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Planned Giving involves the integration of personal,
financial, and estate planning concepts with a person’s plan
for lifetime or testamentary charitable giving. The most
common type of planned gift is charitable bequests in a
person’s will or trust. There are other types of planned
gifts, and persons should discuss them with a qualified
charitable gift planner and a professional advisor, the type
of planned gift that would be most appropriate for them.
By including Northwestern State University in your financial
and estate plans, you may increase your current income and
reduce taxes, while providing future support for areas of the
university important to you. Planned giving allows people to
make very meaningful legacy gifts as part of their estate
plan.
If you are interested in planned giving please contact Dr.
Chris Maggio at 318-357-4414 or
maggioc@nsula.edu.
Bequests
Northwestern State University friends and alumni can leave a
legacy at the University through a bequest in their will or
trust. Bequests are important to the University because in
most cases they help build the endowment.
There are several ways to make a bequest to NSU, including the
following:
1. You may choose to bequeath a specific amount of cash from
your estate.
2. You may bequeath certain property from your estate, for
example, a home, farm land or other real estate, artwork, or
other tangible personal property.
3. You can give a fixed percentage of your estate, for example
2%, 5%, 10%, etc.
4. You can choose to give the remainder or residue of your
estate after all other bequests have been satisfied.
5. Stocks and publicly traded securities are easy to give and
offer great tax advantages. You can transfer the stock
electronically through your broker or mail the stock
certificate and a signed stock power for each certificate.
6. Finally, if you already have a will or trust you can modify
it (by adding a codicil) to include a bequest to NSU.
Please note that bequests to NSU should name the NSU
Foundation as the charitable beneficiary. The NSU Foundation
is a designated recipient of gifts for the benefit of NSU and
is certified as a “qualified charitable organization” as
described in the Internal Revenue Service Code, Section 501
(c) (3). Therefore, gifts made through the NSU Foundation are
eligible for deductions for federal income tax, gift tax and
estate tax purposes.
Life Income Agreements
With a life income agreement, you essentially make a gift to
Northwestern State University while retaining income interest
from the gift. There are two life income agreements that are
available through NSU: a charitable gift annuity and a
charitable remainder trust.
Retirement Plan Designations
RETIREMENT PLANS FACE DOUBLE TAXATION
An increasingly important element in estate planning is the
retirement accounts (IRAs, 401ks, etc.) that you have been
accumulating tax-free. You may be inclined to name your
children, niece/nephew, or others as the beneficiaries of the
account. However, did you know that if an individual other
than your spouse is named, whatever remains in your account
can be taxed twice?
Unlike other property (i.e. cash, stocks, etc.) that passes to
your heirs and may be subject only to estate tax, the balance
of your retirement account (except in case of Roth IRAs) is
subject to income tax as well. And it is your heirs who will
have to pay it.
Example of the Taxation on Retirement (based on maximum tax
rates)
IRA Value: $250,000
Less 49% Estate Tax (122,500): $127,500
Less 38.6% Income Tax (49,215)
Net to Heirs: $78,285
Total Tax as a Percent: 69%
How can you reduce or eliminate the taxes on Retirement Plan
accounts?
Avoid undesirable tax costs with thoughtful estate planning.
Making a charitable gift from your retirement plan is an
innovative way to support NSU and save taxes. With a little
planning, both the University and your heirs can enjoy
increased benefits.
What are your options for using a retirement plan account to
reduce taxes and make a gift to NSU?
1. Name the NSU Foundation as a beneficiary of your IRA or
Retirement Plan.
Naming the NSU Foundation as a beneficiary of all or part of
an IRA or retirement plan can achieve both estate tax and
income tax savings. The funds will avoid estate tax, leaving
for your heirs those assets not subject to additional income
taxes. NSU, as a non-profit organization, will not pay income
tax and your heirs will receive their share of your estate
without the burden of more taxes.
Use your plans beneficiary form so that NSU can receive an
outright distribution from your IRA following your death. The
NSU Foundation can also be named a contingent beneficiary
subordinate to you and your spouse. If you wish to leave part
of your IRA to NSU, it is best to create a separate IRA for
your spouse and one for NSU. Check with your plan
administrators for the best alternative for your needs.
Use your retirement plan’s beneficiary designation form – not
your will! Retirement plan assets should not be used to
satisfy a specific monetary bequest in your will or your
estate may end up paying more taxes. The estate will be
treated for income tax purposes as receiving a distribution of
retirement plan assets and using those assets to satisfy the
estate’s obligation to pay the bequest. In such instances, the
intended charity should only be named as the direct
beneficiary of the retirement plan assets on the appropriate
beneficiary designation forms supplied by the retirement plan
administrator or custodian.
2. Use your retirement plans to fund a Charitable Remainder
Trust (CRT)
Have the balance of IRA’s or retirement plans transferred at
your death to a charitable remainder trust. The trust will pay
income to a surviving spouse or other heirs for their
lifetimes or a period of years.
If your spouse is the beneficiary, no estate tax is due on the
funds. If others are beneficiaries, the charitable deduction
will reduce the estate tax. In either case, the transfer of
assets will not trigger income tax. Because of the tax
savings, the income beneficiaries could potentially receive
more income/assets by utilizing the charitable remainder trust
than if they had received the retirement assets outright.
3. Reduce tax on your Required Minimum Distribution
Once you reach a certain age 70 1/2, you must begin taking
minimum distributions out of your IRA or retirement plan.
Income tax on minimum distributions can be offset by a
deduction for charitable gifts. Consider using your minimum
distribution to make an outright gift or life income gift to
NSU that generates an offsetting charitable deduction.
Charitable Lead Trusts
A charitable lead trust is one of the most effective
techniques available to pass wealth to the next generation
with a minimum of transfer taxes. A Charitable Lead Trust can
be created during the donor’s lifetime or by will/bequest. The
gift is placed in the lead trust for a fixed period of years,
usually 10 to 25. Annual payments from the lead trust support
the area of NSU designated by the donor. Payments may be a
fixed amount (annuity trust) or a fixed percentage of the
value of the trust (unitrust). When the trust term ends, the
remaining principal is returned to the individuals named by
the donor, typically the donor’s children or grandchildren.
Advantages of a Charitable Trust
It provides
significant support for a Northwestern State University
program important to you.
It can provide a
substantial inheritance for your heirs.
You receive a gift
or estate tax deduction based on the present value of your
projected gift payments to NSU.
It reduces the
size of your estate and thus the estate taxes that could be
due upon your death.
Assets to use for
Lead Trust
Cash or other
income-producing assets
Interests in
family businesses and family limited partnerships
Income-producing
property
Who Is a Good
Candidate to establish a Lead Trust?
A person who has
more income than he or she feels necessary.
A person who
wishes to transfer assets to children or grandchildren at
reduced gift and/or estate tax cost.
A person who has
an income-producing asset suitable to establish a lead trust.
Note that a lead
trust is not tax-exempt. Therefore, it can be disadvantageous
to establish a charitable lead trust with an appreciated asset
if the plan is for the trust to sell the asset. On the other
hand, if the asset is appreciated stock and the trust sells
just enough each year to make its payout, the trust can work
well.
Types of Charitable Lead Trusts
Non-Grantor: The trust principal is distributed to donor’s
heirs at the end of the trust term, which is the most common
type of charitable lead trust.
Grantor: The trust principal is returned to the donor at the
end of the trust term.
Living Trusts
Living trusts allow you to provide for yourself and your
family before and after your death. They are fully revocable,
so you can change or terminate them at any time. Unlike a
will, a living trust lets you determine in advance of your
death how and by whom, decisions will be made for you.
This type of plan is most useful if you don’t know whether or
not you will have enough assets to give to charity. You can
set aside assets or income into a trust and name NSU as the
ultimate beneficiary of the trust assets.
There are many benefits to a living trust. You, or a
beneficiary, receive the income from the trust assets, you are
in charge, but a professional trustee does the detail work,
you name who will immediately receive the trust remainder, the
trust assets bypass probate, sp the terms are private.
Credit Shelter Trusts
A credit shelter trust is created to receive the $650,000
exemption (1999 level) that is allowed by law from the federal
and estate taxation in the estate of the first spouse to die.
This type of trust allows the assets from the trust to pass
tax free through the estate of the surviving spouse at the
time of his or her death. If these assets had not been placed
in trust, they would have been included in the surviving
spouse’s taxable estate.
Life Insurance
Make a gift of an existing Life Insurance policy
Nearly everyone has some type of life insurance, perhaps in
the form of group protection provided by your employer or in
the form of an individual policy that you purchased from a
professional life insurance agent or financial planner.
As you review your year-end financial status, remember that a
no longer needed life insurance policy is a viable gift.
Policies that are paid up may be deductible as gifts for their
replacement value (unless that value is greater than the tax
or cost basis). Policies that still require premiums to be
paid can be given, and the future premiums deducted from
annual income tax. The donor may qualify for income tax
deductions when the organization is deemed to have an
insurable interest in the donor’s life. A new policy on your
life naming us as beneficiary guarantees a future gift as
well.
Using Life Insurance for Wealth Replacement
Life insurance can also be used to provide “wealth
replacement” for heirs when other planned gifts are made. For
example if you establish a Charitable Remainder Trust, you may
choose to set up an irrevocable life insurance trust. Death
proceeds from that trust could be designated to benefit your
heirs, thereby replacing the assets that were used to
establish the Charitable Remainder Trust.
If you are interested in planned giving please contact Dr.
Chris Maggio at 318-357-4414 or
maggioc@nsula.edu.
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Northwestern State
University Office of Alumni and Development
535 University Parkway | Natchitoches, LA 71497
Phone (318) 357-4414 or Toll Free (888) 799-6486 |
