Select a gift arrangement below to learn more about the arrangements we work with.
Outright Charitable Transfers
Cash, securities and real estate are popular gift assets, but many other assets can be suitable in certain circumstances. Indeed, your clients may have “forgotten assets” such as life insurance policies, savings bonds and commercial annuity contracts. When structured properly, gifting these assets can have favorable tax results. By transferring long-term capital gain assets directly to the Community Foundation rather than selling them, your client receives a deduction for their full fair market value and avoids any capital gains tax. This feature makes such assets more attractive than gifts of cash, although any available cash can be used to replace the contributed assets and increase your client’s cost basis in them.
Perhaps the most popular planned gift, a bequest is understood broadly to be a portion of your client’s will or living trust that is reserved for charity. It can be in the form of a fixed sum of money, a specific asset or a stated percentage of the client’s residual estate. Whatever the particulars, they are always revocable, which contributes to their popularity. A bequest to the Community Foundation can be contingent, making it a valuable element in any disclaimer planning you may be doing for a client. Additionally, for clients with estates subject to either federal or state estate tax, a bequest qualifies for a dollar-for-dollar charitable deduction.
Frequently, people have more money in IRAs or qualified retirement plans than they will ever need. For this reason, many include designations for the benefit of their favorite charity at death. This ensures flexibility during life and tax advantages thereafter, in that any money distributed to charity upon death is not subject to income tax. By contrast, loved ones are generally taxed heavily when left with these assets. For this reason, a client wishing to provide both for individuals and for charity is often advised to leave assets that get a step-up in basis to the former and assets harboring taxable income to the latter. One may also designate the Foundation as the beneficiary of the proceeds from a life insurance policy or of the value of a commercial annuity contract. Beneficiary designations avoid the probate process and, as with charitable bequests, can reduce estate taxes and be altered during your client’s life.
Charitable Gift Annuities
Your client contributes cash, publicly-traded securities or certain other assets. In return, the Community Foundation pays your client, or any one or two persons they name, a fixed amount of money each year for life. The client receives a tax deduction for part of the value of the contribution and their annuity payments are favorably taxed, especially when long-term capital gain assets are contributed. This is because part of the appreciation is never taxed. The rest can be spread over life expectancy, so long as your client is the sole or initial recipient of the annuity payments. An additional portion of the payments is typically received tax free over the same period.
Deferred Charitable Gift Annuity
Although most gift annuities are established by older persons and begin making payments right away, clients still in their working years sometimes establish deferred annuities. They receive an upfront tax deduction while securing for themselves future cash flow that can supplement what they expect to receive from a pension, an IRA or a qualified retirement plan. Indeed, because gift annuities can be funded with assets other than cash and are not subject to contribution limits, they can serve as an appealing alternative or adjunct to traditional retirement vehicles.
Charitable Remainder Trusts
These trusts pay income to your client and/or other beneficiaries each year for life or a term of years. A charitable remainder trust is often funded with appreciated property, because neither the client nor the trust pays any capital gains tax when the trust is funded or when the property sells. The client also receives a tax deduction for part of the value of the assets contributed. The amount of income can be either fixed (a charitable remainder annuity trust or “CRAT”) or variable (a charitable remainder unitrust or “CRUT”). That being said, a CRUT is often preferred, because the payment choices offer more flexibility and additional contributions can be made to a CRUT. If desired, the Community Foundation can serve as trustee.
Charitable Lead Trusts
This trust offers an ideal way to provide income to charity before distributing the trust’s assets to your client’s heirs at a substantially reduced gift or estate tax cost. The trust can be structured to produce an income tax deduction for your client, typically as a result of returning its assets to the client upon termination. The amount paid to charity can be either an annuity or a unitrust percentage. Because the trust is a taxable entity, care must be taken in selecting the funding assets and then managing them once they are owned by the trust. If desired, the Community Foundation can serve as trustee.
Retained Life Estates
If you have a client who owns a personal residence or farm they may eventually leave to charity, but also desires to continue occupying the property for the time being, that client can deed their property to the Community Foundation now and retain the right to use the property for life or a term of years. An income tax deduction is available for part of the current value of the property, and your client receives the comfort of knowing they can reside on, rent or even sell the property and divide the proceeds with the Community Foundation. Retained life estate arrangements have the further advantage of not going through probate.
A client who wants to contribute an asset to charity, but who cannot afford to make an outright transfer, can sell the asset to the Community Foundation for less than its fair market value. The client receives an income tax deduction for the difference between the price paid and the full value, and only a portion of any gain will be taxed. Bargain sales are often most appropriate with real estate or other assets not readily divisible into units.