Planned Giving & Tax Planning

A donation of appreciated stock can avoid capital gains taxes (state and local) and provide a deduction at the appreciated value. This approach is even more valuable with the loss of state tax deductions.

A donor advised fund allows donations to be made to the fund, then distributed to charities over time. The deduction is taken when the gift is made to the fund and can be “bunched” to meet limits. Family Foundations may also wish to take advantage of donor advised funds to help smooth out giving as portfolios move up or down.

You may also be able to make a gift of up to $100,000 to GallopNYC with a distribution from your Individual Retirement Account (IRA) and take advantage of tax savings. This distribution to charity can be a significant benefit for IRA owners who are required each year to take minimum required distributions, which are included in their gross income for income tax purposes.

Including GallopNYC in your will or trust is a meaningful way to help us continue to serve New Yorkers with disabilities and special needs.

Ways You Can Give Through a Will or Trust:

• Leave a specific dollar amount or asset to GallopNYC.

• Designate a percentage of your estate to be given through your will or living trust.

• Give only the remainder, or residue, of your estate, or that which remains after bequests to loved ones have been made.

Retirement assets are one of the most beneficial gifts you can give to GallopNYC. These funds grow tax-free until the time of withdrawal. With the innovative use of these assets, you are able to contribute generously to GallopNYC as well as provide for your loved ones. Many taxes on assets in retirement plans can be avoided or reduced through a carefully planned charitable gift.

A retirement plan can be a tax-efficient and simple way of including GallopNYC in your estate plan, by naming GallopNYC as a beneficiary on your plan’s beneficiary designation form. The tax advantage stems from the fact that most retirement plans (other than Roth IRAs) are subject to income taxes—and possibly estate taxes—if left to an individual beneficiary; however, a charity that is named as the beneficiary does not pay income or estate taxes on the distribution. Thus, the full value of what is distributed can be used by as a gift from your estate, supporting the purpose you designate.

Life insurance is often overlooked as an asset that you can use to make gifts to GallopNYC. There are a number of ways to support GallopNYC’s programs with an insurance-related gift.

Add a beneficiary to your policy.

It is relatively simple to make a change to the beneficiary/beneficiaries of your insurance policy without changing your will or other aspects of your estate plan. Just ask your insurance company for a form that will allow you to make the GallopNYC a beneficiary of your insurance policy.

Give a paid-up policy.

You can transfer ownership of a paid-up life insurance policy to the GallopNYC. After the transfer, the GallopNYC can elect to either cash in the policy right away or keep the policy and receive the death benefit later. You would receive an immediate income tax deduction for either the cash surrender value or the basis (usually the cost), whichever is less.

Making the GallopNYC the owner and beneficiary.

You can take out a policy and make the GallopNYC the owner and beneficiary of the policy. Premium payments can be made by you directly to the insurance company or by the GallopNYC, by way of your annual gift to the organization. Whichever way the premiums are paid, you can take an income tax deduction.

A Charitable Remainder Trust (CRT) is a life-income arrangement that provides you and/or other beneficiaries with a stream of income for life or for a period of years. After the trust terminates, the principal, or “remainder interest,” goes to GallopNYC. CRTs are separately invested and managed trusts. GallopNYC does not manage these trusts for donors.

CRT Benefits:

• When appreciated assets are donated to the trust, they can be sold without incurring capital gains tax, allowing the entire proceeds from the sale to be reinvested.

• You can receive a charitable income tax deduction in the year the gift is made, with an additional five years to carry over any unused deduction.

• You can add to certain types of CRTs at any time.

• Through reinvestment within the trust, you can achieve diversification of a previously concentrated asset.

• Any assets that you contribute to a CRT are immediately removed from your estate, reducing your estate tax exposure.

Basic Types of CRTs:

• Unitrust (CRUT): This type of trust pays a variable income based on a fixed percentage (for example, between 5 and 6 percent) of the trust assets, revalued once each year. One advantage of a unitrust is that your income can increase as the trust principal grows over time. This type of CRT allows you to make additional contributions at any time.

• Annuity Trust (CRAT): This type of trust pays a fixed annual income that is determined when the trust is established. The annuity trust is often preferred by those who are interested in the security of a constant return.

Charitable Lead Trust (CLT) is an arrangement that can be thought of as an inverse to CRT. In a CLT, the charity gets an annual annuity and the remainder goes to trust for the donor’s family free of estate tax. Many additional benefits include the tax treatment of the account and tax deductions.

In a Charitable Lead Trust, the charity gets an annual annuity for a set term and the remainder goes to trust for the donor’s beneficiary free of estate tax. In addition to providing a means for benefiting a favorite charity, a properly designed lead trust will produce an estate or gift tax deduction for the donor for the value of that portion of the trust designated for charity. For someone that gives annually and wants what’s left to go to kids free of estate tax this is a good strategy. Think of it as an inverse to CRT. The exact tax treatment will depend on the type of trust, grantor or non grantor., and other factors.

• In a grantor charitable lead trust, the grantor can take an immediate income tax charitable deduction for the present value of the future payments that will be made to the charitable beneficiary, subject to applicable deduction limitations. However, the trust’s investment income is taxable to the grantor during the trust’s term.

• With a non-grantor charitable lead trust, the trust is considered the owner of the trust assets. The trust itself pays tax on its undistributed net income, and is able to claim an unlimited income tax charitable deduction for its distributions to the charitable beneficiary.

A charitable gift annuity is a contract between a donor and a charity. As a donor, you make a sizable gift to a charity using cash, securities or possibly other assets. In return, you become eligible to take a partial tax deduction for your donation, plus you receive a fixed stream of income from the charity for the rest of your life.

Charitable gift annuity donors (annuitants) receive payments for the rest of their lives. The size of your payment is determined by many factors, including your age(s) when you set up the charitable gift annuity. (For example, younger donors will typically receive more payments but they’ll be smaller.) The amount is fixed and will never fluctuate or adjust for inflation. But it’s also backed by the charity’s entire assets, not just your gift, and will continue for the lives of the donors no matter how well or poorly the investments of the annuity perform.

Fresh idea for Family Foundation - a donor advised fund.

Foundations may benefit by working in conjunction with donor advised funds. For foundations that give a fixed percentage as per guidelines, distributions will vary. If the donor establishes a donor advised fund in conjunction with the foundation, they can use the DAF to smooth any lower dollar foundation withdrawals.

The material presented in this website is intended as general educational information on the topics discussed herein and should not be interpreted as legal, financial or tax advice. Please seek the specific advice of your tax advisor, attorney, and/or financial planner to discuss the application of these topics to your individual situation.