If you plan to make a charitable gift by will, please think it through carefully. Then, meet with your attorney to discuss and update your will. Tell him or her exactly what you want to do. Be as clear as possible in describing what you want given and to whom.
Let Us Know - We hope you’ll tell us when you have named the Tampa Bay Research Institute (TBRI) in your will. We would very much like the opportunity to thank you for your generosity. If you prefer to remain anonymous, your gift will be kept completely confidential. But at the same time, recognition of your gift can encourage others to do the same. Whatever the case, we will honor your wishes, because we appreciate your support immensely.
Various bequest options for supporters of the Tampa Bay Research Institute, Inc.
A specific amount may be worded: “I give, devise and bequeath the sum of …. dollars to the Tampa Bay Research Institute, Inc., its successors or assigns, a charitable 501(c)(3) organization located at 10900 Roosevelt Blvd. St. Petersburg, FL 33716.”
A percentage from your estate may be worded: “I give, devise and bequeath ….% of my estate to the Tampa Bay Research Institute, Inc., its successors or assigns, a charitable 501(c)(3) organization located at 10900 Roosevelt Blvd. St. Petersburg, FL 33716.”
A certain asset from your estate may be worded: “I give, devise and bequeath [insert here a description of the particular property]” to the Tampa Bay Research Institute, Inc., its successors or assigns, a charitable 501(c)(3) organization located at 10900 Roosevelt Blvd. St. Petersburg, FL 33716.”
A residuary bequest, after other bequests and expenses have been paid, may be worded: “I give, devise and bequeath all the rest, residue and remainder of my property and estate, both real and personal, wherever located, to the Tampa Bay Research Institute, Inc., its successors or assigns, a charitable 501(c)(3) organization located at 10900 Roosevelt Blvd. St. Petersburg, FL 33716.
Charitable Gift Annuity
The concept of the charitable gift annuity in America dates back to 1843, when a merchant in Boston first donated a gift of money to the American Bible Society in exchange for a flow of income. Today, the concept includes valuable tax benefits for donors. But perhaps more valuable than the financial advantages is the satisfaction donors gain by helping to continue to provide quality programming that educates, entertains and enlightens Florida’s West Coast.
A gift annuity is a simple, contractual agreement between a donor and TBRI in which you transfer assets to us in exchange for our promise to pay one or two annuitants payments for life.
By donating through a gift annuity, you: (1) contract for a fixed payment for yourself or yourself and another individual, if you choose, and (2) make a gift to TBRI. If you itemize deductions on your tax return, savings from the charitable deduction reduce the net cost of the gift.
For a period of years, based on a government table of life expectancies, a portion of each payment received is considered a nontaxable return of your investment in the gift. This further increases your after-tax dollars available for spending or investing.
An annuity funded with appreciated property results in these additional advantages: (1) the gain allocated to the gift portion completely avoids the capital gains tax, and (2) the portion of gain to be recognized can be spread over the expected term of the contract (provided that the donor is a primary annuitant and the annuity interest is assignable only to the charitable organization).
With a deferred payment gift annuity, the start of payments is delayed until a specific date, initially determined by the donor. Deferral of payments increases the initial income tax charitable deduction, tax savings and the annuity rate. However, it also reduces the nontaxable amounts to be received. This option is appealing to younger donors who wish to improve future income, such as at retirement.
Understanding Annuity Rates Annuity rates are higher for older annuitants and lower for younger annuitants, based on life expectancy. As a result, gift annuity contracts are generally more appealing to older donors because the purchasing power of a fixed dollar return can shrink over any long period, even with modest inflation.
Rates are also adjusted according to the number of annuitants, with rates for two-life contracts often lower due to the extended life expectancy. The age of an annuitant is the age reached at the nearest birthday when the contract is made, and rates are the same for men and women.
A specific annuity rate is a matter of agreement between the donor and the issuing charitable organization. Below you’ll see how one-life annuity rates increase with age. These rates are recommended by the American Council on Gift Annuities and are changed periodically. Please contact us for current rates.
Charitable Remainder Trust When you create a charitable remainder trust, you irrevocably transfer money, securities or other assets to a trust that will then pay you an income for life or for a period of years. If you wish, the trust also can pay an income to another beneficiary of your choice. At the death of the surviving beneficiary, the remaining principal in the trust goes to TBRI.
You can design your trust to fit your own special needs. First, you decide how much you’d like to put into the trust. Second, you determine the income you’d like to receive from the donated assets. The rate of income return you select must be at least 5 percent. Usually, the rate selected is 5 percent to 7 percent. The best rate for you will depend upon the number of beneficiaries you select and their ages. Third, you decide which type of charitable remainder trust will work best for you.
Choosing a charitable remainder trust is a little like shopping for a new car-the right one depends on your personal needs. Luckily, CRTs come in five variations. We can help you and your professional advisors decide the method that will work best for you.
Which Is Better: Annuity Trust or Unitrust? Whether you choose an annuity trust or a unitrust depends primarily on your economic outlook. With an annuity trust, you receive the same fixed amount each year that you choose at the beginning. This is advantageous when you want to be certain of the dollars you’ll receive. If you’re concerned about the possibility of recessionary times and falling market values, the annuity trust has greater appeal. Although you can’t add to this annuity trust later in order to increase your income, you can always create a new trust for that purpose. In comparison, a unitrust may be a hedge against inflation. If you foresee economic growth resulting in appreciation of the trust’s assets, you’ll favor a unitrust. The valuation can rise or fall, but over time a well-managed unitrust may offer better protection of your purchasing power than fixed dollar payments. A further advantage is that if you want to enlarge the trust later, you can make additional contributions without the cost of creating and administering more than one trust.
Marvelous Tax Benefits Now look at the major and wide-ranging tax savings you can realize when you create a charitable remainder trust.
First, when you fund the trust, you immediately obtain the benefit of a sizable income tax charitable deduction. This is equal to the present value of the remainder interest ultimately payable to TBRI, based on Internal Revenue Service tables of life expectancy factors. The older the beneficiary, the greater the charitable deduction.
You can fund your charitable remainder trust with cash, securities or other property. Highly appreciated assets that generate low current income are an ideal funding medium. While you’d be reluctant to sell such assets directly because of the tax you would pay on the gain, you can transfer them to the trust without incurring the capital gains tax. The trust could sell the assets without incurring any tax and then reinvest the proceeds in order to secure a higher current income yield.
Perhaps over the years your personal investments have grown handsomely, but you now realize that their yield is grossly inadequate. Unfortunately, if you sell and reinvest in higher yielding securities, you’ll lose part of your gain to taxes.
The answer? Transfer your appreciated securities to a charitable remainder trust. In return for your gift, you might get an income two to four times greater than the current dividend from the typical growth stock.
Charitable Lead Trust
When people think about providing an inheritance to children and making a significant charitable gift through their estates, a vehicle known as the “charitable lead trust” is an excellent method to accomplish both objectives.
A charitable lead trust is a trust that the estate owner establishes either during life (an inter vivos trust) or at death (a testamentary trust). The income from the trust flows to a charitable organization, like TBRI, typically for a stated number of years. After that period, the assets inside the trust are then distributed. The fact that the assets will one day be transferred to another person means that this trust has one further distinction: it is a “nongrantor” trust, as opposed to a grantor trust. “Nongrantor” means the trust assets are not owned by the person who established the trust, and the assets are not going to be returned to him or her someday. (A “grantor” trust is one in which the assets will eventually be distributed back to the donor. As a result, the donor is subject to tax on the assets.)
The Tax Benefits Of all the charitable vehicles available to donors, the charitable lead trust is among the most complex. However, a nongrantor lead trust does offer the advantage of providing excellent tax benefits to the estate owner.
Let’s take a look at an example of how the trust works: A person transfers $1 million to the trust. The donor does not receive an income tax deduction. And, TBRI receives an income for 20 years. That income is either a fixed dollar amount or a percentage of the trust value as it is determined each year. For our purposes, let’s assume that TBRI is to receive $50,000 each year. This means that we will receive $1 million over a 20-year period. At the end of that time, the assets in the trust, which may or may not have grown in value, are then distributed (in our example) to a child or even a grandchild with extra planning.
How does this gift impact the donor? As mentioned earlier, the donor receives no income tax deduction. This fact makes it difficult for many people, including attorneys, to understand the benefit to the donor. In fact, the donor may have to pay a gift tax for the privilege of establishing a charitable lead trust.
A Look at the Issues When the gift is established, the IRS requires a calculation to be made to determine the present value of the amount going to the child someday; in our case, in 20 years. Let’s say that value, based on the data we have assumed, is $400,000. This means that the value to TBRI over the years, as calculated by the IRS, is $600,000. If the donor is subject to tax and he or she is at the 46 percent marginal level, the gift tax due on establishing the gift could be nearly $200,000. Not a good deal. Or is it?
When the gift is established, the tax paid is the only tax that will ever be due on that transfer. As far as the IRS is concerned, the transfer is being made on the day of the gift, not in 20 years. Now, consider the possibility that the trust has grown over the years, which is highly likely. And, let’s say the value is ultimately $3 million. This means that the child will receive $3 million and no tax is due. If that asset were transferred outright at that time, the estate tax at the 46 percent rate assigned to that asset would be $1.38 million, far more than the $200,000 (even in inflation-adjusted terms) paid 20 years earlier. Further, during that time, WEDU has an annual income from the trust of $50,000.
Retained Life Estate
You Retain Rights, Responsibilities and Tax Savings By deeding your home to us now, you can obtain a sizable income tax deduction this year. The amount depends on the value of the property and your age (and the age of any person given life use). In addition, you retain the right to rent your home or make improvements to it. You continue to have responsibility for maintenance, insurance and property taxes.
Example: Mary, age 65, a widow, deeds her home to us, though she plans to live there for the rest of her life. The market value of the property is $200,000 (the house, $160,000, and the land, $40,000). Using the required IRS table to discount the gift based on Mary’s life expectancy and a 4.6 percent charitable midterm federal rate and future depreciation of the house, her accountant determines her income tax deduction to be in excess of $81,000.
Any personal residence qualifies for this tax deduction–a farm (with or without the house), vacation home, condominium, even stock in a cooperative housing corporation.
Your gift to us must be an irrevocable remainder interest. In other words, after your life use and that of any survivor, TBRI receives the property outright.
Tax Savings for Partial Use Even a home you don’t occupy year-round may qualify. For example, you could give TBRI a one-half interest in a vacation home. You would continue to use the property for six months of each year while we, as half owner, would use it for the remaining six months. As a result, you’d be entitled to an income tax charitable deduction based on half the property’s fair market value.
Life Income From Home Transferred to a Trust If you don’t want to live in your unmortgaged home any longer, consider transferring it to a charitable remainder trust. The trustee can then sell the property and invest the proceeds in income-producing securities. You’ll receive an income for life–and so can a survivor you name. The trust principal is then transferred to TBRI, without any exposure to estate taxes when the surviving spouse is the only income beneficiary.
When you transfer appreciated property that has been held long-term, you won’t pay any tax on the capital gain. And you’ll benefit from a substantial current income tax deduction.