Types of planned gifts one-pager
For more in-depth conversations, or to offer something to ask a donor to pass along to tax advisors, consider a one-pager describing types of planned gifts. Below is sample copy.
Popular Types of Planned Gifts
Leaving a Bequest
If you’ve put together an estate plan with the help of an attorney, chances are, you’re familiar with the term “bequest.” A bequest is an instruction for assets or money to transfer to a person or charity following your death.
Here are ways you can leave a bequest to [ABC charity].
Will or trust
You can include a bequest to [ABC charity] in your will or revocable living trust (which is a vehicle you establish to avoid probate). You can leave a specific dollar amount, or a portion of the “remainder” of your estate or trust after distributions to family and other beneficiaries. You can update your will or trust anytime prior to your death.
Beneficiary designation
You can leave a bequest through a beneficiary designation on your IRA or other retirement plan, or even on a life insurance policy. Beneficiary designations can be updated throughout your lifetime as your family and financial situation changes.
Charitable Remainder Trust
A “charitable remainder trust” (sometimes referred to as a CRT) is a planned giving technique that allows you to make a future gift to [ABC charity] and be eligible for an up-front income tax deduction, and retain an income stream for life or for a period of years.
To establish a charitable remainder trust, you will work with your attorney to establish a trust agreement and also work with a person or entity who will serve as the trustee of the charitable remainder trust. Your local community foundation frequently works with donors to establish and serve as trustee of charitable remainder trusts to support [ABC charity] as well as a donor’s other favorite charities.
Your tax advisor will help you determine whether you could benefit from establishing a charitable remainder trust. Factors include:
Your plans to leave gifts to charity following your death to meet your charitable goals
Your income requirements while you are living
The types of assets you own and whether there is a particular highly-appreciated asset or assets (such as stock or real estate) that would make an ideal gift to a charitable remainder trust to reduce the capital gains tax exposure
Here’s how it works:
Your charitable remainder trust can name yourself or someone else to receive a potential income stream for a term of years, no more than 20, or for the life of one or more non-charitable beneficiaries (such as you and your spouse)
Your charitable remainder trust will name [ABC charity] to receive the remainder of the donated assets following the term of years or death of the income beneficiary or beneficiaries.
Your charitable remainder trust will establish the terms of the income stream received by the income beneficiary or beneficiaries.
A “charitable remainder annuity trust” (CRAT) distributes a fixed annuity amount each year. You cannot make additional contributions to a CRAT.
A “charitable remainder unitrust” (CRUTs), on the other hand, distributes a fixed percentage (at least 5%) based on the balance of the trust assets (revalued annually), and you can make additional contributions to the trust during your lifetime.
At the end of the income beneficiary’s lifetime, or at the end of the term for the income interest, the remaining trust assets are distributed to [ABC charity].
Charitable Gift Annuity
A charitable gift annuity is a planned giving vehicle that is a good fit if you like the idea of an up-front tax deduction, a steady lifetime income stream, and a remainder gift to charity. A charitable gift annuity (also referred to as a “CGA”) is similar to a charitable remainder trust, but often easier to establish, especially if you plan to set up a planned gift to [ABC charity] with $50,000 or less.
A CGA, like any other annuity, is a contract. You agree to make an irrevocable transfer of cash or assets to [ABC charity]. In return, our organization agrees to pay you (or a designated beneficiary such as a spouse) a fixed payment for life. You are eligible for an immediate income tax deduction for the present value of the future amount passing to charity.
How much income can you receive from a charitable gift annuity? That amount is determined according to national standards and it is based on “rate of return” assumptions that are revised from time to time based on what’s going on with interest rates. Talk with our team to learn more about payout rates and what you might expect if you establish a charitable gift annuity to support [ABC charity].
If you are over 70 ½, a charitable gift annuity might be particularly attractive. This is because a “Legacy IRA” rule allows for a once-in-a-lifetime, $50,000 distribution from an IRA to a charitable gift annuity or charitable remainder trust. Your tax advisor can help you understand the taxability of your income payments from a charitable gift annuity, whether you establish the charitable git annuity through a QCD, stock, or other assets.
Gifts of Stock
While technically not “planned giving” because a current gift is the result, giving closely-held stock or real estate to [ABC charity] requires a lot of careful planning. It’s well worth exploring, though, because these gifts of “complex assets” frequently result in strong tax benefits to you, as well as providing strong support to [ABC charity] and other organizations you care about.
In general, making a gift of highly-appreciated assets is a strong planning technique. When you contribute highly-appreciated stock in a public company, for example, to [ABC charity], you are typically eligible for an income tax deduction at the stock’s fair market value on the date of the gift. When [ABC charity] sells the stock, the organization pays no capital gains tax. By contrast, you would have paid capital gains tax on the sale of the stock if you had sold it first and then transferred the proceeds to charity. The same is true for gifts of highly-appreciated real estate and closely-held stock; frequently these assets have large unrealized capital gains.
If you are considering giving part (or all) of a closely-held business to charitable causes, please reach out. These transactions carry with them layers of complexity, largely around the timing of the charitable gifts in relation to the sale transaction. The best outcomes are achieved through a thoughtful, multi-step process. The team at [ABC Charity] is happy to work with you and your advisors to develop a plan to give your business to charity. Many successful closely-held exit transactions occur only after several years of planning—and most of that planning occurs well before potential buyers are even engaged. With the help of Your Community Foundation, we can work with you and your advisors to ensure that your charitable intentions–as well as you tax intentions–are met with your gifts of closely-held stock.
Gifts of Real Estate
If you own highly-appreciated residential, commercial, or undeveloped real estate, you may have reached the point where you no longer want to manage or maintain it. This is a perfect opportunity to discuss the option of giving real estate to [ABC Charity].
As with gifts of other long-term appreciated assets, your gift of real estate may fall into the category of a current gift, meaning you are transferring it during your lifetime. But it is still a gift that requires a lot of planning.
Your gift of highly-appreciated real estate can help you avoid capital gains taxes and generate more money for [ABC Charity] and other favorite charitable causes than you would have by selling the property first and donating the proceeds.
Remember that lifetime gifts of property held for more than one year are typically deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift. Not only does this help avoid capital gains tax, but it also reduces the value of your estate for Federal estate tax purposes if estate taxes are a concern. You can also use real estate to fund a charitable remainder trust.
At [ABC Charity], we understand that, unlike cash or even stock, real estate is often tied to strong emotions that might even surprise you when you start to discuss disposition. We can help you structure a gift to real estate so that you can extend the emotionally important, family-related dynamics that may have been linked to the property for generations, even after our organization sells the property and invests the proceeds or deploys the proceeds to fund our programs and missions.
Qualified Charitable Distributions
If you are aged 70 ½ or older, it is well worth your time to investigate whether a tool known as a Qualified Charitable Distribution might be right for you as a tax-savvy way to support [ABC Charity].
Here is how it works:
You can make a QCD if you have reached the age of 70½, and as such you can direct up to $100,000 annually from your traditional IRA to [ABC Charity]
If you’ve reached the age-73 threshold for IRS-mandated Required Minimum Distributions (RMDs) from qualified retirement plans, a QCD counts toward your RMD.
QCD transfers are not included in your taxable income.
QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws.
Life Insurance
You may want to consider giving a life insurance policy to [ABC Charity]. Here is how that works and why it may be beneficial for you to do so.
Giving a life insurance policy to a charitable organization through a beneficiary designation is useful because the proceeds of that policy will not be included in your taxable estate for Federal estate tax purposes if that is a concern in your situation.