Oklahoma Baptist Homes for Children

Neal Wooldridge

a word from Neal Wooldridge
Vice President for Planned Giving

Giving Without Robbing

Sometimes, donors are reluctant to make an estate gift to Oklahoma Baptist Homes for Children, feeling they would be “robbing” their children of that amount.   They are adamant about passing on their entire estate to their family.  While opinions vary widely on the subject of inheritance, you may be interested to learn about some fascinating options that can benefit both family and charity, without shortchanging or “robbing” either.  In other words, it is possible to “leave it all to the kids” and make a significant charitable gift at the same time.  Here are just three possibilities:

1. Wealth Replacement Life Insurance

The typical arrangement goes like this:  The donor uses a non-income-producing, highly appreciated asset, like nonproductive real estate, to fund a charitable remainder trust.  The trustee of the trust sells the asset and reinvests the proceeds in a balanced portfolio of income-producing securities which provide enough annual income to the donor to meet the payout requirements of the trust.

The donor uses the income tax benefits and the income produced by the trust to fund an irrevocable life insurance trust using special provisions in the tax code.

When the donor dies, the remaining assets of the trust pass to the qualified charity, like OBHC, which is named in the trust.  At the same time, the life insurance trust pays a death benefit to the donor’s children.  These plans can be structured to provide the children with proceeds equal to, or greater than, the value of the real estate.  As they say, it’s a win-win arrangement.

2. Charitable Remainder Trust with Extended Payments

In this scenario, the donor creates a charitable remainder trust {see above} and adds a term of years to the trust payout period.  That is, after the donor who has been receiving income from the trust dies, the trust continues to “live” for a period of years.

During these added years, the trust provides the children with income.  The accumulated value of this additional income can approximate the value of the asset originally used by the donor to fund the trust. 

3. Charitable Lead Trust with Remainder to Children

This charitable giving vehicle is the reverse of the charitable remainder trust.  Instead of the charity receiving the remainder of the trust, it receives income payments from the trust for a limited period of time.  After the specified term, whatever is left in the trust (the remainder) passes to the children.

This technique can be especially useful when the asset involves stock that is expected to appreciate significantly in the future.

All three of these charitable gift plans outlined here in very broad terms require the assistance of a qualified professional for specific and authoritative application.  There are tax issues that need to be addressed in light of the donor’s overall estate plan.

Neal Wooldridge, Oklahoma Baptist Homes for Children’s Vice President for Planned Giving, understands these plans and can assist you by further explaining how these may work for you.  If you desire, he can also meet with your attorney or other professional advisors to assist them with helpful background material.

Please feel free to contact Mr. Wooldridge at (405) 570-9836, or e-mail Neal Wooldridge.

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