Planned giving is the process of arranging a present contribution to take effect at a future date, through a will or trust. Planned giving is also referred to as gifting or legacy planning. Planned giving utilizes a combination of legal and tax strategies and financial products during the lifetime or at the death of a donor. There exist many different types of planned giving, the selection or combination of which is dependent on the charitable goals of the donor and the donor’s assets. 

Tools for Planned Giving

Gifts Made Upon Death of a Donor

Estate Plan Gifts

A donor may make a bequest to a beneficiary and/or charity in his or her Will or Living Trust within an estate plan.  A bequest can be an expressed dollar amount, a percentage amount, or a remainder amount of the donor’s estate designated in his or her Will or Living Trust.  The use of a charitable bequest in a donor’s estate plan allows the donor to leave a charitable legacy and reduce the donor’s estate tax. A donor may also make specific gifts of real estate or other tangible items, like artwork, vehicles or jewelry.

Beneficiary Designation Form Gifts

A donor may make a gift to a beneficiary and/or charity by naming the beneficiary and/or charity as the designated beneficiary of bank accounts, money market and investment funds, including retirement assets (including an IRA, 401K, 403b, pension or other tax deferred plan) or life insurance policy. If a life insurance policy is transferred to a charity, then the donor receives the benefit of an income tax deduction in the year the transfer is made. 

Gifts Made During the Lifetime of a Donor

Life Income Gifts

A life income gift allows a donor to give assets to a charity while providing the donor, the donor’s designated beneficiaries, or both, with income for a period of time before the charity is permitted use of the donor’s gift. To make a life income gift, the donor transfers assets to the charity and the charity manages the investment of the assets and pays the income to the donor and/or the donor’s designated beneficiaries for a designated period of time, or for life.  Different vehicles for life income gifts include Charitable Gift Annuities, Charitable Remainder Unitrusts, Charitable Remainder Annuity Trusts, and Pooled Income Funds.

Charitable Gift Annuity

A Charitable Gift Annuity is where a donor makes a current gift to a charity and the charity agrees by contract to pay the donor and/or his or her designated beneficiaries a fixed amount each year for life. When the donor and/or his or her designated beneficiaries pass away, any remainder of the initial gift is distributed to the charity and shall be used pursuant to the contract with the donor. This type of gift allows the donor and his or her beneficiaries, if any, to receive a fixed income for life and the donor benefits by receiving an immediate tax deduction, while achieving his or her charitable goals.

Charitable Remainder Trusts 

The donor creates an irrevocable trust from which the donor and/or his or her designated beneficiaries receive annual payments for a term of years or for life.  At the end of the term or the death of donor and or/his or her designated beneficiaries, the remainder of trust assets pass to the charity for the purposes the donor designated. There are two types of Charitable Remainder Trusts: a Charitable Remainder Annuity Trust and a Charitable Remainder Unitrust. The Charitable Remainder Annuity Trust provides a fixed payment to the donor and/or his or her designated beneficiaries pursuant to the trust instrument. Whereas, a Charitable Remainder Unitrust provides a fixed percentage of the trust value each year to the donor and/or his or her designated beneficiaries pursuant to the trust instrument, however the value of the unitrust is recalculated annually to determine the payment.  This type of deferred gifting is beneficial to the donor because they or their designated beneficiaries receive income for a period of time, or life, while supporting charitable causes. 

Charitable Lead Trust

A donor funds a Charitable Lead Trust and the trust makes payment to a charity for a specified time and at the end of that period, the remainder of the trust is distributed to donor’s designated beneficiaries, the upside of which is a potential of significant tax savings. 

Life Estate in Real Property

A donor may gift real property now to a beneficiary or charity and reserve a life estate in the property which will enable the donor the right to use the property for his or her lifetime and the property will pass to the beneficiary or charity at the donor’s death. 

Conclusion

Planned giving done correctly is mutually beneficial to the donor and their selected beneficiaries and charities, as estate and financial plans can provide significant tax savings and financial benefit to the donor while leaving a charitable legacy for his or her family and community. 

Contact your investment advisor, accountant our attorney to explore your planned giving options.  If you need further information, please contact Claudia Andersen, CEO at the Parasol Tahoe Community Foundation, at 775-298-0187.  

This Planned Giving Information is provided by Jamie Walker, Esq. of Alling & Jillson, Ltd.