This information is intended to provide you with general gift planning information. Our organization is not authorized to provide specific legal, tax or investment advice, and this publication should not be looked to or relied upon as a source for such advice. Consult with your own legal and financial advisors before making any gift. In addition, we recommend that any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.
Bequest Through Will or Living Trust
A very simple and popular way to make a gift that will live long after you are gone is to give through your will or revocable trust. This designation may even help to reduce your estate taxes.
You may contribute either a specific sum or asset or a percentage of your residuary estate with a bequest in your will or living trust. Bequests also offer you the opportunity to designate a specific purpose or endowment for your gift, if desirable.
Below is sample bequest wording you may wish to share with your attorney:
“I give to the Park Hill School District Education Foundation, Inc., a not-for-profit corporation for charitable and educational purposes, in Kansas City, Missouri…
(Cash Bequest)…the sum of ________dollars ($__________).
(Stock Bequest)…________shares of common stock of ___________Corporation.
(Percentage of Estate)…_______percent (___________%) of the residue of my estate.
I request this bequest be used by the Park Hill School District Education Foundation, Inc. for the following purpose: _____________________________________________________________. I direct no federal estate tax or state death taxes be allocated to or paid from this bequest.”
One of the greatest donor concerns is that a charitable gift is used as it is intended. We understand this concern and want to make certain all wishes are met. We also want to make sure the intent is clear and manageable. If you wish to restrict your gift to a specific school, education program, scholarship or grant program, contact the Foundation office to determine the appropriate wording to ensure it is used according to your intentions.
Retirement Account Beneficiary Designations
A retirement account is one of the best and easiest types of assets to transfer at your death to the Park Hill School District Education Foundation. Any non-charitable beneficiary of a retirement account will pay income tax on distributions from the account after your death (in addition to any estate tax payable). If you are going to make a charitable bequest, it is usually better to use your retirement account for this purpose, and to leave other assets (not subject to income tax) to your other beneficiaries.
Of course, married couples may want to postpone the decision by transferring the retirement account to the surviving spouse, and then arrange for the survivor to pass some or all of the account at death to the Park Hill School District Education Foundation.
Life insurance can be an important and easy method for you to provide significant benefit to the Park Hill School District Education Foundation, while not subtracting from the financial benefits you otherwise want to leave to your family.
Life insurance can be used to provide a direct benefit to the Foundation at your death. You can purchase a new policy for this purpose, and through a relatively small annual cost (the premium), you can provide a benefit to the Foundation far greater than what might otherwise be possible. This significant gift can be made without impairing or diluting the control of a family business or other investments. This may also be a good way to deal with an older insurance policy that is no longer serving its original purpose. Rather than terminating the policy, consider naming the Foundation as beneficiary.
If you retain ownership of the insurance policy, you will name the Foundation as beneficiary, and will retain the right to control the policy and/or change the beneficiary in the future. Alternatively, you can get an income tax deduction if you currently transfer the policy to the Foundation and then make future gifts to the Foundation to pay any premiums. Either way, when the insurance proceeds pass to the Foundation at your death, they will not be subject to estate tax.
Life insurance can also be used to provide financial benefit to your family to offset any charitable giving you have done during lifetime or may provide for at your death. There could be estate tax benefits in using this approach because it can be relatively easy to keep life insurance proceeds from being subjected to the estate tax, and life insurance proceeds are generally not taxable for income tax purposes. Therefore, the life insurance proceeds can pass to your family free of all taxes, and this will allow you to leave other assets to the Foundation to carry out your charitable intentions.
Charitable Remainder Trusts
With a Charitable Remainder Trust (“CRT”), an “income interest” can be reserved for you or for you and your spouse, and the remainder interest will then pass to the Park Hill School District Education Foundation. You can select the amount of income to receive each year (within certain limitations) and you can choose to have the income determined as a percentage of the asset value or as a fixed dollar amount. The income payments can also be set up on a monthly, quarterly or annual basis.
There are many tax benefits connected to CRT. When created during lifetime, the donor will be allowed an income tax deduction for a percentage of the value of any assets transferred to the CRT. By contributing appreciated assets to a CRT, it is also possible to delay or entirely avoid the capital gain tax that would otherwise be paid on the sale of the asset. Because the remainder passes to charity at your death (or after the death of you and your spouse), there will be no estate tax on the assets held in the CRT at your death.
[It is also possible to create a CRT for the benefit of a beneficiary other than you or your spouse. The estate tax and gift tax consequences of this trust are slightly different, and if you want more information on this technique, please contact us.]
Charitable Gift Annuity
Similar to a Charitable Remainder Trust, you can establish a Charitable Gift Annuity, which is not a separate trust, but rather an agreement between you and the Park Hill School District Education Foundation. You would transfer cash or securities to the Foundation in return for a fixed income for you and/or for you and your spouse (or other designated beneficiary) for lifetime. The size of the payment is determined at the time the gift is made and will not fluctuate with the market.
Similar to a CRT, you will be allowed an income tax deduction for a portion of the value of the asset you initially contribute to a Gift Annuity. Future payments you receive each year will be treated in part as income and in part as a return of your original investment.
You could also establish the Gift Annuity to defer income for a period of years, which usually provides for a larger income tax deduction when created.
Charitable Lead Trust
A Charitable Lead Trust (“CLT”) is an excellent vehicle for people to make a significant charitable gift at death while still providing a future benefit to children and grandchildren (or other beneficiaries of your choice). The income from the CLT is paid to the Park Hill School District Education Foundation for a number of years. When the term ends, the remaining assets are distributed to or held in trust for your children, grandchildren or other beneficiaries.
A CLT is not exempt from income tax, but a deduction is allowed each year for amounts actually paid to charity. The biggest tax advantage from a CLT is that it reduces the estate tax that might otherwise be payable at your death, even though the assets will eventually benefit your family (or other beneficiaries). A CLT can be a useful compromise between leaving assets to charity and leaving assets to your family, and the potential tax savings may allow you to provide considerable support to the Foundation at a significantly reduced cost to your family.
[It is also possible to create a CLT during your lifetime, with the remainder interest coming back to you at the end of the charitable term. The income tax consequences of this kind of CLT are different, and if you want more information on this technique, please contact us.]