In your estate planning you can designate that a specific amount of money or a specific percentage of your estate – or your entire estate – be left to the Foundation in your will. You can also make a residuary bequest, where the residue of your estate goes to the Foundation after other specific bequests are made, or a contingent bequest, where your gift is dependent on certain events.
Gifts of life insurance
You may transfer ownership of a life insurance policy to the Foundation or name it as one of several beneficiaries, or the sole beneficiary, of the policy. If the Foundation is the sole beneficiary or recipient of a transfer, the policy’s face value will be removed from your taxable estate. Future premiums you pay can be treated as charitable gifts, and if the policy has a cash value you can take an immediate tax deduction.
Gifts through IRAs and other retirement assets
Depending on your age and other considerations, you may use your retirement assets from such sources as 401(k) plans to fund a gift to the Foundation without the gift being taxed as ordinary income (although this does not generate a charitable deduction). A lifetime gift through an individual retirement account can also have positive estate tax consequences.
Charitable remainder trusts
With a charitable remainder trust, you give a specific amount that is placed in a trust managed by a financial institution, and though you relinquish control of the funds you retain a lifetime income interest in them. After you (and other beneficiaries) pass on, the remaining funds are given to the Foundation. Charitable remainder trusts can be set up during your lifetime as an intervivos charitable trust or through your will as a testamentary charitable trust. Specific types of charitable remainder trusts include:
- Unitrusts, where a fixed percentage of the trust’s assets (based on their current market value) is paid to you or your beneficiaries as income each year, meaning the income amount can vary
- Annuity trusts, where the annual income payment is based on a specified percentage of the assets determined by their value when the trust is first established, meaning the amount of the annual payment never changes
Charitable gift annuities
You can establish a charitable gift annuity, where you and/or other beneficiaries receive a fixed annual sum for life, and name the Foundation as the beneficiary of its remainder value. You can also establish a deferred payment gift annuity, where annuity payments do not begin until a specified number of years after the gift is made. This allows you to take an immediate tax deduction (perhaps during a time in your life that you’re in a high tax bracket) and postpone the income until you really need it (perhaps after your retirement).
Charitable lead trusts
With a charitable lead trust (reversionary trust), you transfer a specified amount that is placed in a trust for a specific period, during which the Foundation receives the income. When the trust ends, the principal reverts to you. Usually you are not taxed on the income that goes to the Foundation during the life of the trust.