Lots of charitable organizations use the term “leaving a legacy.” But how is that different from making a gift online or writing a check today? A vision of the future.
Common Types of Legacy Gifts
Legacy gifts can come in a variety of forms, from simple bequests to complex trusts, all with different requirements and advantages depending on your circumstances. However, these gifts most commonly fall within a few categories:
- deferred gifts of cash or non-cash assets
- gifts that pay the donor income
- more complex gifts that protect the donor’s assets
Within these broad categories, there are a few common ways to give:
Deferred Gifts of Cash or Non-Cash Assets
Bequests
Bequests are a popular and fairly simple way to make a planned gift. These ‘outright’ gifts are charitable contributions left as a bequest in a legal will. They’re usually given as a specific dollar amount; a non-cash asset such as stocks, real estate, or other property; a percentage of your total wealth; or a remainder of your estate after other bequests have been paid.
Retirement plans & life insurance
You can name NPAT as the beneficiary of your life insurance policies or unused retirement assets. These can include individual retirement accounts (IRAs), 401(k)s, 403(b)s, or pensions. Because these gifts are often larger than what a donor could give in their lifetimes, they can significantly impact a nonprofit.
These types of planned gifts are a good option for donors who have paid-up policies or retirement accounts that they won’t use.
If you have a large estate, gifting retirement accounts and life insurance policies can help your heirs avoid income and estate taxes.
Have Questions? We’re Here to Help.
We would be honored to discuss how your impact can last far into the future. Contact NPAT Development Director Jeff Sargent at [email protected] or 972-275-9255 if you’ve included us in your will or with any other questions about planned or legacy giving. Thank you!
Gifts that Pay a Donor Income
Charitable Gift Annuities
A charitable gift annuity allows you to give a large amount of cash or securities in exchange for a fixed income payment for life. NPAT receives any leftover funds as well as any income generated from investing those funds.
Charitable Remainder Trusts
There are a few types of charitable remainder trusts, but in each, the remaining funds go to the nonprofit after the trust is terminated. A charitable remainder annuity trust pays you a fixed amount based on a percentage of the initial assets used to fund it. A charitable remainder unitrust pays you a percentage of its principal and is revalued annually so that payments increase over time.
Gifts that Protect a Donor’s Assets
If you don’t want to give up your assets completely when making a gift, there are a couple of ways to give while still having a significant impact.
Charitable Lead Trusts
When you make this type of gift, the charitable lead trust pays an ‘income’ to the nonprofit for a specified number of years or for your lifetime. And when that term is up, the assets are given back to you or your beneficiaries. Charitable lead trusts can reduce estate taxes, while still transferring wealth to your heirs. Because the primary benefit is reducing estate taxes, these planned gifts are best for wealthy donors with significant estates.
Retained Life Estates
With retained life estates, you transfer a property deed or title to a nonprofit while retaining the right to use the property. Unlike a charitable lead trust where the asset returns to the donor, retained life estates belong to the nonprofit after the set term is up. At that point, the nonprofit can sell or keep the property for its own use.
This type of planned gift is great for donors who want to simplify their estate settlement process and reduce estate taxes. Like most planned gifts, they can also receive an income tax deduction for the property’s value.
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Disclaimer: Certain forms of gifts may be subject to review prior to acceptance.
Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.
Header photo: Dragonfly at Clymer Meadow by Kirsti Harms.