Options For Giving
UNDERSTAND YOUR OPTIONS. THERE ARE SEVERAL TO CHOOSE FROM.
For any donor, in addition to the satisfaction that comes from contributing to the future of his or her favorite community organization or program, there may also be significant tax and estate planning benefits.
Gift of Assets
Cash
Cash, checks, and money orders mailed before the end of the year will enable you, if you itemize, to take an income tax deduction for that year. Gifts of cash are deductible up to 50% of your adjusted gross income. A pledge to make a gift, however, may only be deductible in the year the pledge payment is made.
Securities
Long-term appreciated securities are those that you have owned (1) for more than one year, and (2) have increased in value. If you itemize your deductions, such a gift would entitle you to a income tax deduction for the full fair market value of the securities on the date of the gift, up to a maximum deduction of 30% of your adjusted gross income for the year.
Property
For both gifts of cash and appreciated property, contributions in excess of the deduction limitations may be carried over and deducted in the five tax years following the gift.
If you wish to make a gift of real estate, the charitable organization will weigh the property’s potential value and determine whether a plan can be devised to maximize that property’s potential. In considering whether to accept a gift of real estate, most charities must determine if the property is marketable so that it can be sold, or whether it should be kept as an investment. Other factors, such as environmental concerns or clouds on the title to the property, may have to be dealt with before the charitable organization agrees to accept a deed.
Gifts of personal property, such as works of art, furniture, equipment or collections, must be used by the non-profit agency for a purpose related to its charitable mission. For tax purposes, the date of the gift is the date of the physical delivery of the item to the non-profit agency, and the value is the item’s fair market value on that date as determined by a competent appraiser.
Life Insurance
A gift of life insurance may allow you to make a sizable gift at relatively low cost. To make such a gift, you would name the charitable organization as an irrevocable beneficiary of your life insurance policy, then deliver and assign ownership of the policy over to the non-profit agency. Gifts of paid-up life insurance policies in particular offer estate planning possibilities. In addition, the non-profit agency may be designated as a secondary or contingent beneficiary of a policy if the donor wishes to keep control of the policy during their lifetime.
Life Income Gifts
Suppose you wish to make a substantial gift for the benefit of your favorite charitable organization, but you still wish to receive some income for the property. You might consider a charitable trust in which you irrevocably transfer cash or property to a trustee. The trustee in turn will distribute a certain percentage or amount of the annual income available from the assets back to you or another named beneficiary. Those payments can continue for your life, or for a specified term of years. The remainder interest in the property would then pass to the charitable organization. You would be entitled to an income tax deduction for the value of that charitable remainder interest, based on the number and ages of the life income beneficiaries and the percentage of income payments you and the trustee agreed upon.
Charitable Remainder Annuity Trust
There are several forms a charitable trust can take. Charitable remainder annuity trusts provide that a specific dollar amount (at least 5% of the fair market value of the assets at the time the trust i s created) be paid at least annually to the beneficiary for their lifetime or for a term of years, not to exceed 20 years.
Charitable Remainder Unitrust
Charitable remainder unitrusts provide that a fixed percentage (at least 5% of the fair market value of the assets in the trust as computed each year) be paid to the beneficiaries at least annually. In a unitrust however, the amount paid to the beneficiaries will vary on a yearly basis according to the annual reevaluation of the trust principal.
Pooled Income Fund
Pooled income funds are trusts into which two or more donors irrevocable transfer property, contributing their remainder interest in the asset to the charitable organization. Each donor retains an interest in the annual proceeds based upon the proportionate share of assets that he or she has contributed to the total fund.
Charitable Lead Trust
Unlike the trusts previously described, the charitable lead trust provides income – either a percentage or a specified amount – to the charitable organization for a specific number of years. At the termination of this period, the principal is returned to the donor or to the donor’s heirs. Under one type of charitable lead trust, the donor includes the income in their taxable income, but are entitled to a corresponding charitable deduction, if they itemize, of the amount of income paid to the non-profit agency in that year.
Charitable Gift Annuity
Charitable gift annuities are similar to charitable remainder trusts in that the donor makes an irrevocable gift to the charitable organization in exchange for life income payments. A charitable gift annuity, however, is a contract between the donor and the organization, under which the charitable organization guarantees payment of the annuity, unlike a trust that pays the annuity from its assets alone. One feature in particular make charitable gift annuities appealing: the donor may specify whether an immediate annuity is to be paid out or whether a deferred payment schedule will begin, at a specified future date, at least one year from the date of the gift.
Wealth Replacement
Wealth replacement uses life insurance on the donor’s life to replace the assets invested in a Charitable Remainder Trust (which will ultimately go to charity). Typically, the life insurance policy is owned by an irrevocable life insurance trust (ILIT), and the ILIT pays the premiums with cash gifts from the donor. To fund these cash gifts for the life insurance premiums, the donor can use either or both the CRT income or the tax savings from the income tax deduction.
Other Options
Real Property Subject to a Life Estate
Under an agreement to donate real property subject to a life estate, the donor may transfer a personal residence or farm to the charitable organization, while retaining the right to use the property for the remainder of their life. The donor is entitled to a federal income tax deduction for the fair market value of the remainder interest in the property at the time it is transferred to the non-profit agency.
Bequests
A bequest is a very simple and an uncomplicated way to help provide for the future charitable programs that are of special interest to the donor. A bequest may be of a specific sum, a percentage of the donor’s estate, or the residue of the estate. A bequest may consist of cash, securities, life insurance proceeds, real estate or other property. A bequest may be made through a will or through a living trust, and should be directed as follows: To the [charitable organization], a not-for-profit corporation with its principal offices located in [city], [state] for the use and benefit of the charitable organization as defined herein [specify use] or [for the general use and purposes of the charitable organization.
A bequest, or a gift made through your will or living trust, is one of the simplest ways to make a gift to the Charity. When you make your bequest, you may designate it for a specific purpose, such as research, or leave it undesignated. There are several ways to make a bequest:
- Specific: The Charity is the direct beneficiary of a stated amount of money or a particular piece of property.
- Percentage: The Charity receives a certain percentage of your estate as designated by you.
- Residuary: The Charity receives all or a portion of the remainder of your estate once specific gifts to family and others are fulfilled.
- Contingent: The Charity receives your assets in case your named individual beneficiaries do not survive you.
- Restricted: You may restrict your gift for a specific area of work, such as research, programs, etc. There are also “naming opportunities” for larger gifts. Please call to discuss these specific options.
- Life Income for Heirs: Any of our life income gifts can be arranged through your will or living trust to benefit your loved ones. Your estate will receive a partial tax deduction, and you will help your heirs as well as the Charity.
Bequests to the Charity are deductible from your gross estate and can offer estate tax savings. There is no limit on the amount you can leave to the Foundation in your will. If you make a bequest, we would be honored to recognize you and express our appreciation for your gift.
Estate, Financial and Philanthropic Planning
Estate planning is the process of working out, with an attorney, accountant, trust officer or other tax adviser, an orderly and desirable arrangement for the disposition of the donor’s estate. The primary objective in any plan should be the fulfillment of the donor’s wishes regarding the security of their family and others that they wish to benefit. Although tax consequences are secondary, they are an important part of estate planning and are often directly related to the accomplishment of the donor’s primary goals.
A well-drafted estate plan may provide benefits to the donor and the donor’s family, but also make it possible for a substantial gift to a charitable organization at a relatively small cost to the donor or the donor’s estate. The importance of working with qualified professionals in estate planning for drafting a will or establishing a trust cannot be over emphasized. Whenever desired, qualified professionals associated with the Leave A Legacy® San Antonio ads can be available to assist the donor, the donor’s counsel or other adviser, or the charitable organization, to insure that all gift arrangements carry out the wishes of the donor.
Apply for Membership
The Partnership for Philanthropic Planning San Antonio is a dynamic group of non-profit planned giving professionals from academic, health care, religious, social and cultural institutions working with a variety of allied professionals including attorneys, accountants, trust officers, financial planners, insurance representatives and planned giving consultants.
While joint membership in the PPPSA and the Partnership for Philanthropic Planning is encouraged, non-profit and allied professionals may join only the PPPSA and receive all the benefits of the local organization.
If you have questions about PPPSA membership, contact Vice President/Membership David Boggan.
(Leave PPPSA and go to PPP national website)
Download and read the Partnership for Philanthropic Planning San Antonio's Bylaws
