Bequests—A Gift in Your Will

A popular and enduring planned gift is a simple charitable bequest, which is a gift made through your will. Bequests are popular because they give you the opportunity to leave a lasting legacy. When you make a charitable bequest, you retain full use of your property during life, so there is no disruption of your lifestyle and no immediate out-of-pocket cost.

To make a bequest, simply direct that part of your estate passes directly to your favorite charities. Since a charitable bequest can take many forms, you have remarkable flexibility in how you make this designation. For example, you can leave…

  • a specific asset
  • a specific sum of money
  • a percentage of your estate
  • what remains of your estate after you have provided for all of your other beneficiaries.

You can also designate exactly how you want your bequest to be put to use. Or, you can provide an unrestricted bequest that can be used whenever and wherever it’s needed most. Most importantly, you can change your bequest whenever you choose which means you remain in complete control of the planning process.

Gift Annuity

A gift annuity is an agreement between you and the Delta Tau Delta Educational Foundation. When a charitable gift annuity is in place, we agree to pay you fixed payments for your life (and/or the life of your chosen beneficiary). The amount of the annuity is based on the gift amount and age of the annuitant(s) at the time of the gift.

A gift annuity can be established with a modest contribution and provides a number of very attractive benefits. You can:

  • fund it with cash or marketable securities
  • receive an immediate income tax charitable deduction for the gift (subject to certain income limitations), and
  • potentially spread out any capital gains tax liability.

What’s more, part of your annuity payment may be federal income tax-free for a certain number of years. As a donor, you can select the payment intervals (usually quarterly) and name the annuitant(s)—one or two persons.

Professionals and other highly compensated employees who frequently “max out” their annual retirement plan contributions because of restrictive rules and regulations may want to consider a deferred gift annuity strategy. Deferred gift annuities offer three important benefits:

  1. They can be used to supplement qualified retirement plan savings.
  2. You receive a current income tax deduction now during your high income years.
  3. You can postpone the start of annuity payments until later—usually after retirement begins.
Remainder Trust

One method of making a gift with a retained right to income is a charitable remainder trust. Let’s look at some of the benefits a charitable remainder trust can provide:

  • An income for you and/or your beneficiaries for life or a period of up to 20 years
  • An immediate and substantial income tax charitable deduction (subject to certain income limitations)
  • Potential avoidance of current capital gains taxes when the trust is funded with long-term appreciated property
  • Reduction of your estate to avoid or reduce death taxes
  • Substantial reduction of probate costs, taxes, and other estate transfer expenses.

Immediate Charitable Deduction

A gift to a charitable remainder trust generates an immediate income tax deduction, even though income is to be paid to the donor (and/or other beneficiaries) for life. The exact amount of the charitable deduction depends on the:

  • value of the property transferred to the trust
  • amount of income benefits that are payable each year to individual beneficiaries
  • approximate length of time the income benefits will be paid
  • interest rates prevailing at the time the gift is made.

Despite the tax and financial benefits of a charitable remainder trust, you should consider this kind of arrangement only if you and your advisors determine it is compatible with your overall estate, tax and financial plan.

Gifts of Stock

Gifts of long-term, highly appreciated securities are the most common type of outright property gift. Typically, individual stocks are given; however, bonds or mutual fund shares are also attractive gift options. Outright gifts of securities can be made quickly and these gifts let you do more with your gift because of the very attractive tax benefits.

For appreciated property held long-term, the full fair market value of securities given to charity is generally deductible. For example, if you give shares of stock that are now worth $10,000, you can deduct the full amount of the gift on your income tax return (subject to certain income limitations), even though you may have bought the stock for less than $1,000.

A charitable gift of securities is not considered a sale of the securities and does not generate any capital gains tax, no matter the amount of the gain. This is a valuable tax incentive provided by Congress to encourage gifts of appreciated property. The result: a charitable deduction is allowed for capital gains that would have been taxed. And, if we sell the securities, we keep every penny of the proceeds since we are tax exempt.

Retirement Account Assets

More and more donors use qualified retirement account assets in their charitable gift planning. The reason: Retirement account assets left to loved ones may be subject to higher taxation than other types of assets.

By using retirement account assets to make a gift (and selecting alternative assets to leave to family members) you may be able to reduce taxes that otherwise would be imposed on those assets and leave more to your intended beneficiaries.

Real Estate

When appreciated real estate is given to us, capital gains taxes can be completely avoided and the full fair market value of the property is generally deductible as a charitable contribution.

Gift of a Remainder Interest in a Personal Residence or Farm

A special provision of the tax law allows an immediate income tax charitable deduction for a gift of a remainder interest in your home or farm. With a remainder interest gift, you retain an absolute right to occupy the home or farm for your life (or the life of a family member). The property passes to us only after termination of the life estate(s).

The charitable deduction allowable for this future gift is the present value of our right to receive the property at some later date. The age of the life tenant is the primary factor in determining the present value of our deferred interest and the charitable deduction. The gift is deductible in the year of the transfer (subject to certain income limitations).

Gift of a Fractional Interest in Real Estate

Federal tax laws let donors take a charitable deduction for gifts of fractional interests in real estate. This type of gift can be especially rewarding when you own a vacation home that you use only part of the year.

Example: Mary and Jim own a $300,000 vacation home that they use for only two months of the year. They can give our institution a 50% interest in the property, secure a tax deduction for the value of our interest in the property, and still have a right to use and occupy the property for up to half the year.

Life Insurance

Life insurance is also an excellent tool for accomplishing philanthropic goals while realizing other important financial objectives. Indeed, life insurance can empower individuals to make charitable gifts they never would have dreamed possible.

Making a gift of life insurance is quite simple. If you are the insured-policy owner you simply transfer physical possession of your policy to the charity of your choice and file an absolute assignment or transfer of ownership form with your insurance company. Your company then will send a letter to the charity showing that the charity is the sole owner of the policy. If you do not change the beneficiary of the policy to the charity prior to transferring ownership, the charity should name itself as beneficiary after ownership has been transferred.

Hypothetical Example

Emmett owns a $100,000 life insurance policy with a cash value of $40,000. No further premiums are due and he no longer needs the coverage. He can assure that his charity will receive $100,000 at his death by making the charity the beneficiary. Or he can transfer ownership of the policy to them now. When he transfers ownership, Emmett receives a charitable deduction equal to the lesser of his cost basis or the policy’s replacement value.

IRA Charitable Rollover

Legislation signed at the end of 2015 permanently extended the popular gift option known as the IRA Charitable Rollover. This is good news for IRA owners age 70½ and over who want to support our work this year, because you can use your IRA required minimum distribution (RMD) to make a meaningful gift. It’s easy to do.

  • Instruct your IRA custodian to make a distribution directly to our organization.
  • Although there is no tax deduction, the distribution is excluded from your income for federal tax purposes—no tax is due!
  • Up to $100,000 of your gift qualifies for this favorable tax treatment.
  • Your gift makes an immediate impact.

Please contact us to learn more about planning and completing an IRA Rollover gift.

Please contact Steve Vedra, Vice President of Development, if you have questions and/or would like to discuss your charitable gift interests.

317-284-0210
Steve.Vedra@delts.org