What is a planned gift?
We define it as any major gift, made in lifetime or at death as part of a donor's overall financial and/or estate planning. By contrast, gifts to the annual fund or for membership dues are made from a donor's discretionary income, and while they may be budgeted for, they are not planned.
Three types of planned gifts:
First, outright gifts that use appreciated assets as a substitute for cash;
Second, gifts that returns income or other financial benefits to the donor in return for the contribution; and
Third, gifts payable upon the donor's death.
What assets can donors use to make a planned gift?
They can use cash, securities (stock, bonds, and mutual fund shares) or real estate. They can give tangible personal property (artwork, artifacts, equipment, etc.) They can fund a gift plan with a business or partnership interest (closely held stock, a share in a professional corporation, an investment in a limited partnership). They can give a paid-up life insurance policy.
Donors can also direct a charitable distribution from the balance remaining in their retirement plan (IRA, 401(k), Keough, etc.) at death. They can also make ULIF the owner and beneficiary of a new life insurance policy.
Note: Some gift assets can prove challenging for a non-profit to administer and/or liquidate. ULI reserves the right to review offers of non-traditional assets carefully before accepting them
How can a planned gift return income to donors?
Donors make an irrevocable gift, but with your agreement retain the right to receive income payments in return, usually for lifetime. Depending on the gift plan chosen, income can be paid to the donor and/or to family members or other individuals. Donors receive an income tax charitable deduction for the fair market value of their gift, minus the present value of the income interest they have retained (calculated as a function of the gift's payment rate and how long payments are expected to be made to the beneficiaries).
What tax deduction do donors receive for a planned gift?
It depends on the asset used to fund the gift, whether the gift was made during the donor's lifetime or at death, and whether the donor retained an income interest from the gift. Here are the guidelines:
· Outright, lifetime gifts of cash, or of assets like securities held by donors for more than one (1) year ("long-term capital gain property"), are deductible at fair market value.
· The charitable deduction for a gift that returns income to donors and/or other beneficiaries, such as a charitable gift annuity or a charitable remainder trust, is the fair market value of the gift asset minus the present value of the income interest retained.
· Revocable gifts that will be paid to upon the death of the donor do not generate an income tax deduction. Therefore, donors do not receive a deduction for including a charitable bequest when they write their will, for naming you the beneficiary of a life insurance policy, or for designating your organization to receive the remaining balance of their retirement plan
What are the tax benefits of a life-income gift?
First, the donor receives a charitable income tax deduction for the full, fair market value of the assets contributed, minus the present value of the income interest retained.
Second, if the donor uses appreciated property to fund the gift, no upfront capital gains tax is applied to the transfer, meaning that the entire amount donated can be put to work earning income for the donor.
Simply put, using one of the aforementioned vehicles to give to the ULI Foundation, you not only strengthen the Institute’s mission and fulfill your philanthropic goals, but you also realize many financial benefits:
• Current income tax deduction
• Avoidance of capital gains taxes on gifts of appreciated securities and other assets, while permitting you to diversify your investment portfolio
• Income payments to you or your designated beneficiary for life or for a fixed period of time—even where the gifts may be currently non-income producing assets
• Gift and estate tax savings
For more information on planned giving please contact Rick Rosan.