A Guide to. Planned Giving

Transcription

1 A Guide to Planned Giving

2 If your life has been touched by Special Olympics, and you want to give back, the SOMO Endowment Fund is a great place to start. In this booklet, you ll learn about planned giving to SOMO Endowment Fund. You ll find explanations of some of the most popular gifts that not only benefit our charity, but also provide you with potential tax savings and regular income. You can make a deferred ( planned ) gift with anything that is of value to you, property, life insurance, stocks, or even an IRA. You can create an annuity that produces income for you and reduces your taxes. Or you can name SOMO Endowment Fund in your will and leave a legacy that lives on to enrich the lives of our wonderful athletes. As we work to ensure a viable future for Special Olympics Missouri, the SOMO Endowment Fund remains committed to serving you with helpful resources, information and support as you consider charitable giving. Just as Special Olympics Missouri works to provide unique programs and services for athletes with mental disabilities, we promise an exceptional level of support for you and your family during your estate planning activities that will profoundly benefit these worthy athletes. If you d like to learn more or discuss your options for a planned gift, please contact Laurie Shadoan, Vice President of Development for SOMO Endowment Fund, at (800) or visit somogift.org. What is Planned Giving? It s the integration of personal, financial and estate planning goals with lifetime or testamentary charitable giving. It s also an opportunity for charitable giving in circumstances that may not otherwise allow a donor to make a gift to charity. Contents 2 Wills/Bequests 3 Gift Annuities 4 Charitable Remainder Trust 5 Charitable Lead Trust 6 Gifts of Property 7 Pooled Income Fund 8 Bargain Sale SEF Guide to Planned Giving 1

3 Bequest A gift to charity at death. A bequest is the simplest type of Gift Annuities A gift annuity is an agreement where a donor makes a planned gift to make and one of the easiest to implement. gift of cash or property and a charity agrees to make fixed payments to the donor for life. Consider SOMO Endowment Fund in your will. A tax-friendly way to help Special Olympics. Many people desire to benefit charity but are unable to donate property while they are alive. For example, a donor may have property that is needed during life to cover living expenses or rising health care costs. A donor can retain ownership and use of property during life and still benefit SOMO Endowment Fund by leaving it to SEF at death. Gift to Charity SOMO Endowment Fund receives cash or property. Estate The amount given to charity is not subject to federal estate tax. Preserves Lifetime Flexibility The donor is able to use and control property while alive. A donor can leave property to a charity like SOMO Endowment Fund by including a bequest in his or her will or trust. Property that passes by a beneficiary designation (such as individual retirement accounts) can be left by designating the charity as a beneficiary. Specific Asset Bequests Many bequests transfer a specific item to a beneficiary. I give my car to Joshua. Specific Amount Another common transfer within a will is the gift of a specific dollar amount. I give $1,000 to Sarah. Bequest of a Percent of the Residue A fractional amount or percent of the remainder of your estate may be transferred to charity. I give 50% of the residue of my estate to SOMO Endowment Fund. Undivided Percentage of Asset Bequests You may bequeath or devise an undivided percentage of a particular asset. I give half of my home to Brian. A charitable gift annuity (CGA) is a contract between a donor and SOMO Endowment Fund. A donor gives cash or appreciated property to SOMO Endowment Fund, for example. In exchange, SOMO Endowment Fund makes fixed payments for the lifetime(s) of one or two individuals. Payout Rate Gift annuity payments are based on a rate schedule. SOMO Endowment Fund uses rates set by the American Council on Gift Annuities (ACGA). Under the ACGA s rates, the older the age of the person receiving gift annuity payments, the higher the rate. Please contact us for current rates. Taxation of Payments A predetermined portion of each gift annuity payment is taxfree and the remaining amount of each payment is taxable at ordinary tax rates. Timing A gift annuity contract can begin making payments immediately (a current gift annuity) or defer payments for at least one year (a deferred gift annuity). A donor wants to make a gift to SOMO Endowment Fund but needs regular payments to supplement income. Donor and SOMO Endowment Fund enter into a charitable gift annuity agreement. Fixed Payments for Life A gift annuity contract provides fixed payments to one or two individuals for life. Partly Tax-Free Payments A portion of each gift annuity payment to the donor is tax-free. Rates by Age Annual gift annuity payouts are based on the donor s age (rates are higher for older donors). income tax deduction for the present value of the gift to SOMO Endowment Fund. 2 SEF Guide to Planned Giving SEF Guide to Planned Giving 3

4 Charitable Remainder Trust A charitable remainder trust receives cash or property from Charitable Lead Trust A charitable lead trust (CLT) receives cash or property from a donor, makes payments for a life, lifetimes or term of years a donor and makes payments to charity for a specified and then distributes the remainder to charity. period. At the end of the period, it distributes the trust property to a specified beneficiary, usually family. A donor wants to turn appreciated A donor transfers cash or appreciated property to the charitable A donor transfers cash or property to the CLT. Unlike a CRT, a A donor wants to give a gift to SOMO property that produces little or no remainder trust, set up by SOMO Endowment Fund. The charitable CLT is a taxable trust. Each year the CLT will report its income Endowment Fund for a period and pay income into a productive asset without remainder trust (CRT) is a tax-exempt trust that can sell the and then take a deduction for the amount that it distributes to as little gift or estate tax as possible. paying capital gains tax on the sale of the property. A donor contributes the appreciated property to a charitable remainder trust associated with SOMO Endowment Fund that will sell the property taxfree and then make payments for life or a term of years. Bypass Gain The trust sells property tax-free. Increased Income The trust pays a percentage of its value to the trust beneficiary. Charitable income tax deduction. appreciated property without paying capital gains tax. A charitable remainder trust can last for the lifetime of one or more beneficiaries or for a specific term of years. Annuity vs. Unitrust Payout A charitable remainder annuity trust (CRAT) pays a fixed dollar amount each year. By contrast, a charitable remainder unitrust (CRUT) pays an amount equal to a percentage of the trust value at the beginning of each year. Taxation of Payouts Most charitable remainder trust payouts are taxed to the beneficiary as ordinary income and/or capital gain. Payout Flexibility A unitrust offers four flexible payout options. A standard charitable remainder unitrust pays a fixed percentage of the trust value. A net income trust (NICRUT) pays the lesser of the trust s net income or the standard amount. A net income with makeup trust (NIMCRUT) is like a NICRUT but can make additional distributions. Finally, a FLIP trust pays like a NIMCRUT until a certain date or event and then flips to payout like a standard CRUT. Learn more by contacting SOMO Endowment Fund. SOMO Endowment Fund, any excess is subject to tax. A CLT can last for the lifetime of one or more beneficiaries or for a specific term of years. Annuity vs. Unitrust Payout Each year, a CLT pays either a fixed annuity amount or available unitrust amount to charity. Lead Trust Types A family CLT receives property and usually distributes it to a family member at the end of the term. A gift tax deduction is available to a donor who creates a family CLT. A grantor CLT receives property that ultimately returns to the donor. The donor gets an income tax deduction when the trust is created. However, the donor has to report trust income on his or her personal income tax return each year. A donor contributes property to a trust that will make distributions to SOMO Endowment Fund for a specified term and ultimately distribute the property to the donor s family or be returned to the donor. Pass Appreciation to Family A donor gives property to a lead trust and that property plus growth passes to his or her family with no additional tax. Gift or Estate A donor receives a current federal gift or estate tax deduction for the present value of the payments that will go to the SOMO Endowment Fund. 4 SEF Guide to Planned Giving SEF Guide to Planned Giving 5

5 Gifts of Property SOMO Endowment Fund accepts a gift of property either a personal residence or farm and the donor retains the right to use the property for his or her lifetime. Pooled Income Fund SOMO Endowment Fund accepts a gift of cash or stock, invests it with similar gifts from other donors and then distributes a proportionate share of earnings to the donor. A tax-friendly way to stay in your home while you support SOMO Endowment Fund. Be a team player with your gift to SOMO Endowment Fund. A person may desire to leave his or her house or farm to SOMO Endowment Fund at death, but would like a current A donor executes a deed transferring property a house or farm to charity. In the deed, the donor retains a life estate, that grants the donor the right to live in the home for life. Donor transfers cash or appreciated property to the pooled income fund (PIF) and receives an income tax deduction for the present value of the remainder interest at the donor s death. A person may desire to leave property to SOMO Endowment Fund at death but currently needs to supplement income. tax benefit. Donors can deed a house or farm to SOMO Endowment Fund but keep the right to use the house or farm for their remaining lifetime. income tax deduction for the remainder value of the home or farm. Preserves Lifetime Use The donor is able to use and control the home or farm while alive. The life estate typically lasts for the life of the donor. Deed Restrictions The deed of the remainder interest to the SOMO Endowment Fund must not be restricted. Mortgage It is possible for a donor to make a gift of a remainder interest even though there is a mortgage upon the residence. MIT Agreement The donor agrees to be responsible for the maintenance, insurance and taxes on the property. Tax-Free Sale The PIF sells the appreciated property and all capital gain is bypassed. Reimbursement The cash or property sale proceeds are invested as part of the pooled fund. Annual Income The donor receives a percentage of the PIF earnings each year. These earnings are usually taxed to the donor as ordinary income. A donor gives cash or stock to SOMO Endowment Fund. The charity issues shares of its pooled income fund to the donor. The donor receives earnings from the pooled income fund for life with the remainder going to SOMO Endowment Fund. Bypass Gain The donor bypasses gain when appreciated property is sold by the pooled income fund. income tax deduction. Increased Income The donor receives a percentage of the pooled income fund earnings every year. 6 SEF Guide to Planned Giving SEF Guide to Planned Giving 7

6 Many people desire to benefit SOMO Endowment Fund but cannot afford to give an entire property to charity. Other people may have mortgaged property that they are willing to give to charity. SOMO Endowment Fund can buy the property at a bargain price or agree to accept the donor s mortgaged property. Immediate Benefit to Donor The donor gets a cash payment or debt relief. Bypass Gain The donor avoids gain on the part of the property that is a gift. income tax deduction for the part of the property given to charity. Bargain Sale SOMO Endowment Fund purchases property for less than fair market value or accepts a gift of mortgaged property. A bargain sale works just like any other sale except that the sale price is a bargain (less than the property is worth). The donor transfers an asset to SOMO Endowment Fund and receives less than fair market value in return. Charitable Deduction The donor receives a charitable deduction for the difference between the fair market value of the property transferred and the cash received in the bargain sale. Cash or Debt Relief A donor sells the property to charity and receives a cash payment or debt relief. Bargain Sale The donor gets the cash or debt relief he/she desires and the charity receives a valuable property for less than full price. The difference between the sale price and the appraised value of the property is a gift to SOMO Endowment Fund. Special Olympics Missouri by the Numbers 2 Athletes who attended the 2007 World Summer Games in Shanghai, China 2 Athletes who will attend the 2009 World Winter Games in Idaho 8 Worldwide ranking of Missouri s Law Enforcement Torch Run 19 Sports offered 37 Years Special Olympics has been in Missouri 112 Counties in Missouri with Special Olympics programs (out of 115) 154 State, area and local competitions 485 Vendors used in Local programs and teams 852 Newspaper clippings in ,000 Miles run annually in the Torch Run 1,311 Registered coaches in ,263 Polar Bear Plunge participants in 13 years 8,653 Medals at state and area games 15,311 Athletes statewide 21,000 LETR T-shirts sold annually 23,426 E-news subscribers 20,000 Winning Edge newsletters distributed 111,904 Potential participants (estimated 2% of Missouri s population diagnosed with mental retardation) 164,381 Total constituents (includes volunteers, family members, donors and law enforcement) 511,025 Website hits monthly $ 4 Million Yearly budget Millions Lives touched and enriched 8 SEF Guide to Planned Giving SOMO summer games photos courtesy of Lightsmith LLC.

7 Through the SOMO Endowment Fund, a nonprofit 501(c)(3) organization, you can make tax-deductible planned gifts as well as annual contributions. As we work to ensure a brighter future for Special Olympics Missouri, we invite you and your advisor to learn about the benefits of making a legacy gift to SOMO Endowment Fund. You ll have the complete confidence that all the money raised in Missouri stays in Missouri to support SOMO sports competition, training and health & fitness education for individuals with mental disabilities. Visit or contact Laurie Shadoan at to learn more Diamond Ridge, Ste 800 Jefferson City, MO Phone Fax somogift.org