Donors have a wide range of gift opportunities to make a difference in the lives of others through planned giving. For some, that means an outright gift of cash or appreciated property; for others, it is a deferred gift arrangement such as a charitable bequest or a gift with a retained income stream. Sometimes it is a combination of gifts carefully planned to help individuals support a program that is meaningful to them.
What follows is a brief overview of different charitable giving strategies. Discuss them with your financial advisor or estate planning attorney to see what is right for you.
Gifts of Appreciated Property
Gifts of appreciated property provide greater benefits for you than gifts made by check or credit card. You can typically deduct the full value of the contributed property (subject to the IRS percentage limitation of your adjusted gross income), which includes the gain portion that has never been taxed. You avoid capital gains tax on the appreciation. If your deduction exceeds the IRS percentage limitation of your AGI, you may carry over your excess deduction over future years, as allowed by IRS regulations.
Example: You buy 100 shares of XYZ Industries for $1,000 three years ago. Those same 100 shares are now worth $10,000. A gift of this stock results in a charitable deduction for the full $10,000 including the $9,000 gain that has never been taxed.
As you plan for loved ones, you may want to consider including the National Dance Education Organization in your will. You can leave NDEO a specific dollar amount or piece of property, a percentage of your estate or the remainder of your estate after other bequests, taxes, and costs are satisfied.
Living Trust, Life Insurance, or Retirement Account
The National Dance Education Organization can also be named as the beneficiary of a living trust, a life insurance policy or a retirement plan. You receive an estate tax deduction for the portion of the death benefit going to NDEO. Retirement plans are an especially valuable opportunity for charitable giving as you can avoid double taxation and IRD (income in respect of a decedent) issues.
Charitable Gift Annuity and Charitable Remainder Trust
Life income gifts such as the charitable gift annuity and the charitable remainder trust are excellent estate planning tools that permit you to make a significant gift to NDEO and, at the same time, retain an income. Simply put, you irrevocably give cash or appreciated property to NDEO and receive both an income tax charitable deduction and an income stream for a set number of years or life.
With a charitable gift annuity, if you have appreciated stocks in your portfolio when nearing retirement age, you can gift these stocks to NDEO. Part of the income stream will be tax-free and you receive a significant one time charitable income tax deduction from your major gift. The gift will support, upon your passing, designated programs or services, scholarships, or general operating expenses as specified in your charitable gift.
A charitable remainder trust (CRT) is a tax-exempt trust that enables you to give NDEO diverse assets and receive annual income. Appreciated assets can be transferred to a CRT and possibly avoid immediate capital gains on the transfer. In addition, the trust would provide you with an annual payout stream. At the end of the payout term, the remainder of the assets revert to NDEO.
Pooled Income Funds
A pooled income fund allows donors to “pool” together cash or securities to create one large gift for NDEO. The NDEO then reinvests these assets as a pool, similar to traditional mutual funds. The fund’s annual income is paid to the donors or their beneficiaries, based on each donor’s share of the pool. Upon the death of a donor or donor’s beneficiary, the remaining share of the pool is transferred to the charity. Pooled-income funds generally are beneficial for investors who wish to make small gifts to charity, subject to the charity’s own minimum requirements, while still receiving income from the gifts.
A donor to a pooled-income fund is generally entitled to a charitable income tax deduction for the amount the charity is expected to receive at the donor’s death. Donors are not required to pay gift tax on contributions to the pooled-income fund, unless the income is received by someone other than the donor or spouse, assuming the spouse is a US citizen. If the donor contributes to the fund at his or her death, the estate will receive an estate tax charitable deduction for the projected value of the trust at the end of its term. If the fund is set up this way, the donor would designate a lifetime income beneficiary.
Please consult with your financial advisor or attorney to see if a particular gift plan is right for you.
Our legal name is the National Dance Education Organization (NDEO) and it is incorporated as a 501(c)(3) not-for-profit corporation in Washington, DC. It is important that this name be used in all wills, deeds, and any written documents that evidence a gift or bequest to NDEO.