Types of Planned Gifts
Design a Plan That Fits Your Needs
As you confront the challenges of the future, the Minnesota Professional Engineers Foundation knows that your generosity can make all the difference in its future success.
But the Minnesota Professional Engineers Foundation also wants to make sure that you will also benefit from making a gift.
How does this happen? Of course, you have the satisfaction that comes from knowing you’ve made a difference in the lives of engineering students. But in fact, the best gift plans also improve your financial and tax situation, often right away.
There are many ways that your philanthropic giving can blend with your own financial needs and tax planning. The following vehicles will allow you to explore the possibilities and opportunities for charitable gift planning.
To design a gift that benefits the people and organizations you care about most, always be sure to obtain the professional counsel of someone that specializes in gift and estate planning. The Minnesota Professional Engineers Foundation can work with your advisors to help you plan for tomorrow and receive maximum benefits today.
A Current Will
A Vital Document
Have you put off making or updating your will? Maybe you think it costs too much to make a will. Perhaps you’re having a hard time deciding about how to leave your money. Or you may simply have an aversion to confronting your mortality.
Drafting a will may seem like a daunting task at first, until you realize all the good that comes from having a will.
A bequest in your will lets you pass any amount you wish to the Minnesota Professional Engineers Foundation free of estate tax. You can give cash or specific property, a dollar amount or a percentage of your estate, with restrictions or without.
To make sure your will accomplishes your goals according to your wishes, be sure to obtain professional counsel who specializes in probate and estate planning.
- Lets you provide for your family after your death
- Allows you to distribute your assets according to your wishes
- Saves on estate taxes, with proper planning
- Lets you leave a legacy without giving up assets
A Living Trust
Keep Control of Your Assets
A living trust lets you provide for yourself and your family before and after your death. It has built-in flexibility that can work very well with your overall estate plans, because it allows you to stay in control of your assets.
Like wills, living trusts are fully revocable, so you can change or terminate them at any time during your life. But unlike wills, the terms of a living trust can be put into effect immediately.
You can also arrange a contribution to the Minnesota Professional Engineers Foundation through a living trust by naming it as the ultimate beneficiary. The method of giving is attractive because you still have complete control of the assets during your lifetime.
- You or a beneficiary receive the income from the trust assets
- You’re in charge, but a professional trustee may do the detail work
- You name who will ultimately receive the trust remainder
- The trust assets bypass probate, so the terms are private
- Assets in the trust are removed from your probate estate, so estate expenses may be less
What to Give
Assets Worth Donating
Any type of asset that you irrevocably donate to a charitable organization like the Minnesota Professional Engineers Foundation results in a current income tax deduction. But there may be other tax benefits to your contribution, as well.
Giving cash is the simplest method. But if you contribute appreciated securities to the Minnesota Professional Engineers Foundation, you have the added benefit of owing no tax on the gain.
You can also give tangible personal property (like an art object, prized collection or antiques) and take a deduction for its full fair market value if the gift is related to MPEF’s exempt function.
These are but three types of assets you can donate outright for the Minnesota Professional Engineers Foundation to receive immediately. Or you can use them to fund a planned gift that gives you lifetime income before the Foundation receives the gift.
But there are even more potential benefits to planning your gift.
- Gifts of cash result in a current income tax deduction
- Gifts of securities also provide relief from capital gains tax
- Donations of personal property allow for meaningful gifts
- All contributions to the Minnesota Professional Engineers Foundation are used to help fulfill the mission of the Foundation
A Versatile Tool for Many Purposes
When you first obtained your life insurance policies, you obviously felt a need for them. But perhaps you don’t need all of that coverage today. Yet you still have those policies. Well, there are a couple of options to explore.
The first option would be that, if you’re thinking about a contribution to the Minnesota Professional Engineers Foundation, a gift of your life insurance could be a sensible as well as generous course of action.
The second option you have is that you can also use life insurance to replace the value of a different gift. For example, you could donate stock to the Minnesota Professional Engineers Foundation because of the tax advantages and purchase life insurance to benefit your heirs in the amount they would have received had you left them the stock. However, with life insurance you also receive the additional advantages that life insurance bypasses probate and your heirs will receive the proceeds of your life insurance income tax free.
- Charitable deduction when you name the Minnesota Professional Engineers Foundation beneficiary and assign the Foundation ownership
- Flexibility through naming the Minnesota Professional Engineers Foundation beneficiary but keeping ownership
- Security for your family by naming the Minnesota Professional Engineers Foundation contingent beneficiary
- Reduction in estate taxes because proceeds are removed from your estate.
Your Retirement Plan Assets
Costly to Inherit
Did you know that your retirement plan assets are facing double taxation? If you leave the assets to your heirs, you’ll generate “income in respect of a decedent.” So not only is the amount diminished by estate taxes, but the recipient also must pay income taxes on it!
If you can make other provisions for your family, there’s a better option for your retirement plan assets — a charitable gift.
To implement your wishes, simply advise the plan administrator of your decision and sign whatever form is required. For an IRA or Keogh plan you administer personally, notify the custodian in writing and keep a copy with your valuable papers.
- Naming the Minnesota Professional Engineers Foundation the primary beneficiary avoids all income and estate tax
- Partial savings when you give the Minnesota Professional Engineers Foundation a specific amount before giving family the remainder
- Naming the Minnesota Professional Engineers Foundation the contingent beneficiary may also allow for greater flexibility in regards to estate taxes
- Donating retirement plan assets could be the most cost-effective gift you can make
A Tax-Wise Gift
Are you thinking of selling land or a building? Beware of capital gains tax! If you sell your primary residence, you can exclude a certain amount of the gain. But this tax break doesn’t apply to other types of real estate, so you may have a better alternative.
A charitable contribution of real estate — whether it’s your personal residence, a vacation home, a farm, commercial real estate or vacation land — will give you numerous advantages.
When you give your home or other real estate to the Minnesota Professional Engineers Foundation, you create an enduring testimonial of your interest in the Foundation’s mission. And what’s more, your personal satisfaction is complemented by valuable tax benefits.
- Income tax charitable deduction for the full fair market value
- Avoidance of the tax on the property’s appreciation
- No hassle from trying to sell the property
- No gift tax, plus a reduction of your taxable estate
Retained Life Estate
An Option That Lets You Have It Both Ways
Let’s assume you like the tax advantages that a charitable gift of real estate would offer, but you want to continue living in your personal residence for your lifetime. Did you realize you can give the Minnesota Professional Engineers Foundation your home, even though you continue living there?
It’s true. It’s called retained life estate.
A gift of your home, farm, vacation home or condominium, even with stipulations about occupancy, results in a charitable deduction of your income tax.
The retained life estate may also provide you with a way to let someone other than you or your spouse (perhaps a sibling or child) have life occupancy of your home with reduced tax obligations.
- Lifetime use of the residence for you and/or another person
- Income tax savings through charitable deduction
- Estate tax savings for you and/or another person (if the other person is your spouse)
- Ability to gift only partial interest in property and receive tax advantages
Closely Held Stock
Make a Gift; Maintain Control
If you own a sizable block of stock in a closely held corporation, you may have a gift option that makes everyone happy.
Suppose you decide to donate some shares (few enough that you retain 50% ownership) to the Minnesota Professional Engineers Foundation. And then the Foundation presents the stock to your corporation for redemption. Your corporation uses retained earnings for the purchase.
The Minnesota Professional Engineers Foundation wins because they receive much-needed funds. But you and your corporation also win.
There’s one caveat: the IRS has ruled that you cannot legally bind a charitable organization to go through with the redemption at the time it receives the shares. But a charitable organization may independently offer the donated stock for redemption.
It’s a favorable option that benefits you and MPEF.
- Income tax deduction for the charitable contribution
- No capital gains tax on the appreciation in value
- Reduction of retained earnings reduces exposure to accumulated earnings tax
- You maintain control of the corporation
Charitable Remainder Annuity Trust
A Gift with Predictable Benefits to You
If you’re disappointed in the yield from your current investments in the stock and bond markets, yet you want to avoid the capital gains tax should you sell, try a charitable remainder annuity trust.
This plan will pay you, year after year, the same dollar amount you choose at the outset. The income payments are fixed — based on the starting valuation. Then after your lifetime (and the lifetime of a surviving beneficiary, if desired), the trust remainder is available to support the Minnesota Professional Engineers Foundation mission.
The charitable remainder annuity trust is more than an eventual gift to the Minnesota Professional Engineers Foundation. It lets you give away the tree and still keep the fruit, because you receive an increased income from your donation.
- A fixed dollar income paid annually, semiannually or quarterly
- Immediate charitable deduction
- A way to increase income from a low-yield holding
- Freedom from investment management
- Avoidance of capital gains tax on appreciated assets used to fund the trust
Charitable Remainder Unitrust
A Gift with Built-in Flexibility
A charitable remainder unitrust is like a combination of a gift and an investment plan. You place assets in trust and you (and/or another beneficiary) receive lifetime income from them, then the Minnesota Professional Engineers Foundation receives the remainder.
With a unitrust, the amount you receive as income is a set percentage of the value of the trust assets, re-determined annually.
You also have the option of choosing one of five variations of unitrusts. A unitrust with a net income plus makeup provision, for example, pays only the actual trust yield, even if it is below the stated percentage. Then in later years, when performance is better, those deficiencies are made up.
This option is excellent for devising a supplemental retirement plan.
- Lifetime income (often greater than your previous yield)
- A sizable income tax charitable deduction
- Avoidance of capital gains tax if you donate appreciated securities
- Professional management of the assets frees you from investment responsibilities
Charitable Lead Trust
Preserve an Inheritance
Are you concerned about the possibility of the government taking a huge part of the assets you were planning to leave your heirs?
There’s a way to pass assets to your family with significant estate tax savings while at the same time making a gift to the Minnesota Professional Engineers Foundation. It’s called a charitable lead trust.
After the Minnesota Professional Engineers Foundation receives income from assets in the trust for a period of years, the principal goes to your family, with estate or gift taxes usually reduced or even eliminated.
The lead trust is an exceptional way to transfer property to your children or other heirs at minimal tax cost. It’s ideal if you’re willing to forgo investment income on an asset but don’t want to force your heirs to surrender the principal.
With a lead trust, you carry out your philanthropic plans over the coming years and save on taxes.
- Can be funded during your lifetime or through your will
- You support the Minnesota Professional Engineers Foundation mission through annual income payouts
- Reduces your taxable estate and potential gift taxes
- Assets can be kept in the family
Charitable Gift Annuity
Boost Your Rate of Return
The concept of a gift annuity is simple. You donate assets that the Minnesota Professional Engineers Foundation reinvests, which immediately becomes general assets for use by the Foundation. The Minnesota Professional Engineers Foundation agrees to pay you fixed payments for life (and, if desired, for another beneficiary’s lifetime).
A charitable gift annuity is particularly attractive because they offer reduced risk and liquidity while still maintaining a competitive income.
And when these aspects are combined with the income being partially tax-free, the effective rate of return is even higher.
- Lifetime payments for yourself and possibly another person
- Charitable deduction for a portion of the value of the gift
- Part of the annual income is considered a tax-free return of capital
- Capital gains tax savings when you contribute appreciated securities
For more information, contact MPEF at 651-457-2347.