Traveling across the world

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1 the planned giving report Fall 2007 Vol.3 No.1 June Hoye, BA 55 Improving the World, Starting with GW June Hoye Traveling across the world to Kazakhstan to monitor election practices isn t something that most 73-year-old American women do. This is one of the many unique things about June Hoye, a semi-retired widow who recently made a generous gift to GW. After traveling the world with her naval officer husband, earning two degrees, and helping the needy through her work, June Hoye is continuing to improve the world around her, starting with GW. This is the second time that June, who handled her family s finances for decades, has given a gift annuity to the University. She holds her memories of GW close to her heart, including her time spent on campus as a young woman. I loved my four years there, she says. The whole dorm got to know each other, and I have stayed friends with my freshman-year roommate to this day. June wanted to give back to her alma mater, which is why she set up a scholarship fund in the Columbian College of Arts and Sciences several years ago. I wanted to provide scholarships for people who need it, she says. When I started school, it only cost something like $13 an hour. The rising cost of a modern education inspired June to help future GW students. Recently, she decided to make another gift to GW when she realized that creating a gift annuity offered her substantial financial benefits. It offers a nice tax break. Plus it s regular income. It was a win-win decision good for the school, good for me, she says. continued on flap Inside: Planning for the Single Person The Heritage Society Send for our free booklet, Single-Minded Planning

2 The Planned Giving Report Planning for the Single Person Singles: The Ultimate Majority There are more individuals living alone today than ever before: younger adults who choose a single s lifestyle or decide to become single again after a period of marriage and older adults who never married or who are alone again after the death of a spouse. American society is changing to accommodate the special needs of people living alone, with everything from single-serving foods to singlesoriented apartment complexes. And just as single people have special needs in accommodations and food, they have special needs in financial and estate planning. While the goals may be the same accumulating assets, generating income, minimizing taxes, effectively distributing property at death the techniques used by the single person may vary considerably from those used by his or her married counterpart. Trimming the Tax Burden Federal income tax can be especially onerous for single people: Their tax liability is higher than that of a married couple with the same total income. As a result, tax-saving measures can be especially valuable. Example: Mary Ann and Betty are the sole income earners in their respective households each with taxable income of about $50,000 per year. However, Mary Ann pays over $2,200 more per year in federal income taxes. Reason: Mary Ann is unmarried, and her income is taxed at a higher rate than a similar amount of income for married persons filing a joint return such as Betty and her husband. To determine tax liability, a taxpayer must choose between taking the standard deduction and itemizing deductions. For 2007, the standard deduction allows a single filer to deduct $5,350 from income (singles over the age of 65 may deduct an additional $1,300), representing a standard amount for various deductible items. If actual itemized deductions exceed the standard amount, the excess produces tax savings proportional to the taxpayer s marginal tax bracket. So, a single taxpayer in the 28% bracket who claims $1,000 in deductions beyond the standard amount will realize $280 in savings. Furthermore, it is often possible to increase current deductions through strategies in keeping with one s overall goals and objectives. Example: Evelyn, who is in the 28% tax bracket, would like to buy a condominium but is worried that the monthly payments will be significantly more than the $700 rent she pays for her apartment. Indeed, payments on the unit in which she is interested would be $950. But she discovers that about $800 of that amount would be deductible as interest expense and real estate taxes. Assuming she has other deductions equal to or greater than the standard deduction, these additional deductions will save her the equivalent of $224 a month in taxes reducing the final out-of-pocket cost to $726, about the same amount she now pays in rent. Keep in mind, also, that thoughtful planning of your investments can yield substantial tax savings. Not all income is taxable: Income from municipal bonds generally is exempt from federal income tax (and state income tax in the state in which the issuing entity is located), and the tax on the income

3 L. Schuyler Fonaroff; Arlene Fonaroff, MA 72, PhD 73; Jane Kolson, GW s associate vice president for development; and Harold R. Evans, AA 45, BA 46; recently became new members of the Heritage Society. from Series EE savings bonds can be deferred. While it is not advisable to enter into transactions merely to create deductions, tax advantages of transactions that otherwise fit in with your objectives and lifestyle should not be overlooked. Ensuring the Final Distribution Some gift- and estate-tax planning options used by married persons are not available to singles. Because of the smaller number of options open, single people must plan even more carefully than married people. This care extends especially to the planning of the single person s will. Each state has its own laws for determining the distribution of an estate when there is no will. In the case of a married couple, these laws tend to favor a surviving spouse and children based on the assumption that these are the individuals the estate owner probably would have wanted to benefit. Such assumptions become much more difficult and often much less valid in the case of singles. If you have no surviving spouse or children, it may be that you would want your property to go to a special friend or a favorite charity. State law, though, will usually provide for distribution to surviving relatives as distant as aunts, uncles, nieces, nephews, and cousins. Without a will, nothing is directed to friends or charities you might have in mind. To be sure your estate is distributed the way you want, spell out your wishes in a carefully constructed will or trust instrument. Also, review the beneficiaries you have named on life insurance policies from time to time to ensure that your desires are expressed appropriately. Charitable Planning and the Single Person The desire to help parents, siblings, or friends; the sense of selfsufficiency; and charitable objectives sometimes seem to compete.

4 The Planned Giving Report Such objectives can, however, be mutually supportive. Single people who rely on their own financial resources for support or for the support of a friend or relative may feel reluctant to part with assets that could be a source of income. Careful planning, however, may bring these goals together with productive results. Women control at least 51% of the personal wealth in the United States. Example: Ruth is a newly retired widow, aged 64. Among her assets are securities that she purchased several years ago for $50,000, which are now worth $150,000. The securities pay annual dividends of about $3,000 roughly 2% of their market value. If she were to sell the securities, significant erosion of the amount available for reinvestment would result from the tax on the $100,000 capital gain. She would like to make a major charitable gift to GW but feels she needs all of her current income to continue to live comfortably. After conferring with her advisors and a member of our staff, Ruth decides to use the securities to fund a charitable remainder unitrust that will pay her 6% of its annual value for the rest of her life. At her death, the trust assets will be transferred to GW to support our continuing work. Result: Ruth substantially increases her current spendable cash. In addition, she not only avoids paying any tax on the capital gain but also gets a current incometax deduction of $60,489. This deduction saves tax dollars $16,937 in her 28% bracket freeing more additional funds for reinvestment. And finally, she has the satisfaction of ensuring her charitable gift leaves a lasting legacy at GW. Planning Options for Single Women The transfer of an estate to beneficiaries can be more expensive for a single woman since she lacks the benefits of the marital deduction. Nevertheless, she has many planning tools available to reduce the impact of transfer taxes. A single woman may wish to place her estate in trust for the lifetime benefit of her siblings. Such an arrangement will not avoid the estate tax at her death but will do so at the death of her siblings. Attractive charitable option: A charitable remainder trust could benefit a brother or sister for his or her lifetime, with eventual distribution of the trust assets to GW. A charitable remainder trust established during life may be particularly appealing to a single woman with minimal family responsibilities. The trust can provide her with a stream of income for life and then pass to charity at her death, providing both incomeand estate-tax savings. For More Information We would be happy to send you our latest booklet on this timely topic, Single- Minded Planning. Simply return the attached card for your complimentary copy.

5 The Planned Giving Report Hoye continued from page 1 June is no stranger to helping others. Up until a few years ago, she worked for the Fairfax (Virginia) Department of Housing and Community Development in the Federal Housing Assistance Program. There, she worked with the poor, the elderly, and people living with HIV/AIDS. June describes the work as both rewarding and frustrating. Her interest in working with people began early. She earned a bachelor s degree from GW in 1955, but her education didn t stop there: I started graduate school at George Mason University in the 70s and worked parttime; I was interested in counseling. Then her husband was stationed overseas for almost three years, so her education was put on hold. She finally graduated in 1980 with a master s degree in education and counseling. Today, June stays occupied by working on the old house she recently bought in Norfolk, which sits on more than half an acre of neglected land. I m getting it in shape. I enjoy it, and I m learning a lot, she says. There s always something to do on the house. As if that weren t enough, June also works part-time for a therapeutic foster care agency and volunteers with the Organization for Security and Co-operation in Europe, which monitors elections in various countries to ensure the democratic process stays intact. She traveled to Kazakhstan with the organization in late August. The focus is the democratization of the country and to make sure the elections are done fairly, without incident, and done well, she says. Despite staying active well into retirement, June is nostalgic for her college days on GW s campus. That I miss. Being right there where all the action is. Visit our Web site to learn more about the benefits of gift planning for your family, GW, and future generations.

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7 BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO WASHINGTON DC POSTAGE WILL BE PAID BY ADDRESSEE: OFFICE OF PLANNED GIVING THE GEORGE WASHINGTON UNIVERSITY 2100 M STREET, NW SUITE 310 WASHINGTON DC NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES

8 The Planned Giving Report A publication of GW s Division of Development and Alumni Relations This newsletter provides general information and examples for discussion purposes. Please consult with your attorney or other financial advisor to evaluate the applicability to your unique tax and financial circumstances. The Heritage Society An honorary society of alumni and friends, the Heritage Society recognizes individuals who have chosen to support the educational mission of The George Washington University through a bequest intention, charitable gift annuity, charitable trust, or other planned giving arrangement. In gratitude for their thoughtful generosity, the University acknowledges Society members in publications and through special events, including an annual luncheon held in their honor each May. If you have already remembered the University in your estate plan, we invite you to notify us, so that we might extend our thanks and welcome you into the Heritage Society. To learn more about planned giving arrangements that provide tax benefits while also creating a legacy at GW, please return the attached reply card or call our office at Heritage Society For more information, please contact: Jane Kolson Division of Development and Alumni Relations The George Washington University Washington, DC Telephone: / pgiving1@gwu.edu Web site: NONPROFIT ORG. U.S. Postage PAID Indianapolis, IN Permit No F St. NW Washington, DC ADDRESS SERVICE REQUESTED