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Understanding Planned Giving
Denise A. Mortati

By: Denise A. Mortati on December 7th, 2018

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Understanding Planned Giving

estate planning

Planned giving is an excellent way to remember those organizations and charities that have meaning or are special to you and your family.  Gifts can be made while you are living or after you are deceased, and can be made from wills, trusts, annuities, retirement plans, or life insurance. Gifts can have a tremendous impact on the future of an organization or charity, enabling renovations and updates, expansion, and additional staff and services, just to name a few benefits. 

Gifts can have positive tax implications, and are an important part of your estate and tax planning strategy.  Remember, too: a gift doesn’t have to be only given in cash: you can give stock/securities, real estate, artwork, personal property, etc. 

Let’s talk about the different types of gifts and gift vehicles.

First, as mentioned above, while living, you can give outright gifts of cash, or assets like securities; these are deductible at fair market value.  

Second, other than outright gifts, some gifts can provide income in return for the contribution.  You can provide income to yourself or other named beneficiaries, with the balance going to the charity, or you can provide income to the charity, with the balance going to you, family or other beneficiaries.

With a donation to a charitable gift annuity, fixed payments are made to one or two annuitants, starting either when the gift is made (an immediate-payment gift annuity) or at a later date (a deferred or flexible gift annuity).  This is set up easily and directly with the organization/charity.  It is part standard annuity and part charitable contribution. You receive a charitable deduction based on the remaining value of the annuity that the charity is expected to ultimately receive. A gift annuity establishes its payments on the assumption that there will be something left for the charity at the end of the contract.  These gifts are irrevocable, which means you can’t get your gift back once the annuity is funded.

Similarly, you can also donate to a charitable remainder trust, which pays beneficiaries income either as: (1) a fixed amount of the trust’s assets at the time of donation (Charitable Remainder Annuity Trust)--the amount received is stable, or (2) an amount that can fluctuate, as the assets are revalued annually (Charitable Remainder Unitrust).  For tax purposes, the amount put into the trust is removed from your estate and is irrevocable.  The choice of charitable remainder trusts depends on your age, the current economic outlook, your tolerance for risk, the asset you are contributing, and whether you will wish to make additional gifts to the trust (you can make additional gifts to the Unitrust, but not the Annuity Trust).

Generally, funding for a charitable gift annuity can start at a lower amount than a charitable remainder trust, as the latter has greater costs to set up and administer. 

The opposite of a charitable remainder trust is a charitable lead trust, in which the charity/organization receives income for a fixed term of years or the lives of one or more individuals (or a combination of both), with the remaining assets going to you or other non-charitable beneficiaries.  The payments can be a fixed amount of the trust’s assets at the time of donation (Charitable Lead Annuity Trust) or an amount of the trust figured annually (Charitable Lead Unitrust), which means that payments will vary, as the assets are revalued every year. Generally speaking, in a unitrust, assets grow, and the percentage going to charity uses up more and more money, thus leaving less for heirs. These trusts are also irrevocable.

Lastly, of course, you can make gifts after your death.  Note that gifts that will be paid to an organization/charity upon your death do not generate an income tax deduction. Therefore, you do not receive a deduction for including a charitable bequest when you write your will, for naming the organization/charity the beneficiary of your life insurance policy, or for designating the organization/charity to receive the remaining balance of your retirement plan.

How do you go about making a charitable bequest after death?

You can give your organization/charity either a specific amount of money or item of property (a “specific” bequest), or you can give a percentage of the balance remaining in your estate after taxes, expenses, and other specific bequests have been paid (a “residual” bequest).  Generally, I recommend to my clients that making a percentage of the residue a better gift than a specific, dollar-amount bequest, as you often don’t know what the balance of your estate will be at the time of your death.

You also have the right to direct the organization/charity to use your bequest for a particular program or activity (a “restricted” bequest), or allow the organization/charity to use it at their discretion (an “unrestricted” bequest).  You can also direct that a bequest be paid if one of your heirs does not survive (a “contingent” bequest).

What happens if you’ve already prepared your will, and now you wish to make a bequest to an organization/charity?  I suggest a “codicil” to your will, which is a document that adds the bequest, and then confirms all other provisions of the existing will.  It’s simple and inexpensive to prepare.

Obviously, this type of estate and tax planning, and whether you should set up a gift annuity, a charitable trust of some sort, or prepare a codicil, should be done with the advice of your estate planning attorney and accountant in order to maximize tax benefits and also to be sure that your gifts are utilized the way you wish them to be, and that you and your family are provided for.

How Can I Get Involved?

As today’s stewards of the United Methodist Homes’ legacy of caring, we are committed to nurturing relationships with donors and cultivating relationships with those who share our beliefs of a mission-based organization caring for older adults.

Your contributions help to improve the quality of life for our residents in many ways.

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Denise A. Mortati is an attorney licensed in the state of Connecticut, and specializes in:

  • Estate planning, including the drafting and execution of wills, trusts, advanced healthcare directives and powers of attorney;
  • Probate matters, including decedents’ estates, conservatorships and guardianships;
  • Elder law issues, including Title XIX applications and asset protection.

She can be reached at 203-913-3010. 

Website:  www.denisemortati.com

About Denise A. Mortati

After several years as a successful business owner, Attorney Mortati decided to enter law school to pursue her dream of a legal career. While attending Quinnipiac University School of Law, she skillfully juggled classes, family and work responsibilities. Upon graduation, she practiced as a Trusts & Estates associate at a Milford, Connecticut law firm until its dissolution in the summer of 2013, at which time she started her own solo practice. Attorney Mortati is an attorney licensed in the state of Connecticut and specializes in estate planning, probate matters, and elder law issues.

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