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New Vision of Excellence
Outright
Giving Opportunities Cash The most common
type of outright gift is cash. However, for many potential donors,
cash is a scarce commodity. In such cases, other forms of outright
gifts should be considered. Outright gifts may be made using: Accelerated
withdrawals from retirement accounts Accelerated withdrawals from retirement accounts Retirement
accounts provide a special source of cash for charitable gifts.
Withdrawals are optional for persons age 59 1/2 to 70 and mandatory
for persons older than age 70. There is no upward limit on the
amount that may be withdrawn. Some people
discover that they do not need all of the funds in their retirement
plan and decide to accelerate the withdrawal of assets. Removing assets
from a taxable estate reduces income and estate taxes upon the death
of the owner of the retirement plan. We encourage
you to check with us or your advisor about the most recent tax
results when completing a gift using retirement assets. (back to
top) A donor
contemplating an outright gift to CMU may wish to consider a gift of
appreciated long-term capital-gain property. This type of gift is
deductible at the full fair-market value, and the unrealized gain is
not taxable to the donor or CMU. From a tax standpoint, it nearly
always is preferable to gift such an asset rather than collecting
the taxable income resulting from the sale of that asset. Gifting appreciated property works well if:
Back to Top Another
investment option is to gift stock in a closely held corporation.
The gift results in a sizeable income tax deduction for the donor
and avoidance of tax on long-term capital gain. The stock then may
be redeemed by the corporation for cash or notes, which often are
referred to as bailout earnings. When only family members hold the
company, the buyback and retirement of the stock may result in a
transfer of assets to children. Gifting closely held stock works well if:
Back to Top It is possible
to make a gift of tangible personal property to CMU; however, the
use of the property must be related to the mission and purposes of
CMU. This kind of gift generates tax deductions equal to the full
fair-market value of the asset. If the use of gifted property is
unrelated to CMU’s tax-exempt purpose, the charitable deduction is
limited to the donor’s cost basis rather than fair-market value. Gifting tangible personal property works well if:
Back to Top Appreciated
property outright When a parcel
of real estate is gifted to CMU, it generates a current income tax
deduction for the fair-market value of the property, as established
by qualified appraisals. As is the case with highly appreciated
securities, the gift of long-term, highly appreciated property to
CMU means that the unrealized gain is not taxable to either the
donor or CMU. Property
through a bargain sale This refers to
the sale of property such as a house, condominium, apartment
building, farm, empty lot, stock, etc., to CMU for less than the
fair-market value of the property. For example, an individual with a
piece of property having a fair-market value of $200,000 may choose
to sell that property to CMU for $100,000, thereby gifting a portion
of the property to CMU. The donor is making a charitable gift equal
to the difference between the fair-market value of the property and
the selling price. There are capital gains implications only on the
non-gifted portion of the transaction. Gifts of mortgaged property
are, in effect, bargain sales. Giving property through a bargain sale works well if:
Back to Top Transferring to
CMU all rights of ownership of an existing life insurance policy may
yield a substantial income tax deduction equal to the policy’s
replacement value or the donor’s basis in the policy, whichever is
less. If premiums remain to be paid on the policy and the donor
chooses to make those payments, a current income tax deduction is
available for each payment. When CMU
receives an existing life insurance policy, it has the option of
retaining the policy until the death of the donor, which makes it a
future gift. Other options include terminating the policy
immediately and collecting the current cash surrender value or
keeping the policy and securing a loan against it that is to be
repaid at the time of the donor’s death. Gifting an existing life insurance policy works well if:
Cash,
marketable securities, and, in some cases, real estate, may be
placed into a charitable lead trust that provides income to CMU for
a specified term of years. At the end of the term of years, the
assets in the trust revert to the donor or to the individual(s)
designated by the donor. There generally
is no income tax deduction for this type of gift, but it can result
in significant gift or estate tax savings. Such a plan allows
property to be transferred to family members at a later date when it
will be taxed at a lower rate. This vehicle is particularly
appropriate for donors with relatively large estates. Creating a charitable lead trust works well if:
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