What is Planned Giving (Estate Planning)?
In general, planned giving can refer to any gift other than cash. More specifically planned giving usually refers to estate gifts.
A planned gift can be as simple as a charitable bequest (a gift through a will) or as complex as trusts that convert real estate or other tangible assets into lifetime income to the donor with a remainder gift to the nonprofit organization; such as Riverfront.
Planned Giving Vehicles
There are numerous planned giving options. The following are brief descriptions of the most typical forms of planned gifts.
Bequests
The definition of charitable bequests is as simple as it sounds: to include a provision in one’s will, estate plan or living trust that allocates funds or assets to a designated not-for-profit organization; such as Riverfront Foundation.
Click here for examples of bequests.
Securities
Donating stocks, bonds, or mutual fund shares are a great gift as they are a tax free gift to Riverfront and they provide an income tax deduction for the donor.
Individual Retirement Accounts (IRAs) and Pension Plans
Legacy gifts from IRAs or pension plans are very similar to bequests. To create a legacy gift through one’s IRA or pension plan, an individual needs only to list Riverfront Foundation on the beneficiary designation form used by the plan administrator.
Life Insurance
There are many ways in which a donor can benefit Riverfront with life insurance. Naming us as one of the beneficiaries of a life insurance policy is the simplest method. A donor may also transfer ownership of a paid-up policy. A charitable income tax deduction may be available when transferring ownership to Riverfront Foundation for the lesser of the cash value or premiums paid.
Life Estates
A Life Estate is a gift of one’s personal residence or farm to an organization while retaining the right to live on the property. Income, gift and estate tax benefits accrue to the donor from such a gift, assuming the gift is irrevocable.
Life Income Gifts
When most people think about planned giving, they frequently think about life income gifts. These gift arrangements generally offer the most intriguing gift options. All versions of life income gifts combine personal and tax planning advantages with a charitable legacy. Life income gifts generally involve the following:
Commonly Utilized Life Income Vehicles
Charitable Remainder Trust
A charitable remainder trust is established when a donor irrevocably contributes cash, securities or other property to a trust paying an income stream to one or two designated individuals for life or for a term of years up to 20 years. The remainder assets are then distributed to the nonprofit. There are various ways to determine the income stream. A charitable remainder annuity trust provides a fixed annual payment amount to the income beneficiaries either for their lives or for a fixed term of years. A charitable remainder unitrust pays out a fixed percentage of the trust value each year.
Charitable Lead Trusts
The most complex and sophisticated of planned gift options are charitable lead trusts. These planned giving vehicles are the opposite of life income vehicles. The payment stream from a lead trust is directed first to the nonprofit(s) during the trust term. The remainder is then distributed to children or other family beneficiaries. The primary reason for donors to use a lead trust is to reduce estate and gifts taxes on inter generational transfers. It is important to note that Lead Trusts are not utilized by donors to receive charitable income tax deductions or the avoidance of capital gains tax. These trusts are primarily an estate planning tool and individuals interested in this giving option must work with their own estate planning professionals.
Tangible Property
Gifts of tangible property, such as art or collectibles, can be among the most challenging gifts. The rules for donors to receive a full fair market value income tax deduction should be understood by the donors, their financial advisors and the recipient nonprofits. The general rule is that all gifts of tangible personal property to nonprofits do not qualify for a standard fair market value deduction. Rather, it is the cost basis, or original purchase price, that is usually the only deductible portion of these gifts. There is an exception, however, when there is a reasonable expectation that the recipient nonprofit will actually make use of the property in a manner consistent with its exempt purpose. An example would be a museum receiving a work of art which it plans to display. This related use qualifies the gift for a fair market value income tax deduction. Another challenge for donors of tangible property is the appraisal requirement. Gift property that exceeds $5,000 in value requires a qualified appraisal. A qualified appraisal is one that is prepared by a qualified person who holds himself or herself out to the public as an appraiser for items similar to those gifted.
Caveat
As with all legal and tax planning questions, competent counsel should be consulted prior to engaging in specific gift arrangements. Donors should also be strongly encouraged to seek independent counsel on any complex gift or estate planning matters. The information provided herein is for educational purposes only.
If you are considering a planned gift or including Riverfront Foundation in your will and want more information, please contact Jackie Jensen-Utz at (608) 784-9450, toll-free at (800) 949-7380 or at jackie.jensen-utz@riverfrontinc.org.
We at Riverfront are very thankful and appreciative to all our friends and supporters. We are especially grateful to those who have considered it fitting to make a provision in their estate plans to support our mission. Thank you!
Riverfront Foundation 3000 South Avenue La Crosse, WI 54601 Phone: (608) 784-9450 Toll-free: (800) 949-7380
