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Planning Your Gift to the Grange Insurance Audubon Center

Any gift is to some extent the result of planning. At the very least, it is the result of a decision on the part of the donor to support an organization. The term “planned giving,” however, is generally applied to relatively large gifts which involve detailed planning by the donor and his/her attorney, tax accountant, or other advisors. This process includes a review of:

• The donor’s objectives in making the gift
• The various methods available for making the gift
• The impact of the gift on the donor’s financial and estate planning

Tax laws encourage contributions to charitable organizations. The tax advantages vary with the nature of the gift and the donor’s financial circumstances. Although tax savings to the donor or his/her estate are not usually the primary reason for making a contribution, they can be a factor in determining the size of the gift and the method of payment.

It is always prudent, therefore, to consult with your financial advisors. Audubon Ohio welcomes the opportunity to work with you and your advisors in planning your gift.

Tax Considerations

To determine the precise tax benefits of a particular gift, you should consult with your tax advisor or attorney. Some general guidelines, however, are worth noting.

Tax benefits are based on the donor’s tax bracket. For example: Assuming a donor makes a $10,000 contribution, the federal income tax savings in the year of the gift, and therefore its net cost, would be:

Multi-Year Pledge Period

A pledge payment period of three years has been established for this campaign. This allows donors to realize recurring tax benefits by spreading their pledge payments over an extended period. In this way, a donor can generally make a much more significant investment than he/she could make through a one-time cash gift. A pledge payment qualifies as a fully deductible contribution in the year it is paid.

WAYS OF GIVING

There are two basic methods of making a contribution: through a current gift or a deferred gift. For either of these methods, any of the vehicles described below may be used.

Gifts of Cash
The most common type of gift is conveyed by cash, money order or draft. A cash contribution qualifies for a charitable tax deduction in the year it is made. The deduction is limited to 50 percent of the donor’s adjusted gross income for the year. Any amount in excess of 50 percent, however, can be carried over for up to five years.

Gifts Other Than Cash
Gifts may also be made using any type of asset other than cash. Gifts of property (e.g., securities, real property, and personal property) are usually deductible at their fair market value when given, rather than the original cost to the donor. Because the deduction is based not on cost, but on worth, this type of gift is very popular.

If a gift of personal property is valued at $5,000 or more, a donor who wishes to claim a deduction must obtain an appraisal from a qualified practitioner. Even if the value does not exceed $5,000, the donor must keep written records regarding the property.

For appreciated gifts of securities or personal property, the tax deduction is limited to 30 percent of adjusted gross income (rather than the 50 percent limit which applies to cash contributions).

Securities
Gifts may be made in the form of common stock or other securities -- including closely-held corporate stock, bonds, limited partnership interests, and mutual fund shares, especially those which have appreciated.

Publicly-traded securities do not have to be appraised. Nor do privately-held securities valued at less than $10,000. If the value of the latter exceeds $5,000, however, a partially completed appraisal summary must be attached to the tax return on which the deduction is claimed.

The Benefits of Giving Appreciated Stock
Assuming a cost basis of $20,000, a gift of $100,000 in highly appreciated stock will produce the following immediate savings:

Potential income tax savings (in highest federal tax bracket) $35,000

Avoidance of capital gain tax of 20% (on long-term property) 16,000

Avoidance of donor’s cost to sell stock (brokerage commission) 500

Total immediate savings $51,500

Real Property
Gifts of real property may include farms, personal residences, and vacation homes, as well as commercial and rental properties. One attractive option may be a life tenancy agreement -- to donate your personal residence or farm, while retaining the right to live there for the rest of your life. The financial benefits will vary with the way the gift is structured.

Tangible Personal Property
Gifts of tangible personal property may include furniture, equipment, fixtures, automobiles, books, gems, precious metals, works of art, stamps, coins, manuscripts, or almost anything else. Such gifts are often designated for an appropriate use by the organization.

Gifts in Kind
Finally, a donor may choose to make a gift in kind – for example, services or materials for use in construction or for some other capital purpose.

Once again, any of the above methods may be used to fund either a current gift or a deferred gift.

DEFERRED GIFTS

A deferred gift is created in the present, often as part of a comprehensive estate-planning process. It is the benefit of the gift which is deferred. That is, the recipient’s full interest in the donated assets is not realized until some point in the future.

A bequest, for example, is legally created by executing a will. The organization, however, does not receive the benefits until the death of the donor. Traditionally, the bequest is the simplest and most popular method of making a deferred gift. In recent years, several additional options have become available.

Life Income Plans
By establishing a charitable remainder trust or, a donor may transfer to an organization cash or other assets (such as stocks, bonds, or real estate), and at the same time receive a lifetime income and current income tax benefits derived from those assets. By establishing a charitable lead trust, a donor may retain ownership of the assets while generating current income for the organization.

Charitable Remainder Trust
Through a charitable remainder trust, the donor or other named beneficiary receives a lifetime income from the assets. Upon the death of the last named beneficiary, title to the trust passes to the organization. A charitable remainder trust can be structured in one of two ways:

• If a fixed income is desired, the trust can be structured as an annuity, paying a fixed percentage of the assets’ original value.
• As a hedge against inflation, the trust can be structured to pay a fixed percentage of the trust’s assets, which are revalued annually. In this way, the beneficiary’s income grows with the value of the assets.

Charitable Lead Trust
A charitable remainder trust, then, pays an income to the donor or other beneficiary, and the remaining assets go to the organization. Conversely, the charitable lead trust pays an income to the organization, and at the end of a specified period, the remaining assets go to the donor or other beneficiary.

A charitable lead trust, therefore, may be advantageous to a donor who is planning the transfer of assets to succeeding generations. This vehicle may also be attractive to a donor who is interested in reducing current taxable income, while retaining ultimate ownership of the assets.

Life Insurance
Gifts of life insurance provide a method of making a substantial gift at a relatively low cost. Such a gift may be made in one of two ways:

• By assigning ownership of the policy to the organization
• By naming the organization as the beneficiary

Certain gifts of life insurance, such as a gift of a paid-up policy, may be considered current, rather than deferred gifts. A donor who makes an outright gift of a paid-up life insurance policy, and names the organization as the irrevocable owner and beneficiary, may claim an immediate tax deduction equal to the replacement value of the policy.

A donor may also contribute a life insurance policy which is partially paid up, and claim an immediate tax deduction equal to the cash surrender value of the policy.

Finally, a donor may purchase and support a new policy which names the organization as the irrevocable owner and beneficiary. In this case, the donor may claim an immediate tax deduction for the premium payments made.

Bequests
A bequest is a written direction contained in a will which disposes of some or all of the property controlled by the will. Through a will, it is possible to give cash, securities, life insurance proceeds, real property, and personal property. It is also possible to create a trust. Bequests are often used to establish memorials in honor of the donor, family members, or others.

PLAN YOUR OWN PROGRAM

In addition to the methods described above, there are ways to give which are not exclusively charitable in nature, but do have important applications for charitable giving. The best way for you to give is the method that best achieves your overall financial objectives, and at the same time advances the mission and goals of the organization. The best method for another donor may not be the ideal approach for you. Once again, it is always a good idea to consult your personal financial or legal advisors.

FOR MORE INFORMATION

For additional information or guidance, please feel free to call upon the development office and campaign staff. We will be happy to work with you to identify ways of making a contribution to the campaign that can, at the same time, advance your overall financial objectives.

Kelly Brown
Audubon Ohio
692 North High Street, Suite 303
Columbus, OH 43215
Phone: (614) 224-3303
Email: kbrown@audubon.org