VWC: Alumni & Friends: College Advancement: Deferred Gifts

Planned gifts typically come from a donor's assets rather than income and can be outright gifts, deferred gifts or a combination of the two.

Each of the deferred giving instruments summarized below is closely regulated by law and requires special arrangements and tax treatment.

A bequest is a gift made through a will or living trust.
Bequests may be stated as a percentage of the estate, as the residual of the estate or a specific dollar amount.
Since a will can be changed, no income tax benefits are associated with a bequest; however, the donor's estate is reduced by the amount of the bequest for estate tax purposes.
The drafting of your will or living trust should be arranged with your attorney.
College representatives are available to confer with you and your attorney in drafting the appropriate bequest clauses.
Suggested bequest language

The charitable gift annuity is a contract between Virginia Wesleyan College and the donor whereby the College promises to pay a fixed annuity to a maximum of two beneficiaries (beginning immediately or deferred to a later date) in exchange for the irrevocable transfer of assets by the donor to the College.
Annuity payments are based on the initial market value of the assets contributed and the ages of the income beneficiaries.
A portion of the annuity payment may be considered a tax-free return of principal.
An income tax deduction is allowed for the difference between the value of the gift and the present value of the annuity.

With a charitable lead trust, Virginia Wesleyan receives the income from the donor's assets for a specified time, after which the asset is transferred back to the donor or to the donor's heirs.
A lead trust can reduce gift and estate taxes or provide a charitable deduction for the donor.

A good choice for those who want to make a gift that furnishes a predictable yearly income, the annuity trust pays a fixed dollar amount annually to the beneficiaries based on a percentage of the trust's initial value.
This amount cannot change during the life of the trust.
Unlike the unitrust, the annuity trust allows no additional contributions, although you can establish additional annuity trusts with the College.
An income tax deduction is allowed for an amount equal to the present value of the College's remainder interest in the trust.

In this case, the donor transfers cash, real estate or securities to an irrevocable trust that provides yearly, fluctuating income to the donor or other beneficiaries for a specified term or for life.
Trust assets are revalued annually, allowing potential growth in income to the beneficiaries.
Additional contributions can be made to the trust.
Upon the death of the final beneficiary, the charity receives the principal and distributes it according to the donor's wishes.
An income tax deduction is allowed for an amount equal to the present value of the College's remainder interest in the trust.

Like a standard gift annuity, a donor makes a gift now and receives an immediate income tax deduction.
The donor begins receiving the annuity payment at a future, predetermined date.
Because of compounding between the date of gift and the first annuity payment date, the amount of the annuity payment can be significant and at a much greater rate than of the standard charitable gift annuity.

Life Insurance can become a gift more valuable than the actual money expended when the policy is given to Virginia Wesleyan, which is named as the beneficiary.
Three different giving opportunities are available with life insurance:
First, a donor can contribute a "paid up" policy to the College and receive an income tax deduction equal to the policy's cash/replacement value.
Second, a donor can name the College as primary beneficiary of the policy, resulting in estate tax savings, but no income tax deduction.
Third, a donor can name the College as owner and beneficiary of a new policy and receive an income tax deduction for an annual gift in the amount of the premiums, which Virginia Wesleyan pays.

A donor may transfer a personal residence or a farm to Virginia Wesleyan, while retaining the right for the donor and spouse to live there for life.
The donor will be entitled to a charitable income tax deduction for a portion of the appraised fair market value of the property at the time of the transfer.
In addition, the donor escapes capital gains tax on the property's appreciation, and his or her estate will be entitled to a charitable gift annuity.

A donor can name Virginia Wesleyan as primary beneficiary of a retirement account with the value being fully deductible for estate tax purposes.
Income in respect of a decedent (IRD) is avoided since the College is a tax-exempt entity. IRD is taxable to non-charitable beneficiaries, even if no estate tax is due.

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