|
Planned gifts are rarely spontaneous. They require thought and careful planning on the part of the donor before they are made. They are typically one of the largest charitable gifts ever made by the donor, motivated by emotional connection and a deep commitment to an organization, its mission and those served by the organization. Planned gifts are popular because they can provide valuable tax benefits and/or income for life.
Examples of planned gifts include bequests, trusts, and charitable gift annuities. Whether a donor uses cash or other assets, such as securities, mutual funds, real estate, life insurance, retirement assets, or other interests and properties, the benefits of funding a planned gift can make this type of charitable giving very attractive to both the donor and charity. With the assistance of a well-informed development officer and a financial advisor, anyone can craft a planned gift to meet his or her charitable and financial goals.
The School for Social Work collaborates with the college’s Office of Planned Gifts and Bequests. General information on planned giving follows; for detailed information, the latest annuity rates and a planned giving calculator, please visit the college’s main website on planned giving.
Potential Benefits of Planned Gifts
Although a donor may want to make a significant donation to a favorite charity, the importance of maintaining financial stability and economic freedom to live comfortably in retirement are critical factors in determining whether or not to make a planned gift and, if so, what kind of a planned gift.
Some benefits in the decision-making process to consider are:
• Ability to set aside supplemental retirement income during working years;
• Increase current income for the donor or others;
• Pass assets to family at a reduced tax cost;
• Reduce the donor's income tax;
• Avoid capital gains tax;
• Diversify heavily concentrated securities;
• Provide a stream of income for an elderly or disabled loved one;
• Dispose of assets that require special management or are hard to sell; and
• Facilitate the transfer of a closely held corporation to children
VariousTypes of Planned Gifts ~ Simplified Explanation
Bequest - When a donor leaves assets to charity via a will, it is called a bequest. The donor's estate will receive a charitable estate tax deduction upon death at which time the gift is transferred to the charity. For suggested wording on how to designate the School for Social Work in a bequest, click here.
Gift Annuity - A gift annuity is a simple contract between a charity and a donor. In return for a donation of cash or other assets, the charity agrees to make a fixed payment for life to the donor or a designee of the donor's choosing. The donor may claim a charitable tax deduction for a portion of the gift.
Income from a gift annuity can be deferred for a period of years. Deferred gift annuities are often set up by younger donors to supplement retirement income. A flexible gift annuity gives the income recipient the option of when to commence annuity payments within a range of years specified in the contract.
Pooled Income Fund - The gift is pooled with gifts from many other donors in a professionally managed fund. Each income recipient receives a proportionate share of the fund’s annual income for life. The income varies depending on how much the fund earns and the number of shares the donor holds in the pool. For making a gift to a pooled fund, a donor receives a charitable income tax deduction and will not have to pay capital gains tax if the gift is of appreciated property. When an income beneficiary dies, the charity receives the donor's portion of the fund.
Charitable Remainder Trust – Unlike a charitable gift annuity, a charitable remainder trust constitutes a separate legal entity that must file its own income tax return annually. The trust makes periodic payments for life or a period of years to designated income recipients. These payments may be fixed (annuity trust) or variable (unitrust). At the end of the trust term, the charity receives the remaining balance of the trust assets.
Charitable Lead Trust –A charitable lead trust is the opposite of a charitable remainder trust: it makes periodic payments to charity during its term, with the remainder reverting to the donor or his or her heirs. Lead trusts are typically used to pass assets to heirs with reduced gift or estate tax costs.
Retained Life Estate - A donor may make a gift of his personal residence or farm to charity and retain the right to live there for the remainder of his or her life. The donor receives an immediate income tax deduction for the gift. At the donor's death, the charity can use or sell the property.
For More Information
To learn more about Planned Gifts through Smith, please contact:
Office of Planned Gifts and Bequests
(800) 241-2056 (option 5) or (413) 585-2035
(413) 585-4677 fax
planned_giving@smith.edu
Revised 4/2/09. |
