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What is Planned Giving?
- A gift made after deliberate consideration through a financial or estate plan
- A gift that requires some type of legal documentation
- A gift made from assets, not current income
- A gift that has tax advantages under current law
- A gift that is arranged now to provide funds to Plan
Planned Giving is a donation method that helps you balance your personal financial goals and your charitable interests while realizing significant tax benefits. “Planned giving” is a term commonly used to describe a wide variety of giving vehicles that allow you to give to charity during your lifetime and/or after your death, while meeting your current income needs and providing for your heirs. Planned giving is typically done in conjunction with estate planning, and is a viable option for donors of all income levels. You may choose a particular type of gift that does not affect your current income or one that provides you an income in your lifetime. Alternatively, you can create an endowment fund and can name it after your family, or through modest payments of premiums now, you make possible a substantial future gift.
From a donor’s perspective, planned giving is attractive for many reasons. It may allow you to make larger gifts than you otherwise could out of your current assets. Depending on how a planned gift is set up, it may also let you receive a stream of income for life, earn higher investment yield, or reduce your capital gains or estate taxes. Planned gifts often appeal to people who want to benefit a charitable organization but aren’t certain how much of their assets they’ll need for themselves during their lifetimes.
There are various types of planned gifts are possible, ranging from a simple bequest in your will to various kinds of charitable trusts. With planned giving, donors can realize tangible tax benefits for themselves and their families as well as for IPA. Cash, real estate, stocks, bonds and other financial instruments are all avenues for a planned gift and its resulting tax savings. Donors are also able to fulfill their philanthropic goals by creating a legacy at IPA.
Donors can designate their planned gifts for workshops, educating the public on this neglected social phobia, or to expand research to name just a few. Alternatively, donors can leave their planned gifts as undesignated, which will afford IPA the flexibility to provide funding where the need is greatest.
The right type of planned gift will depend greatly on a donor’s personal situation and objectives. Accordingly, IPA and its experienced staff are committed to helping you discover the best gift planning solution that achieves all of your financial and charitable giving goals. Planned giving is a classic “win-win” situation for donors and IPA.
Most Popular and Simple Gift Planning Methods
1. You can give cash, appreciated securities, or real estate during your lifetime to IPA, either in one lump sum or, depending on the asset you wish to contribute, by pledging an amount over a number of years. Giving outright provides an immediate benefit and you can see your gift put immediately to good use.
2. You can make a testamentary gift through your Will or Revocable Living Trust. You can designate a percentage of your estate, a specific dollar amount, the rest and residue of your estate, or a combination of these options. This enables you to retain the use of all of your assets during your lifetime and make your gift when you no longer need those assets.
3. You can make IPA, the beneficiary of a life insurance policy or a qualified retirement plan such as an IRA, a 401(k) or a 403(b).
4. You can make a gift of cash, appreciated securities, or real estate to, or in exchange for, a life-income plan, such as a Charitable Gift Annuity, deferred payment Charitable Gift Annuity, or Charitable Remainder Trust. The significant benefit here is that you receive lifetime income, an income tax deduction, and capital gains savings (if applicable). After you pass away, the remaining assets are distributed to IPA for the benefit of IPA.
Bequest
What: A bequest is the most frequently utilized planned giving method in the United States. Simply stated, a charitable bequest provides for a distribution of cash or property to charity upon a donor’s passing. The charitable bequest provision is usually contained in or can be easily added to a donor’s Will or Revocable Living Trust.
- The three most common types of bequests are as follows:
- Specific dollar amount, e.g. $10,000,
- Specific asset, e.g. my Picasso painting, or
- A percentage of the estate, e.g. 10% of my residue estate.
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 car, home, art or jewelry. Others leave a paid life insurance policy or other financial investments, such as stocks, bonds or CDs.
These gifts may provide tax savings:
Charitable Gift Annuity (CGA)
What: 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.
Who: A CGA is excellent for donors who want a high, safe income stream that will last for the rest of their life, and for donors who have a significant tax liability in the current tax year.
Charitable Remainder Trust (CRT)
What: A CRT is a planned gift where a donor irrevocably transfers cash or property into a special type of tax-exempt trust. Donors will receive fixed or variable income for life, and a substantial income tax deduction. Because a CRT is exempt from income taxes, it can actually sell property tax-free.
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.
Who: A CRT is an excellent solution for charitably inclined donors who desire to sell an appreciated asset but do not want to pay capital gains tax. By transferring the property into a CRT, the trust may sell the contributed property and purchase new property without the payment of any capital gains tax. A CRT is also ideal for donors who desire additional retirement income and for donors who have a significant tax liability in the current tax year.
When the trust terminates, any remaining assets in the trust will pass to the UH Foundation for purposes designated by the donors.
Beneficiary Designations
What: An excellent way to make a planned gift is to name IPA as a beneficiary of certain types of “beneficiary designation” assets. For example, a donor may name IPA as a 20% beneficiary of her life insurance policy or IRA. By doing so, a donor quickly and easily creates a planned gift that will avoid probate, fulfill philanthropic goals, and potentially save significant income and estate tax.
Who: Many people own life insurance policies and qualified retirement plans, such as 401(k) plans, 403(b) plans and IRAs. In fact, these assets in most cases represent a significant portion of a person’s estate. Accordingly, prudent estate planning requires giving careful thought to the eventual distribution of these valuable assets.
Charitable Lead Trust (CLT)
What: A CLT is a planned gift in which a donor irrevocably transfers cash or property into a special type of trust for a set time period. During that period, the trust makes charitable distributions to IPA for purposes designated by the donor. Once the trust fulfills its charitable distributions, all of the trust assets plus any growth are returned to the donor and his/her family.
Who: A CLT is an excellent option for donors with large taxable estates. With proper planning, it is entirely possible and perfectly legal for a donor to transfer $1 million, $5 million, $10 million or even $100 million to his/her family with little or no gift and estate tax.
