Planned Giving Details
A will is a vital document that protects your family and those you care about. Bequests are provisions in your will or revocable living trust that designate how your assets will be distributed after your lifetime. Charitable bequests can eliminate or reduce federal estate taxes and they are one of the simplest and most flexible ways of giving. You have the option of naming Bernard Zell as the beneficiary of a fixed dollar amount or a percentage of your residuary estate.
Types of Bequests include:
- Cash Bequest: You may designate a specific sum of money be given to Bernard Zell in your will or trust.
- Residuary Bequest: In your will or trust, you may designate where the remainder of your estate will go after all other bequests, debts, and taxes have been paid. You can designate Bernard Zell as beneficiary of all or a portion of your residual estate.
- Specific Bequest: You may designate that a specific item, such as personal property (real estate, artwork, jewelry, a collection of stamps or coins, etc.) or a certain stock be given to Bernard Zell.
Real Estate or Business Interest
You may convey real estate to Bernard Zell either as an outright gift or by establishing a charitable remainder trust.
In the case of an outright gift, the property is transferred by deed to Bernard Zell and is subsequently sold. In the case of a trust, the property is transferred by deed to the trust and the trustee then sells the property and uses the proceeds to pay income to the beneficiaries.
In you make an outright gift, you receive a current income-tax charitable deduction based on the appraised fair market value of the property and you avoid any income tax on the capital gain.
Charitable Remainder Trusts:
With a charitable remainder trust, you will also avoid tax on capital gain and, as an income beneficiary, you will receive annual income from the trust that is based on the proceeds of the sale of the property. When the trust is established, a current income tax charitable deduction based on the present value of the remainder interest to Bernard Zell will result.
Fractional Interests in Real Estate:
It is possible to convey a fractional interest in real estate (such as a vacation home) to Bernard Zell, thereby allowing you to retain use of the property for a portion of each year. This generates an income-tax charitable deduction equal to the contributed fractional interest of the fair market value of the property, while guaranteeing the enjoyment of the property for the portion of the year for which you retain the right to use it.
You can designate Bernard Zell as a beneficiary of all or a portion of a life insurance policy that has served its original purpose. Many find this enables them to make a larger charitable gift than otherwise possible. Your estate may receive a charitable estate tax deduction for the amount of the insurance received by Bernard Zell.
Another option is to name Bernard Zell as the beneficiary and owner of certain types of insurance policies. Designating Bernard Zell as the owner of the policy may entitle you to an immediate income tax deduction. Additional premium payments you make may also be deductible as a charitable contribution.
Charitable Gift Annuity
The charitable gift annuity (CGA) is a simple form of life-income gift that will pay you and/or someone you choose a fixed income, part of which may be tax-free. In addition, you will receive an income-tax charitable deduction for a portion of your gift and a potential reduction in gift and estate taxes. Best of all, your gift will ultimately support Bernard Zell’s Permanent Endowment Fund after your lifetime.
A charitable gift annuity may be structured as either a one-life gift annuity, in which you or your designated beneficiary receive the income for life, or as a two-life gift annuity that provides income to you and another beneficiary, such as your spouse, for as long as you are living.
The annuity rate which you, or you and your spouse/beneficiary, will receive is calculated based upon your age(s) at the time of the gift. The older you are, the higher the annuity rate you will receive.
You will be entitled to claim a charitable deduction on your income taxes in the year you establish a charitable gift annuity. The amount of your deduction is the present value of the charitable portion of your gift, determined by your age(s), the payout you will receive, and the federal discount rate in effect at the time you make your gift. A charitable gift annuity may be established by making an irrevocable gift of cash or appreciated securities (in limited circumstances, other assets may be utilized). If you use securities, you may considerably reduce your capital gains tax liability.
Upon termination of the charitable gift annuity, the remaining principal will be used to support Bernard Zell’s Permanent Endowment Fund or another specified purpose you may have designated.
Retirement Plan Assets
Many people may think they can’t afford to be charitable during their lives. But with the creative use of excess retirement assets, they’re often able to contribute philanthropically as well as provide for heirs. Additionally, Bernard Zell may help preserve—or perhaps even increase—the amount of remaining assets available for heirs.
As a holder of traditional IRAs, 401(k)s, or other qualified retirement plans, you may not realize that you can leave your non-spousal heirs only a small portion of the remaining retirement monies after taxes. You have not yet paid income taxes on these monies; therefore, just as IRA withdrawals are taxed during your lifetime, the remaining monies will also be taxed before they are passed to your non-spousal heirs. However, in addition to income taxes, there may be estate taxes and possibly generation-skipping taxes also due on these inherited assets. In the end, as much as 65% of your retirement monies may be depleted in taxes.
Upon reaching retirement, some people have found that they no longer need their IRA assets to maintain their lifestyles. Others have also seen their retirement accounts grow with remarkable returns. They watch their stock-invested IRAs grow faster than they can or want to use them, even with market volatility. As a result, these assets continue appreciating well into retirement years, and many individuals may find they have in excess of a half-million dollars of unused IRAs. Finally, few have focused attention on the effect of the significant combined taxes associated with leaving any unused portion of these assets to their heirs. To maximize the use of the remaining portion of these assets, here are three charitable approaches to consider:
- Beneficiary Designation. Name Bernard Zell as the beneficiary of excess or unused retirement assets after your (and/or your spouse’s) lifetime. Consider leaving heirs assets less heavily taxed than traditional retirement funds.
- Charitable Remainder Trust after Your Lifetime. Create a charitable remainder trust through your will, naming the trust as the ultimate beneficiary of excess or unused retirement assets. The trust can provide income to your heirs for a period of years after your lifetime, and then the trust monies can fund charitable endeavors. Since it is a charitable trust, there is more money available to generate income for heirs. At the end of the trust’s term, the remaining assets are distributed to Bernard Zell to support its mission.
- Charitable Remainder Trust during Your Lifetime. Create a charitable remainder trust during your lifetime, funding it with excess retirement or other assets. The lifetime benefits of the trust may relieve some of the tax burden associated with the withdrawal of these assets to fund the remainder trust.
Charitable Remainder Trust
You establish a charitable remainder trust by making an irrevocable transfer of assets (cash, stocks, bonds or real estate, in most cases) to a trust. The trustee may be a financial institution or an individual of your choice. When you contribute appreciated property to fund the trust, you avoid any initial income tax on the capital gain. The trustee may sell the assets and reinvest the proceeds in a portfolio of stocks and bonds. You and/or a designated beneficiary receive an income for life, after which the trustee distributes the remaining assets to Bernard Zell and any other charities you have designated. You have the choice of setting up an annuity trust, which pays a fixed income, or a unitrust, which pays variable income based on a fixed percentage.
The charitable remainder annuity trust is a way to avoid the fluctuation in interest rates and ensure fixed income for life. This trust agreement locks in a fixed annuity rate, and donors or their designated beneficiaries receive regular annuity payments for life or a period of time not to exceed 20 years. The contributed property is received by the trust at its fair market value, and the annuity rate is multiplied by this value to calculate the periodic payments to the income beneficiaries. In addition, you are entitled to a current income-tax charitable deduction based on the present value of the remainder interest to Bernard Zell.
The other type of charitable remainder trust, referred to as a unitrust, may be used to provide a variable payment, based upon a fixed rate multiplied by the value of the assets in the trust, as recalculated each year. In an inflationary period, when trust assets grow, the increasing value of the trust portfolio will result in larger annual payouts.