Supporting the Future with a Planned Gift


Ways to Make a Planned Gift

Charitable Bequests: The term "charitable bequest" is used to describe anything you give or leave to charity from your estate through a will or a revocable inter vivos ("living") trust. An "estate" is any property, money or personal belongings that you may have at the time of your death. Most people leave an estate when they die, even though they may not have a great deal of wealth. Even an individual with a small estate can arrange to leave a charitable bequest.

You can arrange to bequeath a gift from your estate in several different ways. You can set aside a specific dollar amount, leave a percentage of your estate, or leave any assets left over after your family has been provided for. Some people use a bequest to give a charity something they own, such as a home or piece of art. Others leave a paid life-insurance policy or other financial investments, such as stocks, bonds or CDs. These gifts may provide tax savings; consult a professional advisor for details.

Life Insurance: A life insurance policy can be a cost-effective way to support charitable causes, especially for the younger donor (45-55). A donor may apply for a new policy or make a gift of an existing policy that has cash value. A new life-insurance policy can enable someone with many current family obligations to turn a relatively small contribution into a dramatically larger gift. For the older donor, a paid-up life insurance policy that is no longer needed makes an excellent gift.

Retirement Plans: Too often, the estate and income taxes imposed on these plans make them a poor choice for passing on to one's heirs. As charitable gifts, however, Retirement Plans can be powerful tools for endowing a charitable legacy to a nonprofit. By carefully planning during one's lifetime, one can give a sizable gift to a nonprofit that would otherwise be heavily taxed. These plans also may be placed in a charitable trust with significant benefits to both heirs and the nonprofit.

If you have already created a sound estate plan that achieves all objectives and takes care of the family, one lingering challenge remains: What should you do with an IRA or qualified retirement plan? Leaving the children the IRA could result in a combined tax of up to 80%.

A good solution: Create a Charitable IRA by naming a nonprofit as the beneficiary of the IRA or qualified retirement plan. By making the nonprofit the beneficiary of an IRA plan, you will avoid the double tax bite of estate and income taxes and create a permanent charitable legacy.

Beneficiary Designation: By designating a charity as the beneficiary of your life insurance or retirement assets, you can enjoy some flexibility in your charitable giving as well as certain tax advantages. The designated charity will receive the specified assets upon your death, and you have the option of changing the eventual recipient throughout your life.

Gift Annuities: A charitable gift annuity provides you with lifetime income. To establish a gift annuity, you contribute funds or assets to a nonprofit organization, and that nonprofit in turn makes fixed annuity payments to you from its general assets for the rest of your life. You receive an immediate income tax deduction for a portion of the gift, and a portion of each annuity payment is treated as a tax-free return of the investment. The portion of the gift not used for payments benefits the nonprofit organization.

Real Estate and Investment Properties: Gifts of real estate can include a house, apartment building, farm, vacation home, commercial building and income-producing and non-income-producing land. A donor can make an outright gift of real property now or through the estate — or use it to fund a charitable remainder trust that provides income to the donor or the donor's children. A gift of real estate typically requires certain procedural steps, including a site visit to the property, a qualified appraisal, a preliminary title report and an environmental assessment.

Why gift real estate?

  • Bypass capital gains tax
  • Increase or maintain current income
  • Eliminate hassle of maintaining rental property
  • Reduce estate taxes
  • Establish income flow for donor
  • Manage income flow to children and/or grandchildren
  • Create current income-tax deduction
  • Satisfy one's philanthropic goals

Give your house and live in it, too! A donor may give a charity his or her personal residence or farm, yet continue to live there for life. Further, the donor's spouse may live there for life. The donor receives an immediate tax deduction for the contribution, based on the value of the nonprofit's remainder interest. The property does not have to be the donor's primary residence -- it may be a vacation or second home, as long as the property is used as a personal residence (in the case of a farm, the donor does not have to reside on the property).

Mrs. Smith, age 72, donates her personal residence -- a house and land -- to her favorite charity with the reserved right to live on the property for the rest of her life. At the time of the gift, the land has a value of $100,000, and the house has a value of $200,000, with an estimated useful life of 45 years. Taking into consideration adjustment factors and the projected value of the property when the charity is to receive it, Mrs. Smith's charitable deduction is $123,045. Mrs. Smith continues to live in her house until death, at which point it passes to her favorite charity.

Charitable Remainder Trusts: A charitable remainder trust allows you and/or other designated beneficiaries to receive income from a trust for your lifetime(s), or for a period of years not to exceed 20. At the end of that time, the balance of the trust is transferred to a charity that you have selected. You can take a charitable deduction for a portion of the gift you make to the trust in the year the trust is formed. (In some cases, additional funds may be added in later years.) The two most common types of charitable remainder trusts are annuity trusts and unitrusts, which differ in how the income you receive from the trust is calculated and distributed.

Charitable Lead Trusts: A charitable lead trust allows you to designate a charity to receive a regular, fixed amount from a trust for a specified time period or the lifetime of a designated person. At the end of that time period, the remainder of the trust passes to your designated heirs or other non-charitable beneficiaries.

For more information about planned giving options, please contact Serena Amerson, Associate Director of Development, at 757.961.2015 or