Planned Giving

Planned Giving

When people think about supporting their Schools, they often only consider gifts of cash or stock. But did you know that many other types of assets, including personal property, can be donated?

Planned gifts, most often called "non-cash gifts," "net-worth gifts" or "deferred gifts," are generally given through a donor's asset base rather than with cash or discretionary income. Through planned gifts, people make provisions for the school district during their lifetimes, but the school district does not receive benefits until a future date.

Benefits of planned gifts may include:

  • Increased income throughout the lives of the donor, a second beneficiary and in some cases, other people or younger family members (often children).
  • A charitable income tax deduction.
  • Relief from capital gains on appreciated property contributed.
  • A potential estate tax deduction.
  • The ability to direct how you want your school district to use the charitable portion of your gift.

 

Tax benefits for planned gifts

  • Revocable gifts yield no tax benefits during life, because these gifts can be revoked.
  • Revocable gifts received in estate settlements do qualify for any applicable estate tax deduction.
  • Irrevocable gifts qualify for substantial income, gift and estate tax deductions, especially when made during the donor's lifetime. Appreciated property transferred to an irrevocable planned gift arrangement during life also escapes capital gains taxes. These tax savings make irrevocable planned gifts extremely compelling for many people. Irrevocable gifts can also be established in your estate plan!

 

Revocable gifts

Up to 90 percent of planned gifts are revocable (which means they can be canceled) through a will bequest or beneficiary designation in an insurance policy, bank account or retirement plan designation. Revocable planned gifts are popular because donors retain complete control of the property during their lifetime.

These provisions cost nothing to set up and can easily be changed or canceled, because the property does not transfer to your school district until the donor's passing. The easiest and most cost-effective revocable provision is to name your school district as a beneficiary of your IRA or retirement plan asset (401k or 403b). Simply include the school district as a beneficiary by specific amount, percentage of the asset or as a contingent beneficiary. This provision can be changed by requesting a change-of-beneficiary form from your plan administrator. Your estate may receive an estate tax benefit, if the provision is in place, when the donor's estate is settled.

Revocable options include:

  • Will or revocable trust bequests — You can gift the school district by specific amount, percentage of estate or trust or in the residue of the will or trust, after all named beneficiaries have been provided for. These provisions can be unrestricted or restricted to a particular purpose or need of the school district.
  • Beneficiary designations
    • IRAs and other retirement plan assets
    • Insurance policies
    • Bank or brokerage accounts

Additional advantages of charitable beneficiary designations, which have the same tax advantages of will bequests, include the ability to control property during life — if those retirement arrangements were funded with pre-tax assets, as gifts to tax-exempt charities (like your school district) or tax-free income.

When individuals are the beneficiaries of this property, they must pay the income taxes due. These designations can be changed frequently, easily and without cost, by requesting a change of beneficiary form from the plan administrator. Given the benefits of electronic mail, these changes can be made quickly. 

Irrevocable gifts

Though they cannot be canceled, irrevocable (non-cancelable) planned giving methods — like a charitable gift annuity, a charitable trust, gifts or real estate and other arrangements — should be considered because of their attractive benefits to the donor.

 The irrevocable options include:

  • Charitable gift annuities — In return for a gift of $10,000 or more, your school district promises (contracts) to pay a fixed dollar return for life to the donor and/or beneficiaries. Contracts are limited to one life or two lives persons living at the time of the gift. The donor receives an income tax deduction for the charitable portion of the gift and escapes a large portion of any capital gains taxes due. The income start date can also be deferred, enabling a higher payout rate and there are a variety of other creative options with charitable gift annuities that may fit your personal circumstances.

  • Charitable remainder unitrusts — The basic unitrust, generally funded with assets of $100,000 or more, provides income for a lifetime or term of years to the donor and/or other beneficiaries in an amount equal to a stated percentage of fair market value of the assets of the trust, revalued annually. The donor receives an income tax deduction for the amount eventually passing to charity and escapes all capital gains taxation — if the trust is funded with appreciated property. Your School District is willing to co-trust these trusts, but recommends that donors establish these arrangements through their qualified counsel of choice. Additional contributions can be made to this unitrust arrangement.

  • Charitable remainder annuity trusts — The donor and/or other beneficiaries receive annually an amount fixed irrevocably at the time of the gift. The amount is stated in the trust agreement either as a dollar amount or as a percentage of the original value of the gift. The annual payments never changes in value. Income in excess of the annual payment is added to the principal. If the income in any one year is less than the annual payment, the shortfall in income comes out of principal.

  • Gifts of a personal residence or other real property — The donor gifts personal residence or farm or vacation home to the college while retaining use of the property for life. In exchange, the donor receives a current income tax deduction based on the value of the property, ages of the donor and the donor's life expectancy. The donor is responsible for the upkeep costs and real estate taxes while retaining the property.

  • Charitable lead trusts — These are generally gifts of assets of $1,000,000 or more, and provide donors the opportunity to pass assets to heirs while reducing or eliminating estate and inheritance taxes by directing income from those assets to your School District for a term of years. This trust can be established during the life of the donor or through the donor's estate plan. This option is the reverse of a charitable remainder trust, with the Lead Trust providing an annual payment to the your school district during the term of the trust. At the end of the trust's term, the assets are returned to the non-charitable heirs with estate and inheritance taxes being reduced or eliminated.

  • Real estate gift options including outright sale of gift of real estate — Residential or commercial real estate or vacant land can be given to your school district. There are a variety of methods to gift real estate, including giving it outright, using the property to fund a "life income gift" such as a charitable gift annuity or charitable trust, or as part of a bargain sale. In a bargain sale, the property is sold for less than its appraised value to the school district, and a charitable income tax deduction is given for the difference between the sale price and the appraised value as a charitable gift to the school district.  Gifts of real estate have a number of appraisal, inspection, review and environmental requirements designed to protect both the donor and the school district.

  • Gifts of tangible personal property — Charitable gifts can be made of tangible personal property such as collections, furniture and other physical belongings. If the property is directly related to the educational mission of the school district, an income tax charitable deduction is available for the full for market value of the property. If the property is unrelated to the school district's mission, the deduction is limited to the donor's original cost of the item. 

    If property created by the donor, such as a sculpture or a painting, is donated to the school district, then the property is considered ordinary income property and the donor's deduction is limited to original costs (i.e. the cost of the stone and tools, or canvas, paint and brushes). In the right circumstances gifts of tangible personal property, are wonderful gifts to the school district.

If you are interested in a variety of other planned gift arrangements not listed on our planned giving page or you have questions about any of the gift arrangements on this webpage, please contact: 

Brian A. Adesso, CSRM

Director of Business Services

 

328 Sixth Street

PO Box 360

Menasha, WI  54952

www.mjsd.k12.wi.us

P: (920) 967-1427

F: (920) 751-5038

adessob@mjsd.k12.wi.us

 

“Reaching Every Student Every Day”