A properly planned gift may help you reduce or eliminate capital gains and gift and estate taxes, while making a huge impact at The Woods. You may realize immediate tax savings, as well.
- Life income gifts, such as trusts and annuities, can provide you and/or your loved ones with an income for the duration of your lives or for a specific number of years.
- Real estate, tangible property, and securities can be turned into gifts with immediate tax benefits.
- Bequests and other testamentary gift plans can allow you to make a more substantial gift than you imagined possible.
Life Income Gifts
Trusts and annuities are life income gifts that serve a dual purpose: They provide philanthropic support for The Woods while also providing both a charitable income tax deduction and an income stream to you and/or your loved ones.
These gift vehicles can provide income benefits comparable to—or in some cases exceeding—those that might be earned in non-charitable vehicles. Many donors establish life income gifts with assets that are producing a very small amount of income, such as cash or appreciated stocks that do not earn dividends.
SMWC offers three basic types of life income gifts:
- A Charitable Gift Annuity (CGA) provides a fixed income for life. (gifts of $50,000+)
- A Charitable Remainder Unitrust (CRUT) makes payments that fluctuate with the market and therefore may provide a hedge against inflation. (gifts of $100,000+)
- A Charitable Remainder Annuity Trust (CRAT) provides a fixed income like a gift annuity, but the tax treatment of the payout may be preferable for donors giving highly appreciated assets. (gifts of $100,000+)
A charitable gift annuity is an agreement between you and SMWC in exchange for your charitable gift, which SMWC agrees to pay you and/or your loved ones a fixed annuity for life. The size of the payment is determined at the time the gift is made and will not fluctuate with the market. SMWC issues gift annuities in amounts of $50,000 and greater.
Donors who choose to defer income for a period of years can take a larger immediate income tax deduction and will receive a higher payout once payments begin. “Deferred payment” gift annuities and “flexible starting date” gift annuities can be great retirement planning tools for younger donors.
You receive an immediate income tax deduction for a portion of the gift, and this deduction can be used over as many as six consecutive tax years. If your gift is funded with appreciated assets, you can also reduce your capital gains liability. Upon establishing the annuity, you get to decide what program area at the College the annuity assets will ultimately support.
A charitable remainder unitrust provides an income based on a percentage of the fair market value of the trust assets as determined annually. Because unitrust payments fluctuate with the market, this form of life income gift may provide a hedge against inflation, and are revalued at the start of each calendar year. If the value of the trust principal increases, so does your income. You can establish a unitrust with a gift $100,000 or more.
Unitrusts offer many opportunities to address specific financial goals and situations. You might find a unitrust to be an attractive way to convert appreciated, low-yielding assets into a high-yielding diversified portfolio without incurring capital gains tax.
When you establish a charitable remainder unitrust, you decide what the trust assets will ultimately support at SMWC. You receive an immediate income tax deduction for a portion of the gift, and this deduction can be used over as many as six consecutive tax years. If your gift is funded with appreciated assets, you can also reduce your capital gains liability.
A charitable remainder annuity trust will provide a fixed payment to you and/or your loved ones for life or for a specific number of years. The size of the payment is determined at the time the gift is made. Donors seeking a higher payout will receive a lower current tax deduction and vice versa (within certain limits). SMWC establishes annuity trusts in amounts of $100,000 and greater.
If you are interested in making a gift that yields a fixed income, SWMC can help you determine whether a charitable remainder annuity trust or a charitable gift annuity is a better fit for your particular situation. In general, a charitable remainder annuity trust may provide a more favorable tax treatment than a gift annuity if you are using highly appreciated assets.
When you establish an annuity trust, you decide how the remaining trust assets will ultimately be utilized at SMWC. You receive an immediate income tax deduction for a portion of the gift, and this deduction can be used over as many as six consecutive tax years. If your gift is funded with appreciated assets, you can also reduce your capital gains liability.
Real Estate, Tangible Property and Securities
Gifts of Real Estate
A gift of real estate may be a principal residence or vacation home, a farm, a commercial building, a lot, or unimproved land. The gift may be the entire property or a fractional interest in the property. You can claim a charitable tax deduction for the full fair market value of the real estate and avoid capital gains taxes on the appreciation. All gifts of real estate are subject to SMWC’s gift acceptance policy (contact our team for more information.)
You may generate a current income tax deduction by giving a home, farm or vacation property, while retaining the right to use the property during your lifetime. The property will also be removed from your taxable estate. Contact SMWC to discuss this gift opportunity in more detail.
Some gifts require appraisal or advance approval in order to be accepted. Examples of gifts of property include horses, rare books, art works, computer hardware and software, equipment and furniture. If property has been held for more than a year and can be put to a use related to the “charitable purpose” of the College, you may be eligible for a deduction based on the asset’s full fair market value. Contact SMWC to discuss this your gift options.
Gifts of Securities
Gifts of appreciated stocks, bonds, or mutual funds held for more than one year can provide special tax advantages. You can claim a charitable tax deduction for the full fair market value of the securities donated to SMWC avoid paying capital gains taxes on the appreciation. For gifts of publicly traded securities, the deduction is determined by taking the average of the high and low trading prices of the security on the date of the gift (or the nearest trading date(s)). Securities held for less than one year may also be donated, but the deduction is limited to the lesser of cost basis or fair market value.
Closely held stock, S corporation stock, limited liability company interests, and partnership interests can sometimes be used to make a charitable gift. Any proposed gift of such assets should be reviewed with SMWC and your tax advisors in advance.
To make a transfer of securities, please contact, or have your broker contact, the Advancement Office at (888) 769-0013 or (812) 535-5270. The College’s broker information for electronic transfer of gifts of securities is:
First Financial Bank, Terre Haute, IN
Carol Myers, Trust Officer
(812) 238-6218 or (800) 511-0045 x6218 (toll free)
SMWC DTC # 901
AGENT BANK 80901
INSTITUTIONAL ID 23558
INTERNAL ACCT # 116227*
SMWC ACCT # 8429
Please include a memo stating from whom (i.e., Jane Doe, Class of 1965) the stock is transferred and that it is for the benefit of Saint Mary-of-the-Woods College.
If you make a gift of real estate, tangible public property, or non-publicly traded securities, you will need to complete IRS Form 8283 for your personal income tax return.
Gifts by Will or Revocable “Living” Trust
The most common form of deferred gift to support SMWC is a bequest contained in a person’s will or revocable (living) trust.
Example of how you might word your bequest to SMWC:
I give, devise and bequeath to Saint Mary-of-the-Woods College, a qualified 501(c)(3) charitable organization located in Saint Mary of the Woods, IN, _____ percent of my residual estate (or a specific bequest of $__________, or other personal or real property appropriately described) for (a specific scholarship, program or unrestricted use), to be used in accordance with the terms of the most recent written directive I have signed with the College, and, if none exists, to be used as directed by the (e.g. President) at Saint Mary-of-the-Woods College.
Please let us know if you have included SMWC in your estate plans. Contact our team to have a conversation about leaving a legacy at The Woods.
Other Testamentary Plans
Gifts of Retirement Plans
Naming SMWC as a primary or contingent beneficiary of a retirement plan (e.g. IRA, SEP, 401(k), 403 (b), ESOP, etc.) may enable you to make a larger gift than you anticipated because income and estate taxes are not imposed when plan assets are distributed to the College. Your retirement account’s plan administrator (the company that manages the account) can help you designate SMWC as a primary or contingent beneficiary on the plan’s beneficiary designation form. PLease send SMWC a copy of this form.
Gifts of Life Insurance
You can name SMWC as a primary or contingent beneficiary of a life insurance policy. If you retain any control over the policy, no income tax deduction is allowed; however, if SMWC is named both the sole owner and beneficiary of a paid-up policy, you may receive an immediate charitable deduction for the lesser of the policy’s fair market value or the net premiums paid. Additional premiums that you pay may also be tax deductible.
Retained Life Estate in Property
You may generate a current income tax deduction by giving a home, farm or vacation property to SMWC, while retaining the right to use the property during your lifetime. The property will also be removed from your taxable estate.
If you need further assistance or information, please contact our office between 8:00 a.m. and 5:00 p.m. EST, toll free at (888) 769-0013. We are here to help!
After hours? Email your questions to email@example.com.