Giving Wisely
Consider this: someone's generosity permeates
every facet of our lives. Certainly our programs benefit from such
acts of kindness.
Charitable gifts help us meet our current goals
and reach farther in the future. By giving wisely, you can achieve
that same outcome, too.
Your gift can take multiple forms and can help
you address a variety of personal financial goals. Do you want
to make a significant gift during your lifetime, or would a gift
as part of your estate work better? Do you have a particular asset
that you are thinking of donating? Do you want to increase your
retirement income, or is your primary goal estate preservation?
Are you carrying excess life insurance or a large balance in your
retirement plan?
We are ready to work with you and your advisors
to craft the gift plan that satisfies you. Here are some additional
opportunities to learn:
- Travel through the Legacy
Planner to help you decide what will work best.
- Click
here to see what options will meet your particular situation.
- Use the following guide to help
you weigh your options.
- Give
now, or give later?
A significant lifetime gift will allow to meet our immediate
objectives. In turn, it will give you maximum tax benefits,
especially attractive if you are in high earnings years.
It can also be the simplest gift to arrange.
You may, however, prefer to leave your assets and cash flow
alone until your death, and instead make your gift through
your estate. Even though we would not use this gift immediately,
it will be critically important for long-term financial strength
and will help ensure that we can meet the opportunities and
challenges the future will present us.
You use a will or revocable trust to make a gift from your
estate. You may also use life insurance or the balance remaining
in your retirement plan. These gifts help you keep your lifetime
financial planning flexible, although they provide only limited
income tax benefits. You will need professional assistance
to set up most estate-plan gifts.
- What
assets to give?
Cash. It is,
of course, the easiest transaction to make. You are limited
only by your cash flow and your inclination to draw from
your cash reserves.
Appreciated securities. Get
the same tax deduction as if you had given cash, but use
stocks or bonds that cost you less than they are currently
worth. Your deduction is based on market value, but you incur
no capital gains liability on the transfer to us. It's one
of the best tax incentives left, and we can work with your
broker to make a gift of securities simple.
Real estate. Gifts
of land, vacation homes or income-producing properties can
bring great benefits to us. We have to review each gift proposal
carefully, and sometimes it's not practical for us to accept.
You can give real estate outright, transfer it in a part
sale/part gift arrangement, use it to fund a life-income
gift, or give your residence and reserve the right to continue
to live there.
A retirement account. The
balance remaining in your retirement account after your death
is subject to double taxation if it passes to your heirs:
it's taxed both as income and as an estate asset. Result?
Over 75% of the account value may go to taxes. It's a better
plan to designate the remainder of your account to JDRF, and
then use other assets for gifts to your family. New regulations
simplify the procedure to name JDRF as beneficiary; we're ready
to assist you.
Appreciated property. You
may be holding property like books, artwork or equipment
that you no longer wish to maintain. Instead, these assets
could bring real benefit to JDRF. There are particular IRS requirements
to meet before you can deduct a gift of appreciated assets.
And, we will review each gift proposal carefully to make
sure that can put the asset to good use.
Business interests. A partnership, an interest in a business, shares of closely
held stock, or a limited partnership share may all hold value
for us. We'll review the proposed gift, and if we agree,
will work with you and your advisors to make the transfer
simple.
- How
can a gift pay me back?
There is a family of gifts that transfers assets to and
then returns income to you. You can use them to convert low-yielding
securities to a higher income stream at a greatly reduced
capital gains cost. You can receive fixed or variable income,
take payments for your lifetime or for a term of years, and
direct the income to other beneficiaries. In essence, you
make a contribution yet retain benefits from what you gave
away.
Your charitable deduction is based on the full market value
of the assets you gave, minus the present value of the income
interest you retained. The higher the income payout, the
lower the deduction.
These flexible, creative gifts address a variety of your
planning objectives. For our part, the return of income permits
a more substantial gift to than you might be able to afford
in an outright format. Even though we cannot use these gifts
until the death of the last income beneficiary, they give
us long-term financial strength that will sustain in the
future.
- What
are my choices in income gifts?
A charitable gift annuity is
the simplest; in return for your gift, we contract to pay
you and/or another beneficiary fixed income for life. The
income rates and the charitable deduction tend to be higher
with a gift annuity than with other life-income gifts. There
is also an attractive reduction in the taxation of annuity
payments. This gift plan is most appropriate if you are risk-averse
in your investing and if long-term fixed income is an appropriate
strategy for you.
A deferred gift annuity delays
the inauguration of income payments to the beneficiaries.
In return for this delay, the deferred annuity increases
both the income rate and the charitable deduction above those
of an annuity starting income payments immediately. If you
are currently in high-earnings years, looking for tax deductions
and new sources of retirement income, a deferred annuity
with income set to start when you turn 65 may fit your needs
well.
A charitable remainder
annuity trust is another option if you are
seeking fixed income. Gift annuities are contracts between
you and JDRF, with payments made as an obligation of our
organization. The annuity trust - an individually managed
trust - provides you a bit more flexibility. However,
its management costs often produce a lower income rate
than a gift annuity could pay and require a larger initial
gift. With that said, the annuity trust does have several
advantages. It can pay income to multiple beneficiaries,
while the gift annuity is limited to two individuals.
It can pay income for a term of years (up to 20) while
a gift annuity can only pay for life. Under certain circumstances
an annuity trust can pay all tax-free income, especially
if it was funded with tax-free securities.
The charitable remainder
unitrust is the most flexible life-income
gift, and it also pays you variable income. The amount
received by beneficiaries is based on a fixed percentage
of the value of the principal, which is revalued annually.
Income in excess of the unitrust amount is reinvested,
so that the unitrust's income rate can be applied against
an increasing principal over time. The unitrust can pay
multiple beneficiaries and can pay income for lifetime
or a term of years. Like the annuity trust, the unitrust
is individually managed and requires a larger gift to
make the management feasible.
A special feature of the unitrust is the ability to grow
principal over time, then reinvest for income, with no capital
gains cost. This feature, explained in the text, allows you
to build up a fund for later needs, such as tuition for children
and grandchildren.
- My
goal is to keep my estate intact, not increase my income ...
Consider a charitable
lead trust. It works in reverse from the
life-income gifts discussed in Questions 3 and 4, above:
your gift is placed in a trust that pays income to us
for a term, then returns the principal to you or your
heirs.
The lead trust is a very effective tool to remove a portion
of your estate from tax liability:
- If the assets are to pass
to your heirs, any growth in the principal after the trust
was inaugurated is exempt from estate tax.
- Further, the amount subject
to tax is reduced by the value of our income interest.
If you have a growing family business or a rapidly appreciating
portfolio, and children whom you'd like to benefit, a lead
trust may be just what you're looking for.
Alan Berkowitz
National Director of Planned Giving
Juvenile Diabetes Research Foundation International
120 Wall Street
New York, NY 10005-4001
1-877-533-4483
plannedgiving@jdrf.org
JDRF recommends that you consult your tax or legal advisors
prior to making a planned gift.
