HOW TO GIVE
Planning now to make a gift after you are gone is a wonderful way to project your values and create positive change beyond your lifetime. Planned Giving can also be a smart financial move, with the potential to lessen the tax burden on your estate. We work closely with your estate planning, legal and financial advisors to help create charitable giving plans that support your legacy and strengthen families and communities for generations to come.
CASH AND NON-APPRECIATING PROPERTY
APPRECIATED SECURITIES AND REAL ESTATE
ORDINARY INCOME AND SHORT-TERM CAPITAL GAINS PROPERTY
RETIREMENT PLAN ASSETS
LIFE INSURANCE BENEFICIARY DESIGNATION
- Charitable Gift Annuities
- Charitable Bequests
- Charitable Lead Trust
- Charitable Remainder Interest in a Residence or Farm
- Charitable Remainder Trusts
When you open a fund with the Amador Community Foundation or wish to add to it at any time in the future, the Foundation can accept a variety of gift contributions through outright donations and estate planning methods.
Charitable gifts of cash and non-appreciating property qualify for federal income tax deductions at the cost in the year the gift is made. The gift is deductible up to 50% of adjusted gross income, and any excess deductions can be carried over for up to 5 years if necessary. The higher the donor’s tax rate, the greater the savings. The Amador Community Foundation will also consider gifts of personal property, such as artwork and jewelry.
Amador Community Foundation can accept a gift of a house or other personal residence, farm, commercial building or other unimproved property. A gift of real estate that you have owned for more than one year entitles you to the same Federal tax advantages as those for gifts of securities (a tax deduction for the fair market value of the property) while allowing you to avoid paying capital gains tax.
With appreciated property sold in a Bargain Sale, the donor sells appreciated property at a lower price than the fair market value to a charity, with the charity realizing the difference as a gift. Each part of a bargain sale is reported separately. The donor reports capital gains on the sale portion and receives a tax deduction for the gift portion. The basis is allocated between the gift and the sale portion.
Long-term stocks, bonds, and real estate that have increased in value may be very appropriate for charitable gifts. The donor is eligible for a charitable deduction equal to the fair market value of the property in the year the gift is made, and all capital gains tax is avoided. This type of gift is deductible up to 30% of the donor’s adjusted gross income, and any excess deductions can be carried over for up to 5 years if necessary.
Such gifts qualify for federal income tax deductions at cost in the year the gift is made. They are deductible up to 50% of the donor’s adjusted gross income, and any excess contributions can be carried over for up to 5 years if necessary.
Retirement plans payable to anyone other than your spouse may be subject to estate taxes at death, followed by income taxes as funds are withdrawn to pay estate taxes. Naming the Amador Community Foundation as the beneficiary or as the alternate beneficiary can avoid this double taxation.
For a gift through your estate, retirement plan assets are often the best way to give because they are so heavily taxed if left to heirs. Income and estate taxes can easily consume over 65% of the account balance at death. By naming the Amador Community Foundation as the remainder beneficiary of these assets, you can maximize your gifts and minimize estate taxes.
Making a gift of an unneeded insurance policy can be a convenient and effective way of meeting your charitable goals. When you transfer ownership of a cash value policy to the Amador Community Foundation, you become eligible for a charitable tax deduction based on its current value. Changing the beneficiary of your life insurance can also be a part of your estate planning.
If you no longer need as much life insurance as you did when you were younger, you can donate the policies to the Foundation and establish a Fund in your name by simply naming the Amador Community Foundation as the owner and irrevocable beneficiary of the policies. If the policies are fully paid up, you can take a tax deduction for either the replacement value or your cost, whichever is less. If the policies are not paid up and you continue paying the premiums, the payments are deductible as charitable contributions. In either case, you get an immediate tax deduction and you may save estate taxes later.
Charitable Gift Annuities
A charitable gift annuity is part gift and part purchase of an annuity. The annuity provides a monthly or quarterly payment for one or two lives, and the payments can begin immediately or be deferred. It provides a fixed income for the annuitant and spreads the capital gain over the lifetime of the annuitant if the assets given are appreciated long-term assets. This type of gift is irrevocable and provides a Federal and State income tax deduction of 50% or 30% of adjusted gross income, depending on whether cash or appreciated property is used to fund the annuity.
Naming the Amador Community Foundation in your will or living trust is a popular way to make a charitable gift. A Charitable Bequest can be a specific dollar amount, a percentage of your estate, or what remains after other bequests — including those to family members — are made. Additionally, your will can specify that your heirs receive lifetime income from your estate, with the remainder going to the Foundation for charitable purposes. If you choose, the bequest can flow into a donor-advised fund for your children to carry on your family’s philanthropy. The Foundation can provide sample language for naming the Amador Community Foundation in your bequest.
Charitable Lead Trust
A Charitable Lead Trust is a trust that pays an annual annuity or unitrust amount to a named charity (such as a Field of Interest or Donor-Advised Fund at the Community Foundation) for a specified number of years. Then the trust principal can be paid to the donor or to any other non-charitable beneficiary, such as children or grandchildren. If this kind of trust is created by a Will, estate taxes can be reduced because of the charitable deduction for the charity’s interest in the annuity or unitrust payment. If it is created during the donor’s lifetime, such a trust will generally eliminate income taxes on the assets in the trust, and the donor can reduce the gift tax on the property that children or grandchildren will eventually receive.
Charitable Remainder Interest in a Residence or Farm
A full or partial interest in a home (any home you own) or farm can be given to the Amador Community Foundation, and the donor can retain the right to live in the home or operate the farm for the rest of his or her life. The gift will create an income tax charitable deduction for the present value of the Foundation’s estimated remainder interest, and the donor will avoid any potential capital gain tax on the home or farm’s built-in appreciation. The charitable deduction thus frees up tax dollars, creating spendable income without any disruption in the donor’s lifestyle. When the Foundation receives the property, it can be sold to establish a fund in the donor’s name or any other name.
Charitable Remainder Trusts
The basic purpose of a Charitable Remainder Trust is actually fairly simple: to pay the donor, or (after the donor’s death) the donor’s spouse (or another individual) income for life and to then distribute the trust principal to charity when the last income beneficiary has passed away. With certain types of trusts (unitrusts), the donor can change the list of charities (or “remaindermen”) at any time during the life of the trust. By using low-yield, appreciated securities to set up a charitable remainder trust, the trust can sell those assets without incurring any capital gains liability, and it can then purchase new, higher-yield stocks. That way, donors can actually increase their current income, avoid capital gains, and make a major gift to charity with assets that would otherwise have been taxed heavily if they were sold and given directly to charity. There are two basic types of charitable remainder trusts: a unitrust and an annuity trust, and variations thereof. Please continue below to find out more about different kinds of Trusts.
The unitrust pays out a specified percentage of the trust’s value, calculated annually. this amount must be at least 5% of the annual net fair market value of the trust assets. Donors can make additional contributions to a unitrust during their lifetime or through their Will. Obviously, if the trust’s assets increase in value, the annual payments increase. The annuity trust pays out a fixed amount each year, and that amount must be at least 5% of the initial value of the property or assets of the trust. This type of trust does not allow donors to make additional contributions.
A charitable remainder trust pays no income tax on accumulated income or capital gains because they are added to the trust’s principal and thus reserved for eventual charitable use. The income beneficiaries of the trust are nonetheless subject to federal income tax on the distributions they receive. Donors can create an immediate Federal and State income tax deduction (and spread it out over 5 years if needed) by creating a charitable remainder trust. The amount of the deduction is determined by Treasury Department tables that consider several factors: the type of trust (unitrust or annuity trust), the percentage or amount to be paid out each year, and the number and age of the income beneficiaries.
A variation of the standard unitrust is the net income unitrust or the income only unitrust. This type of trust pays the beneficiary either the net yearly income or a fixed percentage, whichever is less. It can also have a “catch-up” clause which permits the trust (in any subsequent year when the income exceeds the percentage) to make up for any deficiencies which may have occurred in prior years.
The term “Q-Tip” stands for “Qualified Terminable Interest Property”. In a trust of this type, the donor’s spouse must be given the right to all the income from the property in the trust for his or her lifetime. Then the property can pass to the Amador Community Foundation. One of the advantages of a Q-Tip trust with a charitable remainder is that the trust can give its trustees the power to invade the trust principal in case the spouse has unexpected medical expenses or other needs.