+ Retirement Plan Assets
Retirement Accounts - IRAs, 401(k), 403(b), TIAA-CREF, and the like - are a major factor in many financial plans. Because they often represent a sizable proportion of one's portfolio, it is natural to think of these assets when considering philanthropy.
When funds are removed from a qualified retirement plan, the owner must pay income tax on the withdrawal. Moreover, if qualified plan assets are included in one's estate, the amount in the plan is effectively taxed twice - once as "income with respect to a decedent" and then again under the estate tax structure. Retirement plan assets thus make a poor vehicle for a person to provide an inheritance to heirs because of the taxes that must be paid on withdrawals during life or on the qualified plan assets contained in one's estate.
Fortunately, both income and estate taxes can be avoided by giving plan assets to charity at death. However, care must be taken to make the charitable organization(s) beneficiary(ies) of the plan directly, rather than allowing the plan assets to be included in one's estate. Since the administration of each plan varies according to the policies written into the plan, it is best to seek advice from your plan's administrator and experienced professional advisors when considering naming charities as beneficiaries of your qualified plan assets.
+ Charitable Lead Trust
A "lead trust" is the converse of a charitable remainder trust. In the lead trust, assets are put in trust for a specific period, either a lifetime or a predetermined number of years, after which the trust assets revert to the grantor (donor), family members, or other individuals. During that period, the earnings of the trust are paid to Lawrence. Thus, the charity's interest "leads" that of the remainder beneficiaries.
Although it is possible to secure an income tax deduction from a charitable lead trust, this vehicle is more commonly used because of its potential to effect substantial estate and/or gift tax savings, which can be greater than if the same assets were transferred to family members through a will or other type of trust. If heirs are to be recipients of the lead trust assets upon termination, a gift tax may be due initially. The amount subject to tax is, however, reduced by the value of Lawrence's charitable interest, which will substantially lower the tax liability.
A properly constructed lead trust can provide a further benefit in the donor's ability to channel to heirs all future appreciation of the assets placed in trust without diminution by gift or estate tax.
A charitable lead trust may be established with cash, bonds, securities, closely held stock, income-producing real estate, or partnership interests.
+ Life Insurance
Billions of dollars of life insurance are in force nationwide, but not all policies continue to serve a useful purpose for their owners. For many individuals, a change in circumstances or the death of a beneficiary leaves them holding life insurance policies that may be a resource for philanthropy.
+ Gift of Partnership Interests
An outright contribution of a partnership interest, general or limited, could provide the donor with a valuable income tax deduction. Because gifts of partnership interests raise complicated tax and investment questions, it is important to discuss such gifts with qualified professional advisors.
+ Family Limited Partnerships
The family limited partnership represents a way for a stock owner in a closely held corporation to arrange for the orderly transfer of stock to the next generation at substantial estate and gift tax savings. Because these arrangements raise complicated tax and investment questions, it is important to discuss such gifts with qualified professional advisors.
For more information, please visit our Create Your Legacy page or contact the Office of Major and Planned Giving at 920-832-6551.
