Disclaimer: The discussion herein is general in nature and may not apply to all individuals. Prospective donors are urged to consult their personal tax and financial advisors concerning the specific consequences of making gifts to JLF. We would be pleased to discuss, in confidence, ways in which you may support JLF. These measures may also have an impact on your estate planning.
Bequests:
Through various types of bequests to JLF, you may secure a charitable estate-tax deduction for the value of the gift. Best of all, you will know that your generosity will support our mission for years to come.
You may prefer to state in your will or trust a sum of money, a percentage of your estate, a specific item, a work of art, or real estate that you wish to give to JLF.
Whatever form of bequest you choose, it is not subject to estate or inheritance taxes and so significantly reduces the tax burden of an estate. The value of the bequest may be deducted when the taxable estate is determined, and there is no limit to the deduction.
Charitable Remainder Trusts:
This is a gift plan defined by federal tax law that allows you to provide income to yourself or others while making a generous gift to JLF. You irrevocably transfer assets, usually cash or securities, to a trustee of your choice. The Trust may become effective through outright transfers during your lifetime or through transfers at death under your will.
Life Insurance Policies:
An important but frequently overlooked role of life insurance is the one it can play in charitable gift planning. Life insurance itself can be the direct funding medium for a gift, permitting the donor to make a substantial gift (face value of policy) for a relatively modest annual outlay (i.e., the premium payment).
Life insurance can also be used to replace an asset that has been given to JLF. How it works: After a donor makes a gift to JLF, the tax savings produced by the charitable deduction are used by his or her children or an irrevocable trust to purchase and pay the premiums on a life insurance policy on the donor’s life. Such an arrangement can ensure that the interests of family beneficiaries will not be adversely affected.
If you are considering this method, please contact Kory Swanson (919.828.3876) or kswanson@johnlocke.org to find out more about the Locke Legacy Leaders program.
IRA and Other Retirement Plans:
You may consider using retirement-plan benefits to make a significant gift that will support JLF. And because of the estate and income-tax treatment of retirement-plan benefits, the cost of your gift to your estate and heirs is often relatively small.
Retirement-plan benefits include assets held in individual retirement accounts (IRAs) and assets held in accounts under 401(k) plans, profit-sharing plans, Keogh plans, and 403(b) plans.
Income taxes on retirement-plan benefits are deferred but not avoided. That means that, as these assets are withdrawn during retirement by the account owner or the account owner’s spouse, they are subject to income tax.
In addition, retirement-plan benefits left to children, grandchildren, and other beneficiaries at the death of the account owner are subject to both income tax and estate tax. This combination of income taxes and estate taxes can result in a tax hit equal to 60% or more of the retirement-plan benefits.
Closely Held Stock:
A business owner who contributes closely held stock to JLF will be allowed a charitable deduction for the fair-market value of the stock. An additional benefit is that the donor will escape the potential capital-gains tax on any appreciation in the value of the stock.
Subsequent to the gift, the corporation could purchase the stock from JLF for cash. This not only enables the donor to retain complete control over the company but also makes cash available to JLF for its current needs. As long as JLF is not obligated to sell the stock to the corporation, the transaction should produce no adverse tax results.
