Rich ’69 and Lynnet DeRemer ’70 Reiner purchased two small duplexes in Lincoln, Neb., in 1969 and eventually grew the investment to about a dozen rental properties in the city. Forty-five years later the couple has found a way to use these properties to build a spirit of philanthropy within their family while helping shape the future of Union College.
For several years Rich and Lynnet thought about their estate and considered how their Lincoln rental properties could be used to pass on their values to their three grown children. Rich and Lynnet, who both grew up with Midwestern values of hard work, saving, delayed gratification, and supporting worthy causes have tried to pass on these values to their children and desire that a legacy of giving be a part of their family for years to come. In family discussions, all agree that education is a top priority, thus making a gift to Union College a logical choice in their estate planning.
The planning started nine years ago, when the Reiners set up an endowed scholarship at Union College to help fund the tuition of a business or English major. At the same time, Rich started a conversation with Advancement personnel about a planned gift that would include some of their rental properties with proceeds to be directed to their scholarship fund as well as Union’s capital projects. “I wanted to help one of my favorite charities,” declared Rich, “but the timing needed to be right.”
Rich, who retired this past June from his position as a healthcare executive with Adventist Health System, wanted to maximize the value of these properties to both his family and Union College. To do so he considered when to relinquish management of the properties, how to continue to benefit from the supplemental income in retirement, and how to gain the most benefit from the charitable income tax deduction.
“Selling the properties outright and gifting the proceeds to Union College would create a significant tax liability, since most of the properties were fully depreciated,” Rich explained. Gifting them during retirement when the couple’s income was reduced would also decrease the value of the charitable income tax deduction. If they sold the properties or gave up management, how would they replace the income from the rental properties that they needed for retirement?
“I had done enough reading to know that a charitable gift annuity or a charitable trust was a good option for our situation and I wanted to help one of my favorite charities,” declared Rich. So he spoke with Scot Coppock, Union College’s director of leadership giving, to let him know they were planning to make this gift one day in the future.
“Rich shared with me that he was thinking about setting up a charitable gift annuity with Union College, but he didn’t need the income right away and asked if he could defer the payments,” said Scot. He also mentioned that soon his taxable income would be reduced significantly and he wanted to establish the charitable gift anuity so he could claim the charitable tax deduction before he retired.”
After asking a few questions, Scot realized a charitable gift anuity would work in the Reiner’s situation, but a charitable remainder trust may be more suitable for their needs. “A charitable remainder trust allowed the Reiners to put their properties into the trust right away and create a charitable tax deduction while Rich was still working,” explained Scot. “Rich and Lynnet could then collect the rental income through the trust for as long as they wanted to manage the properties, and sell the units inside the trust when they were ready.”
Allowing the trust to sell the fully depreciated rental properties also meant the capital gains tax would be deferred and the Reiners would avoid having to pay it all in one lump sum. “The Reiners will still need to pay the capital gains tax,” Scot pointed out, “but it will be spread out over many years.”
“Scot’s presentation was very thorough and my financial advisors were impressed with it,” said Rich. “My advisors said, ‘This is the year to do it,’ and the projected cash flow from the charitable remainder trust will be at least equal to, or greater than, the rental income from the properties.”
Rich and Lynnet set up the charitable remainder trust with their estate attorney and placed the rental units inside the trust. They listed Union College as the beneficiary of the trust and left open the possibility of letting their children help decide how the money will be used. “We hope by getting the kids involved we will help them understand why a part of our resources will go toward supporting the greater good,” explained Rich, “and not be used just to buy more toys.”
When asked what advice he would give to others who are considering creating their own planned gift, Rich said, “You have to realize there can be some significant financial benefits to doing this.” He added, “Get some good professional advice from a lawyer, a financial advisor and certainly use the resources available through Union College.”
If you want information on how you can set up a charitable remainder trust or a charitable gift annuity to improve your income stream and reduce taxes while also benefiting Union College, please contact Union’s Director of Leadership Giving Scot Coppock, CSPG, at 402.486.2503 or firstname.lastname@example.org. Scot is eager to help you discover how a deferred gift can benefit you and your family.
By Scot Coppock, director of leadership giving