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.

Bequest in a will or living trust

  • 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

Charitable gift annuity

  • 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.

Charitable lead trusts

  • 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.

Charitable remainder annuity trust

  • 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.

Charitable remainder unitrust

  • 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.

Deferred gift annuity

  • 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

  • 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.

Retained life estate

  • 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.

Retirement accounts

  • 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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