Gift Types
Gift Types
Table of Contents:
The Visalia Education Foundation
Gifts of Cash
Gifts of Securities
Gifts of Real Estate
Gifts Via Individual Retirement Accounts and Annuities
Gifts of Life Insurance
Corporate Gifts and Matching Grants
Charitable Provisions Through Estate Planning
For Further Information
This section provides a number of planned giving ideas that take into consideration recent changes in the Federal income, gift, and estate tax laws. These plans are designed to show you how you can give cash, securities, insurance, annuities, or real estate to the Visalia Educational Foundation and at the same time reduce your income tax or estate tax burden. The examples illustrated take into account only Federal and California State tax laws.
All planned giving decisions should be formulated and discussed with family members as well as your financial consultant, attorney or accountant. A well-designed plan will ensure that your loved ones' financial security is enhanced, that your charitable wishes are fulfilled, and that you and your loved ones receive all of the tax benefits possible under the law.
About the Visalia Education Foundation
The Visalia Education Foundation is a not-for-profit founded in 1983 that
has as its mission "to identify and secure resources to promote educational
excellence for the students of the Visalia Unified School District." The Foundation
carries out its mission through community fundraising to make available:
- student scholarships for graduating seniors
- teacher mini-grants for innovative classroom projects
- increased student access to classroom technology
- other educational enhancements outside the school district budget
Although we have come far, much remains to be done. The fight to make sure
every Visalia student has access to up-to-date technology, is able to attend
college and becomes a productive member of society is only just beginning.
More than ever before, students need your help to ensure a brighter tomorrow.
Gifts of Cash
Most donors prefer this type of gift. The amount can be deducted in the year
that the gift is made, provided that you itemize your deductions and meet
other income tax criteria. Current tax laws allow you to deduct up to 50%
of your adjusted gross income. If your gift exceeds the 50% figure, you may
deduct the difference over the next 5 years.
The actual cost to the donor making a cash contribution depends on his/her
income tax bracket--the higher the bracket, the lower the cost of the contribution.
EXAMPLE: Mr. Jones is in the 28% tax bracket. His cash gift of
$1,000 saves him $280 in taxes making his out of pocket cost of the contribution
$720.If Mr. Jones itemizes deductions on his California State income tax return,
he will realize additional tax savings.
Gifts of Securities
Appreciated Value: It is usually in the donor's best interest to make a gift
of appreciated property rather than the proceeds from its sale. If the gift
qualifies as "long-term property" you can avoid the capital gains tax and
legally deduct the full market value, generally subject to a limitation of
30% of your adjusted gross income.
EXAMPLE #1: Mrs. Smith wishes to make a gift of $2,000 to the Education
Foundation for scholarships. She has decided to sell stock with a market
value of $2,000 which was originally purchased for $500 several years ago.
The transaction will result in taxable income of $1,500. Assuming she is
in the 28% tax bracket, the Federal tax incurred would be $420 ($1,500 x
28%). She would only realize $1,580 ($2,000- $420) from the transaction
after taxes which would leave her short of her desired goal. The $1,580
realized would be reduced further by the amount of her State income tax.EXAMPLE #2: If Mrs. Smith were to donate the same appreciated stock
to the Foundation, she would be entitled to a charitable deduction of the
$2,000 fair market value. The advantage of this option is obvious.
The Foundation receives the full $2,000 and Mrs. Smith does
not have to pay any capital gains tax and can now deduct the full amount for
tax purposes, thus realizing a Federal tax savings of $560 ($2,000 x 28%)
plus any applicable State taxes. This example is based on the assumption that
Mrs. Smith's adjusted gross income is in excess of $6,667.
When giving "long-term property" that has appreciated in value,
the donor may be subject to the minimum tax. We recommend that you consult
with your tax advisor prior to making donations of appreciated property.
Depreciated Value: A donor who wishes to give property that
has decreased in value would be better served by selling it. The donor would
then be able to claim a capital loss on taxes and receive the benefit of a
charitable contribution.
Gifts of Real Estate
Tax rules and income tax benefits are generally the same as for Gifts of Securities.
Gifts via Individual Retirement Accounts and Annuities
IRA and/or Annuity accounts offer extraordinary tax-free savings opportunities
for almost every working American. In addition to naming a loved one as a
beneficiary, the Visalia Education Foundation can be designated as a successor
or final beneficiary.
EXAMPLE: Mr. Brown has an IRA worth $500,000 at the time of his
death. Mrs. Brown continues to draw money as the primary beneficiary until
her death. The Education Foundation, as final beneficiary, receives tax
free any remaining IRA or annuity funds.
Gifts of Life Insurance
New Policies: A donor who takes out a life insurance policy and makes
the Visalia Education Foundation the owner and beneficiary can take a charitable
tax deduction for each premium payment made during each calendar year.
EXAMPLE: Ms. White purchases a new $100,000 policy and makes the
Visalia Education Foundation the owner and beneficiary. The annual premium
payment would then be paid to the Foundation which allows the amount to
be claimed as a charitable contribution by the donor. The Foundation in
turn pays the required premium to keep the policy in effect.
Paid-up Policies: The donation of a paid up life insurance
policy to the Foundation entitles the donor to an income tax deduction for
the cash value of the policy up to 50% of his/her adjusted gross income. If
the value of the policy exceeds 50% of adjusted gross income, the donor can
deduct a part of the value of the policy in the year of the gift and the remainder
over the next five years.
Policies with Premiums: A donor who makes a gift of a
life insurance policy with premiums to be paid is entitled to an income tax
deduction equal to the estimated cash value of the policy and the amount of
the annual premium subject to the 50% of adjusted gross income limitation.
EXAMPLE: Mr. Marquez donates his $50,000 life insurance policy
with a $20,000 cash value to the Visalia Education Foundation. The Foundation
is now the owner and beneficiary of said policy. The annual policy premium
of $1,000 is paid by Mr. Marquez to the Foundation which allows him to claim
a charitable tax deduction for that amount. The Foundation in turn pays
the premium to keep the policy in effect. In addition, Mr. Marquez can deduct
the current cash value of the policy, $20,000, from his gross income for
tax purposes.
Corporate Gifts and Matching Grants
If you own a business that is incorporated, you can make a charitable gift
to the Foundation through your corporation; up to 10% of your corporation's
net income is deductible for tax purposes. Two other tax deductible corporate
options include Employee Matching Grant Programs to benefit the Foundation
and, if pre-approved by the Foundation, gifts of surplus inventory to the
School Store.
Gifts of surplus inventory generally qualify for an additional
deduction for the basis plus 1/2 of any appreciation in its value, not to
exceed twice the basis of the donated inventory.B
Charitable Provisions through Estate-Planning
A well-written will may meet all of your estate planning needs. When properly
thought out, and with the assistance of legal counsel, you may be able to
greatly reduce or eliminate your Federal and State estate taxes through provisions
made in your will.
Bequests can be made to provide full financial security to your
family, serve as a memorial to yourself or a relative, and benefit students
for generations to come. Your estate can deduct, for Federal estate tax purposes,
the total dollar value of any property passing to the Visalia Education Foundation
under your will because of the tax exempt status of the Foundation.
Another option is to have your estate establish a trust under
which income from a particular asset would be paid to the Visalia Education
Foundation for a fixed period, after which the asset would be returned to
your designated beneficiary. Your estate would receive substantial tax benefits.
Then there is the "Double Duty Will." Your Will could direct
a certain percentage of your estate or a specific amount to your children
and grandchildren. The rest of the assets would be put in a fund to provide
income for the life of your surviving spouse. When your spouse passes away,
the remaining funds would be turned over to the Visalia Education Foundation.
Because the balance of the funds are designated for charitable purposes by
you, your children's and grandchildren's inheritance will be larger because
of their reduced exposure to estate taxes.
Your financial planner can help provide you the means to extend
your generosity beyond today and into the realm of eternity. Your tax deductible
gift or gifts will assist the Visalia Education Foundation in providing the
building blocks necessary for brighter tomorrows for all our students. With
your help, we can look forward to graduating better-prepared students who
will help ensure Visalia's continued quality of life for now and the generations
to come.
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