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Legacy Gift Planning:

Matching the Right Gift

to the Donors’ Circumstances

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• Definition of Legacy Gift Planning

• Types of Legacy Gifts

o Bequests

o Beneficiary designations, joint accounts, POD and TOD

o Lifetime Income Gifts

Charitable Gift Annuities

Charitable Remainder Unitrusts (CRUTs) Charitable Remainder Annuity Trusts (CRATs)

o Charitable IRA Rollovers

• Case Studies

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Charitable giving from accumulated resources rather than income.

Income

WagesInterest and dividends

Retirement incomeSocial Security

Annuity payments

Accumulated Resources

Savings AccountsReal Estate

Personal PropertyRetirement Plans

InsuranceAppreciated Securities

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• A gift established by a provision in your will.

• The easiest way to make the biggest gift.

• Revocable – it can be changed.

• Can be for specific dollar amount or percentage.

• Can be a specific property.

• Can be contingent.

• Can be residual.

• Can take care of family and charities in the same document.

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• Beneficiary Designations

o Life Insurance

o Retirement Accounts

• Joint property with right of survivorship

• POD and TOD accounts.

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For donors who are at least 70 ½ years old:

• Can rollover up to $100,000 directly to a qualified charity.

• No tax consequences (no income tax on the amount rolled over and no charitable deduction).

• Must be done directly from the IRA Administrator to Charity.

• With the recent increase in the standard deduction, this is now attractive to more people.

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A charitable gift annuity provides income during donor’s lifetime.

• Guaranteed Income for one or two lifetimes

• Tax advantageso Charitable contribution deduction for the year

of the gifto Part of the annuity income is tax-free

• Age-based rates

• After donor’s death, remainder goes to charity

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Age Rate AnnuityTax Free

Portion

Charitable

Deduction

60 4.7% $470 $309 $2661

70 5.6% $560 $407 $3,686

80 7.3% $730 $581 $4,763

90 9.5% $950 $855 $6,152

• Offers more flexibility than a gift annuity

• Can pay a fixed amount of income (CRAT) or a fixed percentage of income (CRUT)

• Can be for life or a term of years

• Donor may be able to add to it (CRUT)

• Tax advantages

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• TINKS• Retired• Both have defined benefit plans• No family or children• The millionaires next door.

Issue: Losing sleep. “What’s going to happen to our stuff?”

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Solution:

Permanent Endowment with Foundation

Both have wills made with contingent beneficiary: Rest, Residue, and Remainder to the Permanent Endowment.

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• 93 Years old• Never married, no children• He has $65,000 in redeemable bonds

paying him 6%• His bonds were called

Issue: James needs to replace the income.

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Solution:

• $65,000 Charitable Gift Annuity• 9.5% = Annual payment of $6,175• $5,600 tax-free• Charitable contribution: $44,838• Expected remainder: $32,500

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John: 70, retired. Two kids.Yoko: 62, working

• Intended to retire to a home John owns in West Virginia.

• BUT, Yoko got a new job in Florida.• Wanted his WV home to benefit his church.• Wanted his kids to get benefit during his

lifetime.• Qualified appraisal: $80,000

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John wanted a Charitable Gift Annuity that would make payments to his daughters. At the daughters’ ages, the rate is 4.3%Payments to kids: $3,440

But:Foundation’s Gift Acceptance Policy doesn’t permit real estate to be the basis of a CGA, and the policy has a minimum age for CGA recipients.

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Solution:

Donated the house to Foundation to create a NICRUT. Until the house sold, the trust payment would be the net income.

After the house sold, it “flipped” to a regular 5% unitrust.

The kids split 5% of the market value each year for their lives.

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$220,000 Family FoundationTrustees: • Dad, Age 102 (widowed)• Daughter, Age 75 (single, no kids)• Trusted family friend, Age 85

Issue: Daughter was managing the trust5% payout ruleAnnual 990

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Solution:

• Dissolved the Family Foundation.• Created Donor Advised Fund with United

Methodist Foundation.• No payout rule• No IRS filings (Included in UM Foundation’s

990)• Former trustee is now adviser

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• Ima is widowed, Age 90• Has a will leaving estate to her two grown

daughters• Survivor’s pension plus her own pension• Owns $40,000 HH-series bonds• Wants to “get rid” of the bonds• Daughter had previously converted other

HH Bonds and thought it was a pain• Loves her church

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Solution:

• Ima cannot avoid paying taxes on the interest by donating the HH bonds during her lifetime

• She did a codicil to her will making a specific bequest of the HH bonds. Her beneficiaries will avoid paying IRD taxes.

• She is contemplating using cash to start the endowment during her lifetime.

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