There is risk to you because you remain responsible for the repayment of the loan, The loan will be at the Applicable Federal Rate (AFR) 2.6% Dec 2017 which is the lowest rate before its considered a gift.
The interest you pay goes to benefit of the charity you designated fulfilling its endowment.
Loan donated to charity in your name which gives write off of same amount. Interest due at the AFR to prevent negative tax implications. Currently varying between 2.5 and 3 percent. So at a 36 percent tax bracket it comes out to 7 to 8 percent of the return each year interest only all extra goes to principle.
Charitable Loan Examples
How this alternative benefits your charity.
For a person who makes $200k per year and pays 35% of their top income in taxes, they can use the $100k FIFE Plan. This FIFE plan will give them a Donation Certificate for $100k. Based on the charitable deduction and their tax rate, the person will be able to receive an additional $35k in tax refund, which should fully fund repayment of the loan if you get a 7.4% rate of return or higher (based on the current AFR rate being 2.6%). Revenues from investment of the $35k will to cover the loan and create a permanent endowment for your charity, which will continue the benefit the charity for which they created the endowment. We have several funds which perform far better than what’s necessary to endow such a plan. In short, the income tax return that you would not have without the deduction arising from the loan funds the loan.
Fixing the Charitable Funding Gap
Last year only around 300 Billion dollars went to all of the charities combined throughout the USA this constituted less than 2% of the GDP this included all Churches and all secular charities including political groups such as republicans and democrats.
- This is not enough to accomplish even the simplest of the charitable goals that these charities have in mind.
- At this rate and pace the charities will never be able to accomplish or significantly contribute to the completion of their charitable goals