Increasingly, alumni, parents, and friends are using planned giving methods to add to gifts made to Washington Academy on an outright basis.
Planned or deferred giving techniques include the bequest, gifts that provide income for the donor (or others the donor names as income beneficiaries), and contributions of assets that return to the donor or the donor's family after providing income to the Academy for a period of years. Such giving vehicles often allow attractive gift/estate, income, and/or capital gains tax benefits.
Many of our friends elect to support Washington Academy by means of a bequest. A gift such as this can be made either by will or through a revocable trust instrument.
Because bequests do not take effect until death, a donor retains control and use of the property during life. Bequests may be of a specific dollar amount, a percentage of an estate, or the residue of an estate, and may be:
Designated for a particular purpose or left unrestrictedUsed to establish or add to an endowed fund (only income is used and principal is held in perpetuity) or a current fund (both income and principal may be used)Made to honor the name of the donor or memorialize the name of a loved one
Bequests can be made through a simple paragraph in a will:
Specific Bequest (usually a stated dollar amount or percentage):
“I give and bequeath to the Trustees of Washington Academy, a not for profit corporation established under the laws of Maine and situated in the Town of Dover-Washington, the sum of to be assigned by the Trustees to benefit the school as they think most desirable…(or to be used for the following purposes…).”
A Residuary Bequest names Washington Academy as the residuary beneficiary, to receive the remainder of the estate after specific devises have been made and all debts, taxes and other expenses have been paid.
A Contingent Bequest enables you to designate the Trustees of Washington Academy as an alternate beneficiary. In which case, it would receive the bequest only if your primary beneficiary (ies) did not survive you.
A charitable gift by bequest usually provides a tax savings because the gift is wholly deductible from the adjusted gross estate. A charitable bequest often places the taxable portion of the estate in a lower tax bracket. Because people often underestimate the extent of these taxes, a thorough study should be undertaken by an attorney or financial advisor when the will is created.
For more information on these and other planned giving options, please contact the Development Office by email or call 207-255-8301 ext. 220.
A charitable gift annuity is a way to make a gift to Washington Academy and receive guaranteed income either for yourself or another for life. In exchange for a gift of cash or certain other property, you or a loved one would receive set payments annually, a portion of which would be tax-free. In addition, as the donor you would be entitled to a charitable income tax deduction. The amount of your deduction would be based on the value of your gift and the age of the designated annuitant. The actual amount of the annuity depends in large part upon the age of the annuitant. Generally speaking, the older the annuitant, the larger the annuity. For example, as of this writing, a 65 year-old annuitant would receive a 6.7 percent annual payout, whereas a 75 year-old annuitant would receive a 7.9 percent annual payout. A portion of each annuity payment is considered to be a return of principal and thus treated as tax-free.
Payments on a deferred charitable gift annuity do not start on the date of the gift. Rather, they are deferred, often until retirement. The deferred charitable gift annuity is attractive to younger donors interested in supplementing their retirement income. An income tax charitable deduction is available on the date the deferred charitable gift annuity is established. As with a current gift annuity, a portion of each annuity payment is considered to be a tax-free return of principal.
A deferred charitable gift annuity can complement other retirement plans. Because of the deferral period, it offers a higher payout rate than a current gift annuity. A particular advantage of a deferred gift annuity is that it can be tailored to one’s particular circumstances. The start of the payments can be postponed until a mutually agreeable date.
The minimum amount needed to fund a charitable gift annuity, whether current or deferred, is $10,000.
A charitable lead trust is a way to make a gift to Washington Academy and to transfer assets to heirs at a reduced gift tax cost. The concept is simple: you transfer cash, securities or other property to a trust to last a set number of years and designate the Trustees of Washington Academy as the income beneficiary; later the trust property reverts to your heirs, either outright or in trust. A charitable lead trust can be used to greatly reduce or completely eliminate the gift tax cost of transferring wealth to children or grandchildren. In addition, any future appreciation on the property can be channeled to heirs without incurring further gift or estate tax liability. Given the size of gift and estate taxes, the savings that can be achieved through use of a charitable lead trust can be especially significant.
A testamentary lead trust provides an estate tax deduction based upon the present value of the charity’s income interest. The estate tax payable is based solely on the present value of the heirs’ remainder interest. By reducing the value of the heirs’ remainder interest, a donor can reduce the amount of estate tax that would otherwise be due. The term of the trust and the amount of the payout can be calculated in such a way as to reduce or eliminate estate tax and take maximum advantage of a donor’s unified credit (currently $650,000). Charitable lead trusts are more appropriate for donors who are facing a large estate tax. Although the minimum needed to establish a charitable lead trust with the Trustees of Washington Academy as trustee is $100,000, such a trust generally is established and works best when funded with amounts larger than this.
Individuals wishing to retain either for themselves or another an income interest in their gift to Washington Academy may consider establishing a charitable remainder trust, which would provide a stream of payments for life or a set term of years to a designated beneficiary or beneficiaries.
There are two basic types of charitable remainder trusts: the charitable remainder unitrust which pays a fixed percentage of the value of the trust as revalued annually, and the charitable remainder annuity trust which pays a set dollar amount annually. The payout from the unitrust will vary from year to year; the payout from the annuity trust remains constant. All payments, whether from a unitrust or an annuity trust, are made solely from the assets of the trust. In general, to establish a charitable remainder trust with the Trustees of Washington Academy as trustee requires a minimum gift amount of $50,000. Charitable remainder trusts can also be established with an individual or corporate trustee.
With a unitrust, money or property is irrevocably transferred to a trustee, with instructions to make payments to one or more individuals annually, either for life or a term of years. The payments will be a fixed percentage of the trust’s value, as revalued annually. Thus, the size of the payments will vary from year to year. Additional gifts may be made to a unitrust. Generally, the higher the payout set by the donor, the lower the tax deduction will be. On the death of the beneficiary(ies) or upon the expiration of the term of years, the remaining trust assets will pass to Washington Academy to be used for the purpose originally designated by the donor.
An annuity trust, like a unitrust, is separately invested. Unlike a unitrust, however, it pays out a fixed payment, as opposed to a variable payment. It is valued only once, when the trust is initially established, and a certain percentage of this amount (at least 5 percent) is distributed annually to a named individual or individuals for life or a term of years. Additional gifts cannot be made to an annuity trust.
By designating the Trustees of Washington Academy as the remainder beneficiary of either a charitable remainder unitrust or annuity trust, you will receive a charitable income tax deduction and, in addition, can save on estate tax and probate costs. Most important of all, however, you will have made a gift of significance to Washington Academy.
Donors may consider giving real estate as a way of making a substantial gift to Washington Academy. Almost any type of salable real estate can be used to make a charitable gift. The specific types of property that can be given include homes -- primary residences, vacation or second homes -- condominiums and shares in cooperative apartments, undeveloped land, rental property, apartment buildings, commercial buildings, farms, ranches and forest land, and mineral rights. The property should, however, be unencumbered as mortgaged property can pose practical problems for the Trustees of Washington Academy and might result in adverse tax consequences for the donor. The charitable deduction that can be claimed for a gift of real estate is based upon the fair market value of the property as determined by an independent appraiser.
In addition to giving real estate outright or by bequest, there are two other ways of giving real estate: by means of a charitable remainder trust and by means of a retained life estate. For a charitable remainder trust funded with real estate, ownership of the property is transferred by deed to the trust. The trust then sells the property, invests the proceeds and provides the designated beneficiary(ies) with annual income for life or a term of years. Because the trust is tax exempt, it incurs no capital gain tax on the sale and thus the entire sale proceeds (net of sale expenses) can be invested on behalf of the income beneficiary(ies). The principal of the trust is transferred to the Trustees of Washington Academy only after the death of the income beneficiary(ies) or the end of the term of years.
A retained life estate enables a donor to make a gift of all or some portion of a personal residence or farm to the Trustees of Washington Academy, and retain the right to live in it for life or a term of years. A life estate can also be created for another’s lifetime. Responsibility for obligations pertaining to the property such as maintenance, insurance and taxes remains with the life tenant. A charitable income tax deduction is available to the donor for the value of the Trustees of Washington Academy’s remainder interest based upon the appraised value of the property.