PLANNED GIVING
What is Planned
Giving?
"Planned
Giving" is the name commonly associated with estate planning
techniques that provide a gift for a college, university or charitable
organization. Planned giving is more than merely writing a check to the
institution. Usually, there is a careful and deliberate thought process
involved, as well as the creation of legal documents, all designed to
accomplish several major goals. Some of these goals typically are:
-
Make an impact on
the institution
-
Honor the memory
of a loved one
-
Achieve a
charitable income tax deduction
-
Obtain federal
estate tax savings
There are many different
techniques for planned giving. The most common methods are:
Bequest
in a Last Will & Testament
The concept of a Will is
quite simple. It is a set of instructions directing how the property of
the person who makes the Will (the "testator") is to be
distributed, and who is in charge of paying the obligations of the
testator and then distributing the assets. A bequest is a gift made in a
Will. Because the Will does not become effective until the death of the
testator, the bequest does not become effective until the testator’s
death.
For more information,
click
here.
Charitable
remainder annuity trusts
A charitable remainder
annuity trust is a vehicle to make a gift while receiving a fixed income
for a fixed period of time and obtaining a charitable tax deduction. To
establish a charitable remainder annuity trust, you irrevocably transfer
certain assets such as cash, securities, or real property.
For more information,
click
here.
Charitable
remainder unitrusts
A charitable remainder
unitrust is similar to a charitable remainder annuity trust. You
irrevocably transfer certain assets such as cash, securities, or real
property. Instead of receiving a fixed income, you receive a fixed
percentage of the net fair market value of the trust's assets as
revalued each year. In other words, when your unitrust increases in
value, your income payment will increase; when the unitrust decreases,
so will your income.
For more information,
click
here.
Charitable
lead trusts
Charitable lead trusts
are the reverse of charitable remainder trusts in that a stream of
income is first paid to the beneficiary for a term of years, after which
the property goes back to the donor or passes to another non-charitable
beneficiary chosen by the donor.
The stream of income that
flows to the beneficiary is either a fixed amount, or a variable
percentage of the trust property, as revalued annually. You are entitled
to a charitable tax deduction if you continue to be taxed on the income
to the beneficiary.
Many people use a
charitable lead trust to reduce or eliminate gift tax cost of
transferring wealth to children or grandchildren and to give appreciated
property to heirs without further gift or estate tax liability. A
charitable lead trust can be established during your lifetime or by your
will.
For more information,
click
here.
Gifts
of annuities
An annuity is an
agreement to make periodic payments, other than life insurance, where
the making or continuance of all or of some of a series of such
payments, or the amount of any such payment, is dependent upon the
continuance of human life.
For more information,
click
here.
Gifts
of cash
The simplest way to give
to an organization is to write a check. Your gift may usually be
designated for a specific area of the institution. Unless the gift is
unrestricted, be sure to indicate the purpose of your gift on the check
or in a cover letter.
Gifts
of life insurance
Naming an institution as
owner and beneficiary of an existing paid-up policy entitles you to a
deduction equal to your cost basis in the policy, or its replacement
cost - whichever is less. Naming an institution as owner and beneficiary
of an existing policy that is not paid up provides you with a tax
deduction approximately equal to the policy's cash surrender value.
You also may purchase a
new policy and name the institution as owner and beneficiary. By
donating the money required for the premium payments directly to the
institution, you receive a full tax deduction on these annual gifts.
For more information,
click
here.
Gifts
of real estate
A gift of real estate may
provide you with a charitable deduction for the full fair market value
of the gift, up to 30 percent of your adjusted gross income - if you
have held it for more than one year - with the usual five-year
carry-over. You are not subject to capital gains tax on the appreciated
value of the property.
As with a gift of
personal property, you will need to have your gift appraised by an
independent certified appraiser to determine the value of your
deduction. Gifts of mortgaged real estate are reduced by the amount of
any debt, and have additional tax consequences.
You may give your home to
a charitable institution and you can continue to live in it until your
death. Because you transfer ownership of the property (actually the
"remainder" interest, reserving to yourself a "life
estate"), you receive an immediate charitable income tax deduction,
with the usual 30 percent limitation and five-year carry-over. The
amount of your deduction is based on the value of the future interest in
the property. Though you benefit from the charitable deduction, in most
cases you continue to be responsible for maintenance, insurance and
property taxes.
For more information,
click
here.
Gifts
of securities
Giving stocks and bonds
that have increased in value (and that you have owned for more than one
year) provides greater tax benefits than giving cash. Not only can you
deduct the full market value of the securities, but you can avoid paying
capital gains tax on the appreciation.
For more information,
click
here.
Gifts of tangible personal property
Items such as artwork,
rare books, equipment, antique furniture, musical instruments, etc. also
make appropriate gifts to institutions that are prepared to accept such
gifts. Gifts of tangible personal property usually entitle you to a
deduction of the property's full fair market value - up to 30 percent of
your adjusted gross income - as long as the project is related to the
institution’s charitable purpose and you have owned the item for more
than one year. You must have your gift appraised by an independent
appraiser to determine the value of your deduction. You may also give
personal property that is un-related to the institution’s charitable
purpose. In this case, your deduction is limited. Be sure to consult
with the institution before obtaining an appraisal or making the gift.
Estate
Planning Links
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about Estate Planning, see our
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Planning Links.
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