Bequest-Like Gifts That Don't
Require a Will
Charitable bequests—charitable gifts made by will—are by far the greatest source of funds from planned gifts. It is commonly held that roughly four-fifths of all funds raised through planned gifts are in the form of bequests.
While donors can change their mind about such arrangements, research has shown that well over 90% of bequest intentions become realized. Hence, fundraisers can have confidence that once in the will, few charitable bequests will be removed later in their donors' lifetimes, especially if the donors are stewarded well by the charity.
Gifts at Death That Are Not Bequests
There are several other ways for donors to make charitable gifts upon death. Known as gifts by beneficiary designation, these gifts boast the same attractive attributes noted above, but since they are not made through the donor's will (or living trust), they are even simpler for the donor to put in place. Here are some options:
IRA and Qualified Retirement Plan Designations
A donor can designate that a charity receive all or a portion of what remains in an IRA (regardless of the type of IRA) or in most qualified retirement plans, such as 401(k) and 403(b) plans. The donor simply needs to name Syracuse University as the recipient of the funds on a beneficiary form provided by the plan sponsor. The donor can even direct the funds to a specific school or University program.
Life Insurance and Commercial Annuity Products Beneficiary Designations
These products include life insurance policies of various kinds and commercial annuity contracts. The donor simply completes and returns to the insurance company a form designating that Syracuse University receives all or a portion of the death benefit associated with a life insurance policy, or the remaining contract value associated with a commercial annuity.
Pay-on-Death and Transfer-on-Death Accounts
A “pay on death” account involves the donor instructing a bank to pay to a charity all or a portion of what remains in an account when the donor dies. A “transfer on death” account entails the donor giving essentially the same instruction to a brokerage firm with regard to investments held in the account at the time of the donor’s death. The particulars of each arrangement will depend on the bank or brokerage firm in question.
Charitable Fund Designations
Donor-advised funds sponsored by financial firms, such as the Fidelity Charitable Gift Fund, Vanguard Charitable Endowment Program, and Schwab Charitable Fund, have become popular vehicles through which many wealthy donors make their annual gifts. Billions of dollars reside in these funds.
Among the options offered by one of these accounts is for the donor to recommend in advance (on a form provided by the account manager) that a lump-sum grant be made to SU from any balance remaining in the account upon death. There are some tax issues that must be considered for the donor in this type of arrangement.
Donor Intentions
Beneficiary forms, provided by the plan sponsor and completed by the donor, can be supplemented with an SU Gift or Endowment Agreement that serves to document the donor’s intentions once the funds are received upon the donor’s death.
In most cases, these gift intentions may be counted at face value in terms of donor recognition and campaign credit. Generally, all of these bequest-like gifts are even easier to arrange than bequests because in most cases, designating SU as a beneficiary of these types of assets is done outside of a will or living trust, and usually does not require the donor to work with an attorney. This is true with respect to both making the initial arrangement and modifying or revoking the arrangement. In addition, these types of estate gifts do not typically enter the probate process.
Reasons for Donors to Give These Assets to Charities First
Donations of IRA and qualified retirement plan assets (those assets that consist of yet-untaxed dollars) feature a tax benefit typically not applicable in the case of bequests. In some cases, making a charitable gift of these assets is a more tax-advantageous choice than giving these assets to heirs. In most cases, when a donor is the owner of an asset that would have been a source of payments to him or her, the named beneficiary of that asset would then be taxed on the income received (known as “income in respect of a decendent”).
The good news for SU is that by virtue of our tax-exempt status, no income tax will be due on any gift of these assets received. This means that if a donor’s estate plan calls for benefiting both individuals and charities upon death, it is most efficient from a tax standpoint to use retirement plan assets to make charitable gifts and to earmark other assets for individuals.
For example, if a donor wants to leave $25,000 to SU and $25,000 to a daughter, it’s generally preferable for the donor to leave assets such as IRA funds to SU, with other assets, such as cash or securities, left to the daughter. While the opposite approach would be equally beneficial to the University, it would be less beneficial to the individual by the amount of income tax the daughter must pay on the IRA assets received.
For more information, please contact:
Mike Mattson
Office of Gift Planning
315.443.4414
Source: PG Calc, February 2011
| 
