid the ex­pense, time, and un certain ties of probate.

Because this arra ngement leaves one free to request re­tu rn of th e money, the re is no cha ritable income tax de­duction.

Those in terested in tttts arrangement are invited tocontact the Office of theSecretary and Treasurer.

Conditional Donation Trust Arrangement

.................................................................Advantag esCan request return of fundsFunds are used im m ediately for Kingdom in terestsAt donor 's death, gift is deductible for estate and in ­heritance tax purposesDisadvantageNo income tax dedu ction aJJowed

Charitable Lead TrustA cha ritable lead trust provides for payments from

property in a trust to Watchtower for a designated term,after which the property eithe r reverts to the do nor orpasses to family members or ot hers whom the donor hasselected.

Probate:The system whereby acourt assumes authorityover the assets of theestate of a d eceasedindividual and determinesthe va lidity of a w ill ifth ere is one. It appoints alegal representative, such asan executor, to manageth e affairs under thejurisdiction of the court.

...............................................................................................................Charit able Planning to Benefit Kingd om Service Wor ld wide 13

The payments to Watchtower must be in the form of anannuity or a fixed percentage of the value of the trustproperty, which is determined annually.

There are two types ofcharitable lead tru sts:• the grantor lead trust• the non-g ranto r lead tru st (the more popular)In the case of the grantor lead tru st, th e property is ul­

tima tely retu rned . The donor receives an income tax de­duction the year the trust is established but will be taxedon the inco me earned annua lly by th e tru st. Funding thetru st with tax-exempt secur ities avoids thi s negative taxresult. Agrantor lead trust is o ften used when someonehas a year of exceptiona l in come, since the opportunityto obtain an income tax deduction might outweigh thedisadvantage of being taxed on the trust 's income in lat­er years ,

Non-Grantor Charitable Lead Trust

I. Gi ft ofassets

2 . Income fora term ofyears

••• o •••• • 0 ••• ••• 0 •• ••• 0 •• ••• 0 •• 0 .0 •• 0 •• 0.

AdvantageRemova l of future appreciationtn property from donor 's estateDisadvantageThe trust is irrevoceble

J.Atdeath(or term ),rem a ind erto children

••••• •••••••••••••••••••••••••••• 0 ••• •• 0 •• 0 •••• •••• 000000 .00 •• 0 0 •••••••••••••••••••••••••• •••• •••••••••••••• • 0.

14 Charitable Planning to Benefit Kingdom Service Wor ldwide

--Example: Allen creates a charitablel ead trust and f un ds it withtncome-proovctng real estatecurren tly valu ed at 5250,000.He directs th at th e trust is to payWatchtower 520,000 annuallyfor 15years, at wh i ch point theassets of th e trust are to be dis­tributed to h is ch ildren. In setti ng upth e trust, Allen has made two gifts: one to Watch ­tower (vaJued a t S232.(JOOaccording to Internal Rev­enue Service tables at the tim e of this printing) andone to his ch i ldren (val ued at $18,(00).

Assume that at Allen's death th e trust assets haveincreased in value to $500,000. 1£Allen had not setup the charitable lead trust, the entire 5500,000would be taxed in his estate. However, on ly thevalue of th e gift to his children at th e time th e trustwas created ( $18,000) was taxed. Th e balance of$482,000 escaped transfer tax entirely.

A non-grantor lead trust created during a person' s life­time does not provide a charitable income tax deduction.However, th e creator of the trust is not taxed o n any in­come earned by the trust. This type of trust is used whenone desires property to be tran sferred to family beneficia­ries at a low transfer cost. It is particularly suitable whenthe property has the potential to appreciate considerably,as noted in the example above .

Of course, a charitable lead trust is practica l only if afam ily does not require the income or the principal fromthe transferred property while Watchtowe r is receivingpayments from the tru st.

When considering a charitable lead trust, a personshould always compare the effects of the trust with th eeffects of simply holding on to assets an d contributi ngthe income from them each year. There may be benefitsin doing the latter.

Con tact the Charitable Plan ning Office for further de­tails.

...................................................... ...........................................................Charitable Planning to Benefit Kingd om Service Worldwide "

Annuity:An asset tha t pays a fixedsum of money yearly or atother regular intervals, theterms of wh ich are set out ina contract, or an agreement.

Annuitant:The recipient of an annuity.The annuitants can be th ed onor, the donor andspouse, or anyone the donordesignates.

Irrevocable:Canno t be al teredor recalled.

Gifts That Will Benefitthe Organization LaterPlanned Gifts That WillProduce Income for the Donor

Gift Annui tyA gift annu ity is a simple co nt ract with a Watchtower

corpo ration that allows one o r two individuals to receivea guaranteed income for life. To establi sh such an annu­ity, a person donates cash o r securities, a nd in tu rn, theWatchtower corporation promises to pay the an nuitants apredeterm ined amoun t in periodic install ments fo r life .

The payments a re based on age and are designed to re­sult in an ulti mate charita ble gift of about 50 percent o fthe value of the trans fer. An income tax deduction isava ilable for the year the an nuity is fu nded. Thereafter,for the designated per iod of the donor's life expectancy,the donor receives a portion o f each pay ment tax -free.Note the exa mple below.

Example: Carmen, aged 70, puts $10,000 intoagift annuity that pays her $570 each year. Partof the annual incom e Carmen receives from theannuity is tax-free (curren tly $383.04 of the $570is not taxed, but the exact amount is determinedby the federally established rate ).

The gift provides her with an incom e taxdeduct ion of$3,909, which in her 28 percent income

tax bracket savesher $1,095.

When Might a Gift Annu ity Be Appropriate?Please note that once th e initial gift of money or ma r­

ketable securities is made, legally it can not be returned,nor can the amount of the pay me nt be changed.

Th us, a person shou ld not cons ide r making an irrevo­cable gift of suc h assets if the re is any real possibility thatthe money or securities may be needed at a later time .

r

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Agift annuity may be more appro pr iate for th ose whoare olde r; suc h ones can perhaps afford to part with anasset if th ey are assured o f fixed payme nts for life.

Acharitable gift an nuity is not regulated by th e Okla­homa Insuran ce Depa rtme nt and is not protected by aguaranty assoc iatio n affiliated with the O klahoma Insur­ance Department. The payments made under a cha ritablegift an n uity are subject to regulatio ns by the Californ iaInsurance Department bu t are not insured or otherwise

Gift Annuity

.................................................................AdvantagesAn n ual income for lifeImmediate tax dedu ctionCapita l gai ns tax deferredDisadvantageThe arrangemen t is irrevocable

guaranteed by t he Cali forn ia Li fe Insurance Guaranty As­socia tion. Don ors should seek th e advice o f counse l priorto entering into a gift an nu ity agreemen t. Charitable giftannuities are not regulated by and are not under th e jur is­diction of th e South Dakota Division of Insurance.

Cha ritable Remain d er TrustsAcharitable rema inder trust (CRT) is an irrevocable ar­

rangeme nt in which a person transfers money, securities, orreal property to a trust. In return, the trust provides an in­come for the do nor or other beneficiaries for life or for adesignated fixed term, up to 20 years.

Summary of Benefits............................tn sum mary.. a gif tan n uitycan offer thesefinan cial and ta xbenefi ts:

• A guaranteed ann uallifetime income far oneor two individuals, pay­able quar terly

• Possible income taxsavings because a portionof the gift can be used asa chari table deduction

• Aportion ofannuitypayments wiJJ beincome-tax free

• Securities that have ap­preciated in value may begiven for a gift annuitywithout incurring an im­mediate capital gains taxon the appreciation

• Probate costsand estateor inheritan ce taxes maybe minimized or avoided

........................................................................................... .Charitable Planning to Benefit Kingdom Service Worldwide 17

The rate of payout is• determined at th e time the trust is established• not less th an 5 percent (but not more tha n 50 percent)

of th e fair ma rket value of th e trust's assetsThe rem ainder inte rest for Watchtower must be at least

10 percent of the value of the property transferred to trust.ACRToffers greater flexibility th an a gift annuity in that

it can be set up for a specified period of years, it can namemore th an two beneficiaries, and it allows th e donor tospecify the payout with in the above param eters.

Wh en Migh t a CRT Be App ropria te?A CRT is co m mon ly funded wit h a highl y app reciated

asset, such as stoc k o r real property. Thi s trust provides forannua l di str ibu tions, capita l gains tax savings, and an im­medi ate income tax deduction.

How It Work sGene rally, the process for implementing a CRT isI. An irrevocable gift of an asset is made to th e trust2. Th e asset is th en sold by the trust tax-free3. Th e t rustee invests the proceeds from the sale4. Th e dono r receives an immed iate tax ded uct ion

Example: Stephen. aged 72, owns stock worth$265,000 for which he originally paid $ 7.500. Heis pleased with how this stock has grown but isdisappointed with th e dividends he gets eachyear from th e stock-only $4,770.

He decides to make a gif t to the organizationthrough a chari table remainder unitrust. The

trust pays Stephen and his wife, also aged 72, 6 per­cent for li fe. The immediate effect otStephen 'sgilt isthat his current annual income from that stock morethan triples(from $4,770 to $15,9(0). He isen titled toa charitable deduction ofS101,087 a t the time of thisprinting. Additionally, Stephen does not have to paycapi tal gains tax on the appreciated valu e of thestocka t the time of the gift. However, he must pay tax dur­ing th eperiod i11 which he receivesdtstrtbuttons.

..................................................... .........................................................." Charitable Planning to Benefit Kingdom Service Worldwide

Charitab le RemainderAnnuity Trust

and also an annua l income from the t rust fo r life orfor a fixed ter m

5. Remain ing asse ts from the tru st are d ist ributed toWatchtower at the death of the last income be nefi ­ciaryor at the end of the fixed term

Type s of eRTsThere are two types of CRTs:• the cha ritable remainder ann uity trust• the charitable remainder unit rustThe major difference between the two is the manner in

wh ich the income payments are determine d.For the cha ritable remainder a n nu ity trust, the an­

nual payout is a set amount o r a fixed pe rcen tage based o nthe fair market value of the asset at th e time of the initietcontribution to the trust. It will never cha nge.

In the case of the cha ritab le remainder unitrust , thepayout is a fixed pe rcentage of the fair market value of the

Summary of Ben efits

• An income for li fe orfora fixed term for one ormore beneficia ries

• An immediate incometax charitable deduction(the older the beneficia ­ry and the lower th e rateof payout, the h igher thededuction )

• No capita l gains taxpayable when the asset issold by th e trust

• Reduction or eltm ine­tion ofestate taxes

CRTsoffer the followingbenefits:

3. At death,remainderp ayable toWatch tower

•

2. Fixed Income,S percent or mort'of trust whenestablished

1. Gift ofasset s- .........

................ ...... ............ ....... ..AdvantagesAnn ual incomeImmediate income tax deductionCapital ga ins tax savingsDisadvan tageThe tru st is irrevocable

.. ........ ..., .Charitable Planni ng to Benefit Kingd om Service Worldwide 19

assets in trust as revalued annually. Payments may varyfrom year to year, based on the value of the trust's assetsat that given time. Additiona l contributions may be madeto charitable remainder unitrusts at an y tim e.

The CRT is unique in its ability to sell low-yielding,highly appreciated assets free from the erosion of capitalgains or ord inary inco me tax and then provide the donorwith an income stream. If a person were to sell those as­sets or give them to family members and they were to sellthe assets, there would be a capital gains tax to pay. Seethe example on page 18.

Asset conversion may be the most visible financial ad-vantage of using a CRT. It is also an excellent vehicle for

• retiremen t pla nning and asset managemen t• asset diversification and risk reduction• wealth accumulation plan nin g• gift and estate planning

Charitable Remainder Unitrust

J. Giftofassets

2. Varied income,S percent or moreof trust as valuedeach year

...........................................AdvantagesAnnual incomeImm ediate income tax deductionCapital gains tax savingsDisadvantageThe trust is irrevocable

3. At death,rema inderpayable toWatchtower

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Other Planned GiftArrangements.......................................................................Ban k Accounts and Othe r Assetsin Trust for Watchtower

Frequently, peopl e have money tha t they wou ld likethe o rganization to have after their death, but they wantto retain access to it for person al needs that might arisewh ile they are st ill alive.

Thi s can be acco mplished by putti ng these funds intofinancial institutions, having the accoun ts in their ownnames, but stating that such assets are " in trust for theWatch tower Bible and Tract Society of New York, l nc.,100 Watchtower Drive, Patterson, New York , 12563­9204, U.s .A."

This a rrangemen t is legally refe rred to as a "Tottentru st" and can be made in some states and with somebanks, but regulations vary.

Complete ownersh ip and control o f t he accoun tremain with the account holder, and all interestor dividends will be paid to that ind ividu al. At his death,any fund s left in the account will pass direct ly toWatchtower. The advantage is t hat th is arrangementpreven ts the delays and uncertainti es typical o fprobate.

In most states, similar arra ngem ents regard ing stocks,bonds, mutual funds, cer tificates of deposit, and othertitl ed investm ents or accou nts may be made.

Some states allow a person to designa te a ben eficiaryfor such assets in much t he same way as he would for alife insurance policy. These designations are often re­ferred to as "pay on death" directions or "transfer ondeath" directions.

None of these arrangements produ ce a charitable de­duction for income tax purposes because there is no im­med iate gift to Watchtower. Duri ng their lifeti me theowners of such accounts or assets may do with them asthey please.

Totten trust:A device used to passproperty in a bank account,after a depositor 's death, toa desig nated person throughthe vehicle of a trust rath erthan through the process ofp robate.

Mutual fund:A portfolio of securities thatis professiona lly managed bya sponsoring managementor investment company thatissues shares to investors.

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Whe n the accou nt o r asse t tran sfers to Watchtower atthe ow ne r's death, tha t gift is then dedu ctible for estateand in he rita nce tax purposes.

Gift of a Remaind er Interest in aPersonal Residence or a Farm

Adonor may tran sfer ow nership o f a ho me or a farmto Watchtower even if he co ntinues to use it for the restof his life, just as though it had not been donated. How­ever, Watchtowe r will take full titl e af te r the donor 'sdeath. Such an arrange ment is generally known as a re­ta in ed life tena ncy, or a life esta te .

Th is arran gement allows a donor to claim an incometax cha ritable deduction based upon h is age and the fairmarket value of the property. Th is arra ngement also pre­vents the de lays and expe nse of p robate. The examplebelow shows how.

It is impor tant that th ose who contemplate taking thisstep con tact the Chari table Planning Office fi rs t.

Example: Instead of tesvtng her housettuvtng an appraised valu e of $247,000)to Watchtower in her will, M arie, aged75, decides to deed it now and retain alife estate in her home for herself. Afterhaving the property appraised, she andWatchtower sign a simple agreementthat she may live in the house for th erest ofher life and be responsible for

taxes, maintenance, and in surance.BecsuseofMarie's age, Internal RevenueService

regulations at the time of this printing entitle her toan income tax charitable deduction that is 56 percentof theappraised valu e of her home, which amounts toa deduction of$138,560. Ifshe is un able to use the en­tire deduction in the year of th e gttt. she has fiveadditionalyears to do so .At her death, Watchtower re­ceives full title to the house.

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Other Arrangements With Real EstateOthe r arrangeme nts that transfer titl e of real estate di­

rectly to Watchtower at the death of an own er do not re­sult in a cha ritable income tax deduction. These arrange­ments vary by state and may be known as a "bene ficiarydeed" or "revocable life estate deed ." They name Watch ­tower as beneficiary by deed but allow the owner to sell,mortgage, or deal with the property as he or she wishesduring th e owner's lifetime without needing Watch­tower's signa ture o r conse n t.

Such arrangeme nts enable one to avoid probate andcan be carried out with an y type of real estate, not just apersonal residence or a farm .

Gifts From Retirement PlansA retirem ent savings plan often represents the major

por tio n of a person 's assets. Typically. that account willprovide a hu sband and a wife with a cash flow for as longas they both live. At their death, however, such quali­fied plans not only are subject to estate tax but alsogive rise to an income tax to the estate or the ultimatebeneficiary. These double taxes can consume the greaterpart of the account, leaving litt le for the int endedben eficiary.

Distributions from retirem ent plan accounts avoidth is double tax when Watchtower is the nam ed benefi­ciary. For thi s reason, reti reme nt funds are usually agood asset to use to make charitable gifts at death.

It is also possible to make charitable gifts during lifefrom certa in types of retirem ent plans. Under curren tlaw, ind ividu als 70 1/2 and older can distribute up to$100,000 direct ly from an IRA to Watchtower. Such a di­rect trans fer does not result in a charitable income taxdeduction and is not included in the individual 's taxableinco me. Although this type of gift does not result in acha ritable income tax deduction, it may appea l to thosewho do not itemize o r who exceed the statutory deduc­tio n limits on contri butions.

It is wise to co nsult a professional adviser when con­side ring such a gift.

Estate tax:A tax based upon the valueof property and interestsin property transferred as aresult of d eath.

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Guardian:One wh o has legalresponsibility for thecare of another.

Executor:The pe rson appointedin a will to carry out itsprovisions.

Planned Gifts Through Wills.......................................................................Wills and Their Preparation

Awill is a legal do cument that gives instructions re­garding how to pass property on to a person's survivorsafter hi s death. It names one o r more beneficiaries whowill benefit from th e estate. In the absence of a validwill, the laws of each state determine how assets are dis­tr ibuted .

Awill di rects the distribution of assets that are titl edin an individual's name alone or in which he has a di­visible interest. Even if arrangements have been madefor the distribution of assets by titling (joint owner­ship), by beneficiary designation ("in tru st for" or "payon death"), or by a living trust, it is wise to have a will.In it a person 's wishes can be expressed should a jo intowner or named beneficiar y die first or should a personfail to arrange fo r the distribution of a certain asset by ti­tle, tru st, o r benefi ciary designation.

Awill is also a means by which a person can name aguardian for his mi nor children .

Because of the co mplexit ies associated with the prep­aration of a will, it is imperative that professional advicebe sough t when taking this step.

Prior to doing so, a person should determine who isto be named as the executor. Th is should be a trustedperson or an institution that can wind up the person'saffairs, collect assets, pay legal debts and taxes, and ex­plicitly carry out instructions in the will. Watchtowershould not be named as execu to r.

An attorney should be well equipped to provide guid­ance in the execution and witnessing of a will .

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A Simple Bequest to the Worldwide WorkHow can Watch tower be included as a beneficiary in a

will? The most usefu l bequest is an unrestricted beq uestfor th e gene ra l purposes of Watchtower. The followinglanguage is suggested:

I give (sum of_ dollars, all of the residue of myestate, or _ percent of tire residue of my esta te] toth e WATCHTOWEII BIBLEAND TIIACT SOCIETYOFNEW YORK, INC., a nonprofit organ izat ion, witha n office a t 100 Watchtower Drive, Patterson, NY12563-9204, U.S.A .

Nor mally, gifts made to Watchtower through awill are deductible for esta te and inheritan ce taxpurposes, usuall y with no limi tati ons as to the amountsor property tha t may be given . However, it wouldbe wise to d iscuss these matters with an attorney. Locallaws of the state in wh ich one lives should always beconsulted.

Key Poi nts t oRemember Wh enCompleting a WillWith Watchtower asBenefici ary............................• Keep the original wiJ/in a safe place and notttythe executor of where itis located. A copycan besent to Watchtower.

• Even if Watchtowerhasa copy, you may revokeor amend the will at anytime.

• Sending Watchtowera general list ofall prop­erty, its location, andnam es and addressesofthe heirs wo uld alsobe helpful. This will savetime and expense tha twould otherwise have tobe borne by the estate.

Those with additionalquestions may contactthe Charitable PlanningOffice.

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Trustee:One who is responsiblefor managing the propertyin a trust.

Trustor:One who creates a trust.

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Planned Gifts ThroughRevocable Living Trusts............................................. ..........................Introduction to Revocable Living Trusts

A revocable living trust, like a will, is a legal documentthat enables a person to pass proper ty to one or morebeneficiaries at death. In t his arrangement, however, aperson transfers ownership of property in tru st to atru stee, who will ensure that the terms of the trust areexecuted cor rect ly.

In most states, but not all, the tru stor may be nam edas both ben eficiary and trustee of a living tru st. If this isdone, a successo r trustee sho uld be named. The succes­sor tru stee will take over and manage the tru st propertyin the event of the trustor 's incapacity. At the death ofthe tru stor , the successor tru stee will also d istribute theincome and principal according to the terms of t he trust.

When Might a Revocable Uving Trust Be Appropriate?Thi s arrangeme nt is appropriate for those who wish

to ma intain control over their property, provide formanagement of tru st assets in case of the trusto r'sincapacity, and enable assets titl ed in the tru st to avoidprobate.

Since assets that were transferred in to the living tru stduring the tru stor 's life are legally owned by the trust,they are not subject to probate, and they pass to t he tru s­tor's beneficiaries with a minimum of tim e and expense .

Becau se one can am end or revoke a living trust at anytime befo re death, an income tax deduction is not avail­able . However, fund s donated aft er the death of the tru s­tor to Watchtower in accordance with the tru st provi­sions are deductible for estate tax purposes.

Whether a revocable living trust is appropriate will de-pend upon a number of th ings, including:

• the property that is owned• the ind ividual' s health and family situatio n• the availability of a successor tru stee• the time and expense of probate in the trustor's state

Charitable Planning to Benefi t Kingdom Service Worldwide

Bequests to the Orga nizationA living trust con tains directions on wha t to do with

the tr ust assets at the tru stor ' s death. How can a trustorbenefi t Watchtower using this ar rangeme nt? The fol­lowin g language is suggested:

The trustee shall distribute [sum of_dollars,all of the residue of me trust estate, or_ percent oftlJe residue ottne trust estate] to theWATCHTOWER BIBLE AND TRACT SOCIETY OFNEW YORK, INC., a nonprofit organization, witb anoffice at lOO Watchtower Drive, P'JNersoIJ, NY12563-9204, U.S.A.

If Watchtower is named as ben eficiary in a trust,pleasecontact the Charitable Planning Office.

Revocable living trusts are usually prepared in con­junction with a last will and testament. All trust sare com plex legal documents and sho uld be discussedwith a qu alified attorney.

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Gifts of Life Insuranceand Annuities•• . ... ...•••••••• ..... .. ... .•• •.••. ... ... ... .••••••• ............••••••.

Naming Watchtowe r as BeneficiaryWatchtower may be named as sole or partial beneficia­

ry of a life insu rance policy or an ann uity. Proceeds pay­ab le to Watchtower at death may be deducted from estateand inheritance taxes. See the example below.

Example: Howard owns a $250,000 lifeinsurance policy. He purchased the pol­icy when his children were infants.Now that they are older, he signs achange ofbeneflciary form furnishedby his insurance company to providethat $50,000 in proceeds wilt be paid

to Watchtower upon his death. The remaining $200,­000 is to be paid to his children in equal shares. Thefull amount of his life insurance is included in hisgross estate for tax purposes. However, $50,000 is ful­ly deductible as a charitable deduction from estateandinheritance taxes.

If Watchtower is named as beneficiary, th e insurancecompany should design ate the beneficiary as:

Watchtower Bible and Tract soaety ot New York, Inc.When naming Watchtower as beneficiary, please in­

form the Charitable Planning Office .

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.......................................................................................................Office of th e Secretaryand Treasurer................................

Watch tower BibJe and Tract Society of New York, In c.25 Col um bia HeightsBrooklyn , NY 11201·24 83, U.S.A.Telephone: (718) 560-5000fax: (118) 560-7446

.......................................................................................................Charitab le Planning Office Watchtower Ribleand Tract Soci etyofNew York, tnc.

100 Watchtower DrivePatterson, NY 12563-9204, U.S.A.Tetepnone:(845) 306·0707Fax: (845) 306-0709

.......................................................................................................The material presen ted in thi s brochure is not offered as legal ortax advice. Examples of tax benefits and results of vario us exa m­pies shown are based on th e stated IRSdiscount rate and o n otherassumptio ns that mayor may not apply to your persona l situ atio nat the tim e of your gift. Not all material presented in th is brochuremay be applicab le or available, as laws vary from state to state.

You are urged to seek the advice o f your tax adviser, attorney,and /or financial planner to make certain that a contemplated giftfits well in to your overall ci rcumstances and planning.

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How to Obtain Answersand More Information

• • •• • •••••• • •• • •• •••• •• • • • • • • • • • • • • • • • • • • • • •• • • 0 .0 • •

We understand th at questionsmay remain .

We would be pleased to workwith an individual's adv isers tohelp atta in objectives regardingcha ritable gifts and estate planning.May Jeh ovah bless all those whosupport the Kingdo m service beingcarried out worldwide to hi s praise.

For details on how best to con­tact us, please see page 29.

30 Charitable Planning to Benefit Kingdom Service World w ide

Charitable Planning to BenefitKingdom Service Worldwide

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Prepared by the Office of the Secretaryand Treasurer and the Charitable PlanningOffice of the Watchtower Bible and TractSociety of New York, Inc.

C 2000, 2004, 2010 WATCH TOWER BIBLEAND TRACTSOCIETY OfPENNSYlVANIA. ALLRIGHTS RESERVED.PUBLISHERSWATCHTOWERBIBlE ANDTRACT SOCIETYOF NEW VORK, INC.

2S Columbia Heig hts, Brooklyn, NY 11201 ·248 3. U.S.A.

Charitoble Planning to Benefit Kingdom sevce WorldwideEnglish ((poE)

Made in the United States 01America

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