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Planned Giving |
Glossary |
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| Bequest: a testamentary gift (or gift received after death) generally received through a donor’s will or other estate-planning document such as a living trust. Charitable Annuity Trust: provides a fixed income based on a percentage of the initial value of the trust assets. By law the annuity amount must be at least 5 percent. This trust is most often used when the donor’s primary goal is to receive a fixed income and long term inflation is not a concern. Charitable Lead Trust: allows donor to give a fixed annual income to charity for either a fixed term of years or the life of one or more individuals. At the end of the measuring term, the trust is dissolved and the remaining assets (or remainder interest) are distributed back to donor or to individuals specified in the trust. Charitable Remainder Trust: A flexible way to give and receive an income. Assets are placed in an irrevocable trust that is managed by a trustee (for example a bank). Assets are invested by the trustee and can grow tax-free. Trust pays an income for life or for a set term of years to the named beneficiaries. When the last income beneficiary dies, or the trust term ends, the trust dissolves and the remaining assets (charitable remainder) are given to the charity for the purposes designated by donor. Charitable Remainder Unitrust: provides a variable income that is a percentage (by law, a minimum of 5 percent) of the trust assets. Assets are valued annually. Income payments increase or decrease with the changing value of the trust. The trust provides a potential hedge against inflation as income payments may rise over time. Also, the trust can be structured to defer income and maximize growth (for retirement planning as an example) or to handle specific types of assets. Endowment: A gift that is intended to be kept permanently and invested to generate income for charity. Life insurance: Name a charity as beneficiary on a life insurance policy The simplest way to use life insurance to give to charity is to name a charity as beneficiary on a life insurance policy. Designating the charity as beneficiary allows donor to make a larger gift than they could otherwise afford. If the policy is a form of cash value life insurance, donor still has access to the cash value of the policy during their lifetime. However, because donor retains control of policy during their life, this type of charitable gift does not provide many of the other tax benefits of charitable giving. Upon donor’s death, proceeds are included in their gross estate, but the full amount of the proceeds payable to charity can be deducted from the gross estate. Life insurance: Donate an existing life insurance policy to charity Donor assigns all rights in the policy to charity. Donor delivers the policy itself to charity and gives up forever control of the life insurance policy. Because transfer of ownership is irrevocable, this provides the full tax advantages of charitable giving. An income tax deduction equal to the basis of the fair market value of the policy may be taken. The policy is not included in donor’s gross estate unless donor dies within three years of transfer. In this case, donor’s estate will get offsetting charitable deduction. Life insurance: Donate a new life insurance policy to charity Donor purchases a new policy and immediately assigns all rights in the policy to charity. Donor pays all the premiums and delivers policy to charity. A charitable deduction for premiums may be taken if structured properly. The IRS treats this transfer as if the charity itself has purchased the policy on donor’s life. Donor is entitled to full tax advantages of charitable giving. Living trust: A written agreement to govern the distribution of assets at death. Trust is established by donor for their lifetime and is usually revocable. Outright gift: contribution of cash or property in which donor retains no interest and can be used right away by charity. Pooled income fund: A pooled income fund is a trust, operated by a charitable organization, that combines the contributions of many donors for investment purposes. When donors make gifts to the pooled income fund, units are assigned to them or their named beneficiaries. The net income from the fund is paid to each beneficiary on the basis of the number of units assigned. This makes it ideal for smaller contributions. Professional advisors: are estate-planning attorneys, financial planners, trust officers, certified public accountants, stockbrokers and insurance agents who can be invaluable guides in helping you plan and execute your charitable giving. Retained life estate: this gift occurs when a donor transfers title of a personal residence or farm to charity and retains the life estate interest while charity retains the remainder interest. Life estate interest is the donor’s right to use the property for a term of years or their lifetime and/or another person. Remainder interest is charity’s right of ownership to the property after life estate has expired. Retirement assets: are assets such as a retirement plan, 401(k), 403(b), IRA, Keogh, or other qualified pension plans. Will: the most basic instrument used to distribute an asset, also called Last Will and Testament. A will is a legal document that spells out the disposition of a person’s assets after death. It is governed by state law and is the most basic element of an estate plan. Please call Kim-Lan Trinh, Associate Director of Development, Planned Giving & Major Gifts, at 313-237-3408, or email ktrinh@motopera.org, for more information and assistance. |
For more information, please call Kim-Lan Trinh,
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