Planned Giving – What is it and How Do I Benefit?
Planned gifts are typically intended to leave a legacy by the donor. While they can be gifts of cash or securities, more typically planned gifts are in the form of will bequests, charitable trusts and gift annuities. The intended purpose of the gift can be to endow a scholarship or faculty chair, to support a specific academic program, cultural organization, or series, or simply for “bricks and mortar.”
The essential part of a planned gift to Purchase College transcends the method of giving. The intent behind the gift-the determination to make a significant difference in a student’s education or the College’s potential -- creates an outstanding legacy for the donor while helping to assure a dynamic future for Purchase College.
Some feel that planned giving is only for the wealthy, but anyone can enhance their capacity to give by careful consultation. The donor can gain significant benefits by gift planning including making gifts that pay income for life or passing property directly to heirs without passing through, and being taxed as part of, an estate.
A current will provides the donor with the opportunity to distribute his or her estate assets according to predetermined wishes. It offers a final expression of the donor’s values to his or her heirs; a chance to address heirs’ special needs; and the occasion to make a gift or gifts to individuals or charitable organizations like Purchase College that have touched the donor’s life.
For donors with children or relatives that they would like to make provision for, a will is indispensable. Similarly if the donor wishes to leave a legacy for a charity, a will is required. A will should be prepared by an attorney and signed by the person or people creating it, and the signature(s) witnessed by two people who are not beneficiaries validating that it is the will of the person or people signing it.
A will is revocable at any time until the donor’s death. The advantage of designating a gift to charity by bequest is that the donor has use of those assets or income until the will is final. Legal bequest language for Purchase College is: “I, [name], of [city, state, zip code] give, devise and bequeath to the Purchase College Foundation [written amount or percentage of the estate or description of property or “rest, residue and remainder of my estate”] for its general purposes (or for the particular purposes the donor designates).”
If the donor designates a gift for a specific program or purpose, it’s important to allow flexibility so that the gift can benefit the College in the future. The following language ensures that flexibility: “If, in the future, it becomes impossible or impractical to use the income from this fund as set forth, the Board of Trustees of The Purchase College Foundation may allocate the principal and/or income as they judge best, provided it is consistent with the general intent of this gift.”
When IRA assets are given through an estate, the value is included in the estate’s assets, but the full charitable deduction offsets the value so no estate tax is due. If IRA assets are left to heirs, they can be subject not only to estate tax, but also income tax, taking a significant portion of the IRA’s value. The Pension Protection Act of 2006 also provides an exclusion from gross income for distributions to charities of up to $100,000 from a traditional IRA or Roth IRA, which would otherwise be included in income.
Donating appreciated securities eliminates capital gains taxes at the time the gift is made or the trust is established, and the charitable deduction for the donation in calculated from the full market value of the stock.
A donor can essentially lend an asset that yields income to the College for a specified number of years. When the term of the charitable lead trust is complete, the asset, including any appreciation, passes to whomever the donor has designated, whether children or other heirs. The charitable lead trust offers substantially reduced estate taxation. If the assets return to the donor, then there is a charitable income tax deduction for the future trust income that is donated to Purchase College in the year the trust is established.
A donor may deed his or her property to Purchase College, but retain responsibility for the property and the right to live there for the rest of the donor’s life. The value of the remainder interest in the property is determined and can be used for an immediate income tax deduction. In addition, no capital gains are paid on the appreciated value.
Property can also be devised to Purchase College in a will with the value of the property deducted from the estate, thereby reducing the amount subject to estate tax.
Charitable remainder trusts are created by placing assets in trust for Purchase College. During the donor’s lifetime the trust will yield income to the donor. If the trust is funded with appreciated assets, capital gains tax is avoided. In addition, the donor is entitled to a charitable tax deduction for the calculated remainder value of the trust. Annual income can either be a fixed dollar amount (a CRAT, charitable remainder annuity trust) or a predetermined fixed percentage rate (a CRUT, charitable remainder uni-trust).
A charitable gift annuity is a gift to Purchase College that provides the donor or a person or persons that the donor chooses with guaranteed fixed payments for life. Investing in a charitable gift annuity offers a charitable tax deduction for the portion of the annuity that is a gift. In addition, the annuity can be structured so that a portion of the income is free from income tax. The income amount is based on the donor’s age; the older the door, the higher the monthly payment.
Donor inquiries regarding planned gifts are invited. Please call Jeannine Starr, Vice President of Institutional Advancement, at (914) 251-6040 to learn more and request free brochures on topics of interest to you.
You may also request informative, color brochures on 32 planned giving topics, including the Pension Protection Act (PPA) 2008 IRA Rollover provision for donors aged 70 ½ and over, Gifts of Life Insurance, and Planning Your Will. The booklets are organized under six main subject headings, Wills and Bequests, Gift Annuities, Other Gift Plans, Trusts, Estate Planning and Retirement and Personal Planning.