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Providing A Gift For Children Or Grandchildren
Life Income Gifts
Outright Gifts
Life Insurance Policies And IRAs
Charitable Gift Annuity
Estate Planning For Keshet
Is There a Pot of Gold at the End of Your Rainbow?
Keshet's Planned Giving Committee offers donors the opportunity to maximize their current income, save on taxes, and to play a vital role in estate planning offered by Keshet for individuals with special needs.
For further information about planned giving and estate planning for Keshet, call the Keshet office 847-205-1234.
Keshet Planned Giving Committee Co-Chairs:
William Doyle
Kerry Peck
Elliott Robinson
Keshet's planned giving program offers assistance to you in your charitable gift planning. Our object is to suggest gift opportunities that are most appropriate to your personal goals, assets and circumstances, and that provide you with maximum tax and financial benefits.
These pages describe the many types of gifts that are possible. It discusses gifts that you can make now, either outright or in exchange for lifetime income. It provides information on many ways to include Keshet in your estate plans. And it provides ideas on the best way to use a variety of assets (e.g., securities, real estate, collectibles, retirement plans and life insurance) to support Keshet.
We welcome the opportunity to discuss your situation with you on a confidential basis to prepare a personal proposal for your legal and tax advisors to review.
Outright Gifts
An outright gift can be applied immediately to Keshet. Many types of assets may be donated.
Cash: A gift of cash is the simplest way to support Keshet. The contribution should be made payable to Keshet. Your total cumulative gifts of cash to charities are deductible up to 50% of your adjusted gross income, with a five-year carry-forward for any excess.
Appreciated stock or mutual fund shares: If you donate appreciated securities that you have owned more than one year, you will be entitled to an income tax deduction for the full fair market value of the securities on the date of your gift. You will also avoid the capital gains tax that would ordinarily be due on a sale. Your total cumulative gifts of appreciated securities to charities are deductible up to 30% of your adjusted gross income, with a five-year carry forward for any excess. When deciding whether to give cash or appreciated securities, a gift of securities is generally considered smarter from a tax standpoint because of the extra advantage of the capital gains tax savings. If you want to continue to hold a position in the securities donated, you can use the cash that might otherwise have been donated to repurchase the same securities. These shares will have a new higher income tax basis.
Real estate: Many types of real estate can be donated to Keshet. For example, you can donate a personal residence, a vacation home, a farm or ranch, an investment property or an undeveloped lot. Assuming that you have owned the property more than one year, you will generally be entitled to an income tax deduction for the full fair market value. (For investment properties on which accelerated depreciation has been taken, your deduction may be somewhat reduced). You will also avoid the capital gains tax that would be reportable on a sale. Your gift would be deductible up to 30% of your adjusted gross income, with a five-year carry-forward for any excess.
If you wish to donate just part of the value of your real estate, you may donate a percentage interest to Keshet. When the property is sold, Keshet will receive proceeds from the donated portion and you will receive proceeds from the rest.
Art, antiques, and other collectibles: You may donate artwork, antiques, stamps, coins, jewelry, and other collectibles to Keshet. These items will generally be sold by Keshet to derive proceeds for Keshet programs. Your gift would entitle you to an income tax deduction for the lesser of the current value or the cost basis. This is deductible up to 50% of your adjusted gross income, with a five-year carry-forward for any excess.
Life insurance policies: You can donate a life insurance policy to Keshet. Your deduction for cash value policy would be for the lesser of the cost basis or the fair market value. Your deduction for a term policy is for the unused portion of the premium paid. Gifts of life insurance are deductible up to 50% of your adjusted gross income, with a five-year carry-over for any excess.
Keshet's Life Income Gifts
Keshet's life income gifts can enable you to enhance your own income and/or provide enhanced income to others. They also provide significant income tax deduction and capital gains tax and estate tax savings.
Keshet Charitable Gift Annuity
A charitable gift annuity pays you a set dollar amount each year (depending on your age) in exchange for a gift of cash or marketable securities (minimum $10,000). A charitable gift annuity is generally established to make payments to donor (if single) or to the donor and spouse (if married). However, you can establish a charitable gift annuity to make payments to you for life and then to another individual (e.g., a close friend, sister or brother), or you can establish your gift to provide exclusively for one or two other individuals from the beginning.
Charitable Gift Annuity Rates
| Age |
|
Annuity Rate |
|
65 |
|
6.3% |
|
|
|
70 |
|
6.7% |
|
|
|
75 |
|
7.3% |
|
|
|
80 |
|
8.3% |
|
|
|
85 |
|
9.7% |
|
|
|
90 |
|
11.5% |
|
|
Your annuity rate will depend on the age(s) at nearest birthday(s) of the annuitant(s). Sample single life annuity rates are as follows for 65 and older.
Rates are effective as of September 1, 1999.
For example, if you donate $10,000 in cash or stock for an annuity when you are age 80, you will receive 9.2% ($920/year) for the rest of your life.
Tax Benefits
The spending power of your annuity is greatly enhanced by the tax benefits. A substantial portion of your annuity will be either tax-free or taxed at today's favorable capital gains tax rates for the duration of you "actuarial life expectancy." And, you will receive an immediate income tax deduction for a sizable portion of the value of your gift.
Example: Mrs. Schwartz, age 80, donates $25,000 in cash to a Keshet annuity. She receives a 9.2% annuity ($2,300/year). A substantial portion of her annuity ($1,403.year) will be tax-free for 9.4 years. And. she gets a tax deduction of $11,805.25. When the tax savings from the tax-free portion of her annuity and the tax deduction are taken into account, the effective return of her annuity at the 31% tax bracket is 13.7%.
Deferring Annuity Payments Until a Later Date
You may establish a charitable gift annuity now, but defer payments until a future date when your income needs will be greater. Even though your payments are deferred, you will obtain your tax deduction now.
Because your gift can grow tax-free at Keshet during the deferral period, your payments will be considerably larger than the amount paid to an individual establishing an annuity at the age of payments would begin. Your deduction will also be greater than that available on an immediate payment annuity.
Example: Mr. Kaplan donates $50,000 to Keshet at age 45 in exchange for an annuity beginning at age 65. His annuity rate beginning at age 65 will be 15.9% compared with the 7.0% available to a 65-year-old donor establishing an annuity now. His deduction will be 69.9% of the value of the gift, compared with 30.6% for an immediate payment annuity.
Even a short-term deferral (2-3 years) can make a big difference in your payments.
Example: Mr. Solomon, age 65, just sold his business and realized a large capital gain. He will be consulting for the new owners for the next three years. He wants annuity payments to begin after that time. By deferring payments three years, his annuity rate will increase from 7.0% (available now at age 65) to 8.2%.
A deferred gift annuity can be a wonderful way for an individual of any age to prepare for future retirement while sheltering high income now. Your income tax deduction can be used to shelter taxes from high employment income, a large bonus, high investment income or a large capital gain.
Charitable Remainder Trusts
A Charitable remainder trust is an individually invested trust that can be tailored to your assets and financial goals. The practical minimum amount necessary to fund this type of trust is generally $100,000.
A charitable remainder trust makes payments to you and/or other designated beneficiaries for life or a term of years (maximum 20), after which the trust assets are distributed to Keshet or other charities of your choice.
There are two types of charitable remainder trusts. Either allows you to choose a percentage payout (within limits set by law).
A charitable remainder annuity trust offers the security of a fixed payout that will never change regardless of the trust's performance. Each year, you receive your chosen percentage of the trust's original fair market value. This type of trust is generally used for gifts of cash or marketable securities.
A charitable remainder unitrust bases your payments upon the investment performances of your trust and offers the potential for rising payments over time. Your payout is your chosen percentage of the value of the trust as revalued each year. If trust value rises, so will your payments. However, there is also the risk that if the trust value falls, payments will decrease. This type of trust is often chosen when the trust is likely to last a long time.
Many types of assets can be donated to a charitable remainder unitrust, including cash, marketable securities, real estate, collectibles and closely held stock. Special types of unitrusts can be designated for assets lacking ready marketability or for a donor's special circumstances.
It is possible to add to a charitable remainder unitrust at any time. This is not possible with a charitable remainder annuity trust.
Estate Planning For Keshet
Many donors can make their most significant contributions through their estate plans. A legacy to Keshet can serve as a lasting tribute to your life and provide perpetual funding for children and young adults at Keshet. There are many ways to remember Keshet in your estate plans. Some techniques enable you to provide directly for Keshet through your will, living trust, insurance policies or qualified retirement plans. Others enable you to provide for the security of surviving loved ones while supporting Keshet. You can provide loved ones with income for life or use of your personal residence. You can also pass assets to loved ones at substantially reduced estate tax through a bequest to Keshet.
Bequests in Your Will
You can name Keshet as the direct beneficiary of a specific dollar amount, a specific asset (e.g., a security, real estate or a collectible), or a percentage of the estate remaining after specific bequests are paid.
All bequests to Keshet are 100% deductible against your estate tax liability and are not subject to the income tax deduction restrictions described earlier.
If you wish to restrict your gift to a particular purpose or program, you may review your intentions with the Keshet Planning Giving staff so that appropriate language can be developed for your will.
You can also name Keshet a contingent beneficiary so that Keshet is "second in line" in case your named beneficiary predeceases you.
Providing A Gift For Children Or Grandchildren
You can establish a gift through your will that will pay income to one or more surviving loved ones for life or a term of years, after which the principal will be used by Keshet. This can be an ideal way to provide an extra cushion of support for a spouse, sibling, special needs child, friend or parent. It can also be a useful way to provide for an adult child or other individual for whom you would feel more comfortable providing an income stream that will last a lifetime rather than a single lump sum payment that could be spent all at once.
Your gift can be structured as a testamentary charitable gift annuity or charitable remainder trust. Both of these arrangements are described under "Keshet's Life Income Gifts" above. If you are providing for your spouse, it is also possible to establish a "QTIP" trust. This trust would pay all income earned to your spouse each year and can also allow him/her the use of principal for your spouse's benefit under specified conditions. This can provide added peace of mind to your spouse. Assets remaining in the trust after your spouse's lifetime would pass to Keshet.
Estate tax would be completely avoided on a charitable gift annuity, charitable remainder trust or QTIP trust established only for your spouse. Estate tax would be reduced if a gift annuity or charitable remainder trust was established for other individuals. You can also name a charitable remainder trust the beneficiary of your life insurance policy or assets remaining in your IRA or qualified retirement plans after your lifetime. No income tax would be payable on the transfer of IRA or qualified retirement plan assets to the charitable remainder trust. Estate tax would be completely avoided if the charitable remainder trusts were established solely for your spouse, and reduced if established for others.
Providing Your Loved Ones with Use of Your Residence
You may leave your personal residence, vacation home or farm to Keshet, reserving the right for your spouse; child with special needs or other loved ones to use your residence for life or a term of years. Estate tax will be completely avoided if use is reserved for your spouse and reduced if reserved for others. The individual(s) for whom you reserve the right to use your residence would be responsible for insurance, property taxes and maintenance.
Passing Assets to Your Heirs at Reduced Tax
A charitable lead trust makes distributions to one or more charitable organizations for a period of time, after which trust principal is paid to your heirs (generally children or grandchildren) with a substantial reduction of gift and estate tax that would otherwise have been paid if the assets were left to your heirs outright. This is an ideal way to pass assets to your heirs while helping Keshet. It can be particularly useful if you prefer to see a period of time pass before your heirs receive part or all of their inheritance.
The duration of the trust can be for a set term of years, the lifetimes of certain persons, or a combination of the two. When your trust is created, you select the payout that will be made by the trust each year to charitable organizations. There are two types of charitable lead trust. A charitable lead annuity trust would pay a set dollar amount each year. A charitable lead unitrust would pay a set percentage of the changing value of trust each year.
Gift and Estate Tax Savings: You can establish a charitable lead trust now or through your will. Trusts established now would entitle you to a gift tax deduction. Gifts established through your will would entitle you to an estate tax deduction. The size of the deduction will depend upon the term and payout of your trust. Either way, only portions of the trust assets are subject to gift or estate tax. And, any appreciation in trust assets following the creation of your trust will be passed to your heirs without any additional gift or estate tax.
Example: Mrs. Gold establishes a $500,000 charitable lead annuity trust to pay 6% ($30,000/year) to Keshet for 20 years, after which her daughter will receive the principal. This entitles her to a gift tax deduction of $321,265. Only $178,735 is therefore considered a taxable gift to her daughter. If the trust were established now would entitle you to an estate tax deduction. The size of the deduction will depend upon the term and payout of your trust.
Gifts to Grandchildren: If trust assets are ultimately passed to grandchildren, generation skipping transfer tax will come into play. However, this tax can be reduced or eliminated entirely if part of all of your $1 million generation skipping transfer tax exemption is applied to the trust. We welcome the opportunity to learn more about your interests and philanthropic goals, so that together we may develop a gift program to be proud of for years to come. At your request, we will be glad to prepare a personalized illustration of how any of the charitable gifts we have described in this section would work in your situation.
Revocable Living Trusts
Many individuals establish revocable living trusts to provide for management of assets in the event of future incapacity and to avoid probate expenses. You can name Keshet as a beneficiary of assets remaining in your living trust in the same manner as in a will, and your legacy will be fully deductible for estate tax purposes.
Life Insurance Policies And IRAs
Life Insurance Policies
The proceeds of your life insurance policy will pass according to the beneficiary designations on your policy. You can name Keshet a beneficiary of all or part of the proceeds of any term or cash value policy. You would do this on a form provided by your insurance agent. Life insurance proceeds received by Keshet are not subject to estate tax.
IRAs and Other Qualified Retirement Plans
Keshet can be named a beneficiary of assets remaining in your IRA or other "account type" qualified retirement plans. Many financial advisors consider these to be the wisest assets to leave to charity because they are taxed so heavily if let to heirs, but not taxed at all if left to charity.
Certain assets, including IRAs, retirement plans and US Savings Bonds, are uniquely suited as gifts to charity. These assets are subject to both income tax and estate tax if they pass to your heirs, but escape both taxes if Keshet is designated as the after both taxes are levied. When Keshet is named beneficiary, 100% of plan assets may be used for programs for children with special needs.
Naming Keshet as a Beneficiary of Your IRA
You can name Keshet a beneficiary of your IRA or qualified retirement plan by requesting a beneficiary designation form from your trustee. If you are married, you may need your spouse's consent to name a charity the beneficiary of a plan. If you want to use only part of your IRA to provide for Keshet or other charities (with the rest being used to provide for loved ones), you should speak with your advisors about establishing a separate account for the charitable portion. Under some circumstances, your required distribution each year will be greater if you name charities as beneficiaries. By separating out the portion designated for charities, the change will apply only to that portion.
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