A number of attractive options exist for giving gifts or for making deferred gifts.
A. GIVING A GIFT OUTRIGHT
Gifts given outright are especially valuable to The Arcadia Foundation because they help meet immediate needs. Such gifts may be made annually for general operating support, for a current special use, or for endowment purposes. Gifts for endowment purposes may be pledged with payment made over a number of years.
(I) Cash – Simplicity and ease of delivery make a cash gift (or check) the most popular type of charitable gift. A gift of cash is considered made on the date it is hand-delivered or mailed, and it is deductible in the year in which it is given. The deductible amount is limited to 50 percent of your adjusted gross income; a deduction in excess of that percentage can be carried over for five years.
(II) Appreciated Property – Examples of appreciated property include stocks and other securities, real estate, and such personal items as art, antiques, rare books, coins, and other collectibles.
Among the tax benefits:
- For commonly traded stocks and securities held for more than one year, the charitable deduction is the current, fair-market value.
- For real estate or closely held stock held for more than one year, the charitable deduction is the current fair market value as determined by an appraisal.
- The deductible amount is limited to 30 percent of your adjusted gross income; a deduction in excess of that percentage can be carried over for five years.
B. DEFERRED GIFTS
For those who cannot or prefer not to make outright gifts or prefer to utilize personally for a time the value of a gift prior to its complete transfer to the receiving charity, the following deferred-gift options are available:
(I) Charitable Remainder Trusts – Using charitable remainder trusts, you transfer assets irrevocably to a trust in exchange for payments to yourself or other beneficiaries that are determined by the types of investments the trust makes. The remainder is then turned over to a charitable entity such as The Arcadia Foundation after the death of last surviving income beneficiary. You may elect to name The Arcadia Foundation as the trustee or another reputable institution such as First Hawaiian Bank as the trustee. Tax savings include an immediate income tax deduction for the gift and possible capital gains and estate and gift tax savings.
There are two basic kinds of remainder trusts:
- Annuity Trusts which provide for a fixed payout.
- Unitrusts which provide for a variable payout, and to which donors may add to at anytime.
(II) Charitable Gift Annuities – In this type of gift arrangement, you transfer cash or marketable securities to The Arcadia Foundation in exchange for a contractually guaranteed schedule of fixed-income payments. The annual rate is based primarily on the gift giver’s age.
There are several tax benefits:
- You can claim an immediate charitable deduction on that part of the transfer which represents the charitable gift element.
- A portion of each payment to the gift making beneficiary may be tax-free.
- Capital gains recognition on gifts of appreciated property is reduced and deferred.
(III) Bequests – There are several types of bequests:
- In a general bequest you simply leave a specified dollar amount to The Arcadia Foundation.
- In a specific bequest, you designate certain asset items (whose value may change over time).
- In a residuary bequest, you assign a certain percentage of your estate’s value to The Arcadia Foundation.
- You might also use your will to establish a charitable trust which uses a specified amount of your estate to provide life income to one or more beneficiaries. The Arcadia Foundation would receive the principal that remains after all beneficiaries have passed away.
There is no limit on the amount that can be deducted from your taxable estate. Since estate tax rates are graduated – the larger the estate, the greater percentage of tax owed – a bequest may reduce the percentage of tax owed on the remainder of your estate after the gift has been made.
C. OTHER SPECIAL GIVING ARRANGEMENTS
(I) Remainder Interest in a Residence in favor of The Arcadia Foundation – This type of gift is created by deeding the property to The Arcadia Foundation; during your lifetime you may enjoy use of the property and you receive a current charitable income tax deduction for The Arcadia Foundation’s remainder interest in this unitrust.
(II) Life Insurance – This type of gift offers a way to benefit The Foundation at a relatively low cost for the donor. In order to deduct premium payments as charitable deductions, the donor must name The Foundation as both owner and beneficiary of the policy. An alternate means of using life insurance is the wealth-replacement option. In this case, you make a gift to The Arcadia Foundation and then, using the tax savings produced by the charitable deduction, purchase and pay the premiums on a life insurance policy which has proceeds roughly equivalent to the value of the contributed assets. The assets used to make the gift are thus “replaced” with insurance.
(III) Charitable Lead Trust – This is the reverse of a charitable remainder trust. It allows you to place assets in a trust, assign the income to The Arcadia Foundation for a certain time, and have ownership of the asset later returned to you or be passed on to your named beneficiary.
GIFT GIVING GUIDE
This is a web-based estimator that can provide you with charitable deduction estimations for a broad range of planned gifts. You may explore a variety of gift options privately, by analyzing your basic information, customizing your figures, and changing your options any time. This basic guide provides you with an additional tool to evaluate your various planned gift options.
Note: The Arcadia Foundation does not provide tax or legal advice. Gift estimations are provided for illustrative purposes only. The actual values may vary based on the timing of your gift. Please consult your attorney or tax advisor prior to entering into any gift planning arrangement.
Gift Annuity: In exchange for your gift to charity, you or 1-2 other annuitants receive a fixed sum each year for life.
Deferred Gift Annuity: In exchange for your gift to charity, you or 1-2 other annuitants receive a fixed sum each year for life starting at the date of first payout.
Charitable Remainder Unitrust: Your unitrust pays a fixed percentage of its value, determined each year, to you or others you name for life or a term of years. The remaining assets then go to charity.
Charitable Remainder Annuity Trust: Your trust pays a fixed dollar amount each year to you or others you name for life or a term of years. The remaining assets then go to charity.
Pooled Income Fund: Your gift is pooled in a fund with gifts from other donors. You or others you name receive your gift’s share of the income the fund earns each year for life. Your gift’s share of the fund then goes to charity.
Retained Life Estate: You deed your home or farm to charity, but retain the right to live in it for the rest of your life, a term of years, or a combination of the two.
Charitable Lead Unitrust: Your unitrust pays a fixed percentage of its value, determined each year, to charity for a term of years or one or more lifetimes. The accumulated assets then go back to you or others you name.
Charitable Lead Annuity Trust: Your trust pays a fixed dollar amount each year to charity for a term of years or one or more lifetimes. The accumulated assets then go back to you or others you name.