Planned Giving and The Legacy Associates
Donors who make provisions for a gift through trusts, bequests, and estate planning are recognized as members of the Legacy Associates.
These plans assist donors to discover the perfect balance of their personal financial goals with their charitable interests and may realize significant tax benefits. Through planned giving you can increase your current income or provide additional retirement income, while earning a current tax deduction and providing for a future gift to Oak Hill Academy.
One of the easiest ways to benefit Oak Hill Academy is to include a bequest in your will. Bequests provide you flexibility in making your estate plans and are a very effective way to accomplish many goals.
There are several ways to make distributions in your will. The following language may assist you and your financial advisor:
- Percentage of Estate: Allows for flexibility and changes in estate assets over time. “I give, devise, and bequeath to Oak Hill Academy, Inc. _____% of my estate.”
- Specific Dollar Amount: Allows you to reach a specific gift level. “I give, devise and bequeath to Oak Hill Academy, Inc. the amount of $________.”
- Specific Property: Identifies specific property or items you wish to give – “I give, devise, and bequeath to Oak Hill Academy the following property ________.” (be sure to identify locations)
- Residue of Estate: Whatever is left after other bequests have been granted. “All the residue of my estate, including real and personal property, I give, devise, and bequeath to Oak Hill Academy, Inc.”
Consult your attorney when preparing any legal documents.
Life insurance can be used to make a charitable gift by naming Oak Hill Academy as the owner and beneficiary of a life insurance policy. Such a gift provides you with a charitable income tax deduction equal to the current value of the policy or net premium payments, whichever is less. It is also possible to purchase a new policy, naming Oak Hill Academy as owner and beneficiary.
Example: Perry & Judy Phillips have a lot to be thankful for. They are successful in their careers and have all they need. Their gratitude for life’s blessings and concern for others has inspired their decision to make a gift to help others. But, they don’t have the resources to do it all today. They choose to buy a life insurance policy, designating Oak Hill Academy as the owner and beneficiary. Their annual gift premiums of $1,000 are tax deductible and they are recognized as members of the Legacy Associates.
A gift of a qualified retirement plan asset such as a 401(k), 403(b), IRA, Keogh or pension plan is another way to benefit Oak Hill Academy and benefit from significant tax savings. Retirement plan assets are often subject to extremely high estate taxes and the income is fully taxable when received by an individual beneficiary. Donors maintain complete control over their retirement funds while living, but at their death the balance remaining in their funds becomes the property of Oak Hill Academy free from both estate and income taxes.
IRA Charitable Rollover
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 has extended the IRA Charitable Rollover for 2010 and 2011. Originally passed in 2006 as part of the Pension Protection Act, the IRA Charitable Rollover allows individuals age 70 1/2 and older to make direct transfers totaling up to $100,000 per year to 501(c)(3) charities, without having to count the transfers as income for federal income tax purposes.
Trusts & Life Income Gifts
There are four primary types of deferred life income gifts.
The Charitable Gift Annuity is created by transferring assets to a trust that benefits OHA. The designated beneficiary receives a fixed annual payment for life or a term of years. At the death of the beneficiary or the end of the term, the trust terminates and the remaining assets are transferred to OHA to be used as the donor directed.
Example: Beverly Cooper Grimes, age 55, is a nursing professional in suburban Maryland doing very well in her career. However, she is frustrated that she can’t add more to her IRA for added security upon her retirement. By establishing a $20,000 deferred gift annuity with payments beginning in 10 years she can receive an immediate income tax deduction, begin receiving payments at age 65 when she plans to retire (a portion of which is tax-free during her expected lifetime), and eliminate possible estate tax due on $20,000.
The Charitable Remainder Unitrust is an irrevocable transfer of property to a trustee which provides both a lifetime income and a charitable income tax deduction. Income is a predetermined percentage of the annual fair market value of the trust. Additional contributions can be made to a unitrust. As the trust’s assets increase, so does the payment to the donor.
Example: Howard Abrams, 80, would like to establish a memorial gift in honor of his wife, Ellen. He owns stock, purchased 10 years ago for $50,000, now worth $250,000, which pays him approximately 2% income per year. He decides to transfer the stock into a charitable remainder unitrust. The trust sells the stock free of any capital gains tax, and will pay him a significantly higher annual income, based on a percentage of the trust’s assets as valued annually. He is also entitled to a charitable income tax deduction for the year in which the trust is established.
The Charitable Remainder Annuity Trust pays a fixed, guaranteed dollar amount, regardless of the trust’s investment performance. The income rate is established at the time the trust is funded. No additional gifts can be made be made to an annuity trust.
Example: Mrs. Avery uses $75,000 of assets to fund a charitable gift annuity. Upon making the transfer to Oak Hill Academy as trustee, she will receive an immediate income tax deduction. In addition, she will begin receiving annuity payments annually that will continue for as long as she lives.
The charitable remainder annuity trust is designed to meet Mrs. Avery’s need for a secure income level. With an annuity trust, her payments will remain the same regardless of interest rates or stock market fluctuations. Her payments are guaranteed by all of the assets of the trust. After her death, the annuity will terminate and the proceeds will be used to benefit Oak Hill Academy as she has directed.
The Charitable Lead Trust is created by transferring ownership of assets (cash, appreciated stock, real estate, etc.) into an irrevocable charitable trust. Income is paid to Oak Hill Academy for a period of years chosen by the donor (up to 20 years) at which time trust assets are returned to the donor or other named chosen beneficiaries.