Since our inception in 1998, we have received millions of dollars in assets as the result of planned gifts. We are committed to providing planned giving options to assist donors and non-profits in the community. By including philanthropy in an estate plan, donors and their heirs often benefit from lower income and estate taxes. The Foundation offers a number of options to make a planned gift that will support favorite charities far into the future. All of the following services are available to any person or business entity. Options for planned giving include: Gifts by Will, Retirement Plan Assets, Charitable Trusts, Charitable Gift Annuities, Life Insurance and Gifts of Personal Residence.
The Foundation will assist in evaluating the following factors in order to provide analysis of the effects to be expected by donors, their heirs, income beneficiaries and recipient charities touched by the proposed gift.
• Tax Effect. The Foundation will review the potential tax effect to donors, income beneficiaries (if any) and recipient charities.
• Accounting Treatment. The Foundation may provide information on how accounting treatment may affect donors, income beneficiaries and recipient charities.
• Gift Value. The Foundation will analyze the present and future value of a proposed planned gift.
• Administrative Requirements. Foundation staff will consider administrative requirements imposed by the IRS and accounting rules, and will apply pragmatic considerations to ease the difficulty of administration.
Foundation staff can work with attorneys, accountants, bankers, brokers, financial planners and other professional advisors to assure that planned gifts meet the expectations of donors.
IRS Circular 230 Notice: The Foundation advises you to seek your own legal and tax advice in connection with gift and planning matters. The Taos Community Foundation does not provide legal or tax advice. The information contained herein is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.
Gifts by Will
A will is a simple and effective way to provide support for favorite charitable organizations. A bequest of a specific amount or a portion of the residuary estate can be made to a fund at the Foundation. The Foundation can provide sample language for consideration. An attorney should review each estate plan from time to time to assure that estate planning documents are accomplishing the donor’s goals. Bequests to the Foundation may include:
Outright Bequests. The donor directs in his or her will that certain assets be transferred to the Foundation in the form of cash, real estate, business interests, personal property, life insurance or other property.
Residuary Bequests. The donor makes a gift of all or a portion of his or her residuary estate to the Foundation and other qualifying charities.
Contingent Bequests. The donor makes a bequest that will come to the Foundation only if a specific contingency occurs. For example, “I give $10,000 to my niece, Judy, but if Judy predeceases me, I give that amount to the Taos Community Foundation for the Capital Area, Taos New Mexico.
Remainder Interests. The donor creates a Charitable Remainder Trust by will, providing for annual payments to be made to one or more named individuals for the lifetime of these individuals, or for a specified period of time not more than 20 years, after which the remainder will be distributed to a fund.
Income Interests. The donor creates a Charitable Lead Trust by will to provide that the income be paid to the Foundation and other qualifying charities for a specified period of time, after which, the remainder will be distributed to individuals named in the will.
Retirement Plan Assets
Assets held in qualified retirement plans or individual retirement accounts (“IRAs” can be gifted to charity. The Foundation can help donors review possible tax effects of using retirement plan assets for charitable giving. Under current tax law, a gift of qualified plan assets to a charity during life is a taxable event for the donor, but a gift of qualified plan assets at death can reduce adverse tax consequences and provide a wonderful gift. The donor may name the Foundation (or a fund) as the designated beneficiary of retirement account assets upon either his/her death or the death of family beneficiaries. The Foundation recommends consultation with a professional advisor to complete such forms. The types of retirement plan assets accepted by the Foundation include:
• 401(k) Plans
• 403(b) Plans
• Roth IRAs
• Keogh Plans
• SEP Accounts
Charitable Remainder Trusts (“CRT”). The donor irrevocably transfers cash, securities or other property to a Trustee, who manages those assets and makes payments to the donor or other named individuals for their lifetimes or for a period not to exceed 20 years. On the death of the beneficiary (or surviving beneficiary if more than one), the assets of the Trust are distributed to the Foundation or other named charitable beneficiaries.
There are two types of Charitable Remainder Trusts:
Charitable Remainder Annuity Trust. The Trustee pays the donor (or other named individual beneficiaries) a fixed dollar amount annually from the Trust for the life or lives of the income beneficiaries or for a period not to exceed 20 years.
Charitable Remainder Unitrust. The Trustee pays the donor (or other named individual beneficiaries) a fixed percentage of the net fair market value of the Trust’s assets, as determined each year, for the life or lives of the beneficiaries or a period not to exceed 20 years.
There are variations of Unitrusts:
Net Income with Makeup Unitrust (“NIMCRUT”). The Trustee pays the beneficiaries the lesser of the net income or a fixed percentage of the value of the Trust assets stated in the Trust Agreement. In years when the net income is less than the fixed percentage, the Trustee may pay the lesser amount but distribute the shortfall in subsequent years if the net income exceeds the fixed percentage. NIMCRUTs may be useful when the contributed assets do not produce a high level of income and may be difficult to see quickly or if the beneficiaries do not have an immediate need for income.
Net Income Unitrust (“NICRUT”). Similar to the NIMCRUT, except there is no makeup provision.
FLIP Unitrust or FLIP Unitrust with Makeup. A FLIP Unitrust begins as a NIMCRUT but is later converted to a straight CRT when the Trust sells certain assets such as real property, a business or other hard-to-value assets. After the sale, the CRT pays the non-charitable beneficiary the amount stated in the Trust Agreement. A FLIP Unitrust may be attractive to a donor who desires to contribute to hard-to-value assets and to receive a stable income but does not know when the assets will sell.
Charitable Lead Trusts (“CLT”). Payments are made to a fund or other charitable beneficiaries for a period of years or for the lifetimes of one or more named individuals. The assets are distributed to designated non-charitable beneficiaries such as a spouse or other family member at the end of the term of the Trust. CLTs provide current gifts for charitable purposes and can result in substantial savings of estate and gift taxes. The Foundation strongly recommends that donors meet with a professional advisor to make a CLT fit within the overall estate plan because of its complexity and possible tax consequences.
Other Planned Gifts
Bargain Sales. A bargain sale is part sale, part gift. A donor receives cash for a portion of the value of an asset transferred to a charity, and the difference between the cash consideration received and the fair market value of the asset, as determined by an IRS qualified appraisal, is deductible as a charitable gift.
Life Insurance. Donors may make a gift of life insurance to the Foundation either by irrevocable designating the Foundation as the owner and beneficiary of the policy or by designating the Foundation as a beneficiary of all or a portion of the proceeds of a policy. Change of ownership and beneficiary designation forms may be obtained from the insurance representative. Prior to accepting a policy requiring ongoing premium payments, the Foundation will obtain a written agreement from the policy holder detailing how premiums will be paid. The donor may also elect to cash out existing life insurance policies and donate the proceeds to his or her fund.
Gift Remainder in a Personal Residence or Farm. Donors may obtain income and estate tax benefits by contributing a personal residence or farm to the Foundation and retaining the right to occupy the property during their lifetimes. The Foundation will receive the entire interest in the property upon the donor’s death. The Foundation normally will not accept gifts of the remainder interest in personal residences or farms when the property is mortgaged; however, the Foundation may in certain instances make an exception. The IRS bargain sale rules referred to above may apply to the transaction.
Read more by downloading the complete Charitable Giving Guide.