Are You a Planned Giver?

Generosity is an important—yet often unrecognized—reason to plan your estate.

Charitable giving is a routine part of daily life for most Americans. In fact, a publication from The Center on Philanthropy at Indiana University, Giving USA 2010: The Annual Report on Philanthropy for the Year 2009, estimates that we contributed $303.75 billion to charitable causes in 2009. Of that amount, 88%, or about $266.61 billion, is estimated to have come from individual giving, bequests, and family foundations.
Truly, this is a place where we come together for the common good.

Planned Giving is directing that a charitable contribution will be made at the time of your death. The Internal Revenue Code makes this possibility attractive in several ways. First of all, charitable gifts are deductible for estate tax purposes. Second, charities are not required to pay income tax on gifts made to them at death from retirement accounts and retirement plans. (Those same retirement assets are taxed as ordinary income when distributed to individuals.)

Planned giving is a personal decision. Following are some of the options that we have found work well for clients who do not want to go to the expense of establishing their own private charitable foundations.

Gifts made through the Alaska Community Foundation or another Community Foundation to benefit specific purposes:

Give to a Donor Advised Fund at the Alaska Community Foundation or another community foundation.

Community Foundations exist throughout the nation; the Alaska Community Foundation serves the state of Alaska. The donations contributed to Community Foundations become part of an investment pool that must be used for purposes that qualify for charitable deductions according to IRS regulations. When
you make a gift to a donor advised fund, you direct the causes you want to support in the community. You can specify that your gift will be endowed (paid out in annual increments forever, similar to the way the Permanent Fund works), or you can specify that the fund may be depleted over time. You can also
name family members or friends who can suggest recipients of contributions. These individuals are referred to as “fund advisors.” Finally, you can limit how your contributions will be used.

Here’s an example. One couple we have assisted, Mr. and Mrs. Snowbird, has directed that a donor advised fund be established at the Alaska Community Foundation upon their deaths. They have provided for a national environmental organization that they like by a separate, direct gift. The Snowbirds have also supported an array of local organizations that benefit the homeless and those that benefit pets. They’re concerned about making big gifts at their deaths to organizations that might not be around in a few years, but they like the idea of supporting whatever organizations may be doing good work in the community from time to time. The Snowbirds have three children, and they want all three to be involved in recommending charities to receive from the donor advised fund, so they have named all of them as advisors. The Snowbirds know that money will come out of their fund only for legitimate charitable purposes and that their children will be able to give input, but can’t demand that the fund be used to support environmental purposes that have been provided for elsewhere.

Give to a Scholarship Fund or a Field of Interest Fund at a community foundation.

Clients who want to direct gifts to be used for scholarships, which can then be used at any university, can establish scholarship funds at a community foundation. Those who want to have their gifts used for a single, well established purpose can see that their wishes are carried out through a field of interest fund at a community foundation.

Direct gifts to specific Charitable Organizations or Educational Institutions:

This works best if you want to make gifts to less than about five organizations, and if you don’t want to give any more to each organization than would appropriately be used in one year. The organizations you select will determine how the funds received will be used. Your gift will not span more than one year unless the organizations decide to save the money. If you want to have your gift used for a specific purpose, you must direct your wishes in the gift itself, and the purpose must be acceptable to the organization.

Many larger charitable organizations have their own endowment funds. By definition, an endowment is intended to last forever. The fund as a whole is invested, and a portion of the return on investment is disbursed for use by the organization. Remaining investment income is added back to the fund and reinvested to protect the fund from inflation. Should the organization cease to exist, any remaining endowment might pass to a similar organization.

Give to a university for scholarship purposes.

There are many scholarship possibilities through our local University of Alaska system. The same is true of any college or university. If you have specific wishes, it is important to plan your scholarship in advance to assure that it will be used as you desire.

Through the years, Foley & Foley’s Generations clients have directed planned gifts worth millions of dollars in their estate planning documents. Foley & Foley can help you decide how best to support your favorite causes.