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Minnewaska Home Development Foundation Bequeath Your Bonds! Savings Bonds:  A Tax-Wise Gift From Your Will Or Living Trust Savings Bonds and Tax Burdens Everyone has some, tucked away in a desk drawer or safe deposit box. U.S. savings bonds are the savings tool of choice for many Americans – partly because of their favorable tax advantages. Savings bonds are bought at a discount and double in value by maturity (the initial purchase price of a $100 bond is $50). Bonds are exempt from state and local income taxes and, generally, the interest also accumulates free of federal income tax. Taxation occurs only when the bonds are cashed, reissued to another person, or reach final maturity. The interest on "college education" savings bonds can be tax-exempt if the owner meets certain requirements. Series EE bonds can be "rolled over" into interest-paying HH bonds without interest accumulation, although the semiannual HH-bond interest payments are subject to tax (but this rollover must occur within a year after the bond's final maturity date). Tax Clouds Roll in at Death Bonds in an estate, however, may be heavily taxed - incurring federal income taxes and both state and federal "death" taxes. Heirs will owe income tax whenever they cash savings bonds. And, depending on the size of the estate, state and federal estate taxes may take an additional one quarter or more. As an example, heirs receiving $100,000 in savings bonds from your estate will one day have to pay income tax on the $50,000 - or more - of built-up interest. In addition, the full $100,000 could be subject to federal estate tax. When all is said and done, your beneficiaries may see only a fraction of the bonds' redemption value. Dispel the Tax Clouds You can erase all taxes on savings bonds at death simply by changing your will or your revocable to include instructions to give savings bonds to Minnewaska Home Development Foundation. Bonds left to us pass 100% free of estate taxes and, because we are a tax-exempt organization, MHDF would owe no income tax at all on the bonds. In other words, every dollar we receive from redeeming the bonds could be used for our programs, contrasting sharply with the shrunken, after-tax amount that would be available to other beneficiaries. These tax benefits alone may allow you to do far more for our future than you might have ever thought possible. Special Planning Necessary Under Treasury regulations, you may not name Minnewaska Home Development Foundation as either joint owner or death beneficiary of savings bonds. But bonds can be left to us in a will or through a revocable living trust as long as the bonds do not have a surviving joint owner or death beneficiary. Caution: For tax reasons, you must specifically identify savings bonds as an asset that you are leaving to us, rather than bequeathing a dollar amount and expecting your executor to make payment from the proceeds by cashing some bonds. More Ideas for Charitable Bequests Income taxes and estate taxes also can take a sizable bite out of: Death benefits from IRAs and other retirement accounts Accounts receivable belonging to a professional or other business owner Renewal commissions for insurance agents Unpaid installments from a land sale contract Again, as a tax-exempt organization, we can keep every dollar of these assets. Furthermore, leaving these items to us will create significant estate tax charitable deductions, providing more tax savingss for your heirs. Bring New Life to Bonds That No Longer Earn Interest Example: A woman was shocked to discover that some of her savings bonds, purchased in the 1940s, '50s, and '60s, had stopped earning interest. She was delighted, however, to learn that she could bring new life to those bonds by using them as a thoughtful gift for her favorite charitable organization. Savings bonds stop earning interest after 30 years (40 years for Series E bonds purchased before December 1965). You generally should redeem, or cash in, these "matured" bonds and reinvest the proceeds – although you will owe taxes on the accumulated interest. Unfortunately, individuals may not gift matured bonds to Minnewaska Home Development Foundation - Treasury regulations do not permit lifetime transfers of bonds to organizations. However, you can make an outright gift of the cash proceeds from matured bonds and reduce your taxes by itemizing your tax deductions. Or, you can offset tax liability when you cash savings bonds and receive a lifetime income by making a "life income" gift arrangement. This will provide future support for our programs, provide a lifetime income to you or another, plus generate a charitable deduction that may eliminate all taxes incurred by cashing in your bonds. Future Income for Your Heirs Example: A 77-year-old widow amassed, through purchases and inheritance, the remarkable sum of $600,000 in U.S. savings bonds. Her total estate, including the bonds, was worth about $1,200,000. Her estate planning goals included providing for her two brothers and supporting two charitable organizations. She discovered that her brothers would owe income tax on at least $300,000 of interest on the bonds, as well as federal estate taxes. Instead she left the bonds to a trust that will pay her brothers income for life, with future benefit to the charities. In addition, her estate will avoid all taxes, including any income tax when the trust receives payment from bond redemption. For more information, please contact us. Minnewaska Lutheran Home (320) 239-2217 e-mail: info@mlh-healthcare.org The information provides is not intended as legal, tax, or investment advice. Please consult an attorney, tax or financial planning professional for questions specific to your financial situation.

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