Planned Gift Options

Index:

Outright Gifts
• Bequest – The gift that provides for our future
• Gifts of Appreciated Securities
• Gifts of Real Estate
• Gifts of Retirement Plans
• Life Insurance – A sizeable gift at a modest cost

Gifts with Retained Benefit
• Charitable Gift Annuity – The gift that provides you with guaranteed income
• Charitable Remainder Annuity Trust
• Charitable Remainder Unitrust – A flexible, income-producing gift
• Charitable Lead Trust – An amazing wealth transfer vehicle
• Remainder Interests in Residences and Farms

Bequest – The gift that provides for our future

A simple and effective way to make a planned gift to Lewis University is to include Lewis in your will or revocable trust. Bequests are an important way to provide for our promising future.  Each individual legacy contributes to our financial strength and ability to meet the ever-growing needs of our students and faculty. If you have not already done so, please consider including Lewis in your will or revocable trust.

Types of bequests
You can give almost any kind of asset to Lewis University through a bequest, including cash, securities, an interest in real estate (such as a residence), tangible personal property (such as works of art or antiques) or the remainder of your IRA, Keogh, tax-sheltered annuity, qualified pension or profit-sharing plan.

Tax benefits
A charitable bequest is deductible for federal estate tax purposes, and there is no limit on the amount of the estate tax charitable deduction your estate can take. In addition, bequests generally are not subject to state inheritance or estate taxes. In a large estate, the savings can be more than half the value of the bequest.

How to make a bequest
A bequest to Lewis University can be made by creating a new will, adding to your existing will, or including Lewis in your revocable trust. If you include Lewis in a bequest provision, please notify the Office of Planned Giving so that we may include you as a member of the Harold E. White Legacy Society, which recognizes those donors who have included Lewis in their estate plans.  Your notification will be treated confidentially.

Samples of bequest language
The following examples can be tailored to suit your interests. Please consult your attorney for assistance in making a bequest.

Unrestricted Bequest

“I give [____ dollars] [____ percent of my estate] [a specific asset] or [the remainder of my estate] to Lewis University, a charitable, tax-exempt organization located in Romeoville, Illinois, for its general purposes.”

Bequest for a Specific Purpose

“I give [____ dollars] [____ percent of my estate] [a specific asset] or [the remainder of my estate] to Lewis University, a charitable, tax-exempt organization located in Romeoville, Illinois, to be used for the following purpose: [state the purpose].”

NOTE: To ensure that we are able to use your bequest as you intend, we strongly encourage the inclusion of the following language if a specific use is stated:

“If the need for funds for the purposes described above no longer exists at some future date, or if the above stated purpose should become impossible, impracticable, or inadvisable, Lewis University may within its discretion use these funds for an alternative purpose which most closely matches my intentions, as deemed appropriate by the Board of Trustees and executive officers of Lewis University.”

For more information

Please contact Robert Kanonik, Director of Planned Giving, at (815) 836-5813 or kanoniro@lewisu.edu.

This information is not intended to be legal or tax advice. We recommend that you consult with a qualified estate planning attorney when drafting your will or trust.

Appreciated Securities – Support Lewis and avoid capital gains taxes

Gifts of appreciated stocks, bonds and/or mutual fund shares can provide substantial tax benefits in the form of charitable deductions, generally for the full fair-market value of the shares, as well as the avoidance of capital-gains taxes. (Note: While the charitable deduction is limited to 30% of your adjusted gross income, the unused portion can generally be carried forward and deducted for up to five additional years.) If you have a depreciated security, it is typically better to sell the investment and use the cash proceeds for your gift. That way you can claim both a loss deduction from the sale and the charitable deduction on your taxes.

Completing a Gift of Stock

If your broker holds your shares in a brokerage account:

1. Instruct your broker in writing to transfer electronically the specified shares in the name of Lewis University to:
   DTC # 2669, for further credit to Account 22-62302.
   (This is a Northern Trust Company account in the name of Lewis University. Our contact at Northern Trust is Erica Gingerich, (312) 444-7898 or eb68@ntrs.com.)

2. Please send a copy of your written instructions along with a letter indicating the purpose of your gift to the University Advancement Office at the address listed below.

If you or your broker holds your paper stock certificates:

1. Please mail the unsigned certificates along with a letter stating the purpose of your gift and, in a separate envelope, mail one endorsed stock power form per certificate to the University Advancement Office at the address listed below. (Note: You may obtain a stock power form from your broker or bank.)

2. The stock certificates will not be negotiable until we have received both envelopes.

Completing a Gift of Mutual Fund Shares

Since the procedure for making charitable contributions varies from one mutual fund company to another, we suggest that you or your broker contact Jon Salvani, Senior Development Officer, at (815) 836-5269 or salvanjo@lewisu.edu about this type of gift.

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Gifts of Real Estate

Lewis University is pleased to consider gifts of residential, commercial and undeveloped real estate. Like contributions of other types of appreciated property, gifts of real estate provide you with a charitable income tax deduction, based on the fair market value of the property, with no capital gains liability for the transfer to us.

You can deliver real estate to Lewis in several ways:
• Through an outright gift;
• Through the gift of a fractional interest in the property;
• As the basis for a gift plan that will pay you income, like a charitable remainder unitrust.
• By giving us your home and reserving the right to continue living there for your lifetime (a retained life estate gift);
• Through a part sale/part gift arrangement with us (a charitable bargain sale).

When you are considering a gift of real estate, keep two considerations in mind:
• First, we will gratefully review your gift offer and evaluate the condition and marketability of the proposed real estate, reserving the final say on acceptance.
• Second, the IRS requires donors of real estate to secure an independent appraisal to establish the fair market value of the property. We can assist you in following the IRS procedures for this appraisal.

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Gifts of Retirement Plans

Suppose you owned an asset upon which was fastened a warning label:
“70% tax due upon death.”
Shocking? Impossible? Not if the asset is your IRA or other retirement account. A combination of state and federal “death taxes” and income taxes can virtually confiscate your savings, leaving little remaining for your heirs.

Federal Estate Tax. The full, date-of-death value of retirement savings is subject to federal estate tax at a 35% rate (estates over $5.12 million).
State and Federal Income Taxes. Both federal income tax and state income tax (depending on the place of residence of your heirs) will be due on death benefits from an IRA or other plan – costing as much as 40% or more.

Generation-Skipping Transfer Tax. This tax can cost 35% when retirement savings pass to a grandchild or other “skip” person (above a $5.12 million exemption amount).
Note: Many of these taxes can be postponed when retirement assets pass to a beneficiary who establishes a “rollover IRA.” If the beneficiary is the owner’s spouse, he or she can roll over an IRA to another IRA or qualified plan. Amounts are taxed as withdrawn.

What Are Your Options?
• Leave retirement plan savings to family members – who might keep as little as 30 cents on the dollar.
• Leave the retirement account to Lewis University – and preserve most or all of the funds free from tax. Many donors would have no trouble choosing the second alternative . . . especially if they were assured that family members were left secure financially.

In many cases, your heirs simply would not need the shrunken amount that would be left after taxes. But you might purchase life insurance that would replace the sum that a family member would have kept. Or you could arrange for retirement death benefits to be transferred to a trust that would pay income for 15 or 20 years to a beneficiary, with eventual benefit to Lewis University. The trust would greatly reduce any federal estate taxes, and no income taxes – state or federal – would be triggered upon your death.

How to Make a Gift
It’s simple to pass an IRA or other retirement account to Lewis University. Just instruct the custodian of your account to name Lewis University as death beneficiary. (If you have a spouse, his or her written consent may be required.)

At the very least, consider Lewis University as the contingent beneficiary of retirement plan death benefits and give your heirs the right to “disclaim” (decline) any death benefits. Heirs who understand the severity of taxes may decide it is best to have retirement assets pass to a worthwhile cause and divert the gift to benefit Lewis University.

Life Insurance – A sizable gift at a modest cost

Our supporters often overlook the benefits of giving a life insurance policy to Lewis University. If you are carrying more insurance coverage than your family obligations now require, you may want to consider gifting an unneeded, paid-up policy. If you transfer all rights and incidents of ownership of your policy to Lewis, you will be eligible for a charitable income tax deduction equal to the policy’s cash surrender value or cost basis, whichever is less. The insurance policy must be whole life, not term insurance. The value of your gift for gift crediting purposes will be the cash surrender value of your policy on the date of transfer.  By relinquishing ownership of the policy, you will also remove the policy proceeds from your taxable estate.
In certain cases, Lewis University will accept gifts of insurance policies for which continuing premiums are due. If you irrevocably transfer all rights and incidents of ownership of such a policy to Lewis, Lewis may elect to continue to pay the premiums. You may take an initial deduction for the cash value of the policy, and you may deduct any additional gifts you make to Lewis in lieu of premiums.

Lewis University reserves the right to cash in any policy it owns at any time at its sole discretion. Of course, you may designate Lewis as the revocable beneficiary of a life insurance policy at any time. Such a designation will not, however, provide you with any immediate tax benefits.

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Charitable Gift Annuity – The gift that provides you with lifetime income

A Charitable Gift Annuity (CGA) is a simple contract between you and Lewis University. In exchange for your irrevocable gift of cash, securities or other assets, Lewis agrees to pay one or two annuitants you name a fixed sum each year for life. Gift Annuity payments are based on rates recommended by the American Council on Gift Annuities. The payments are an obligation of the general resources of Lewis, and are backed up by a reserve account. Minimum initial gift is $10,000.
There are two basic types of CGAs and they each meet different needs:

Immediate Payment
With an immediate payment gift annuity, your payments begin as soon as the contract takes effect. For example, if quarterly payments are elected, payments begin at the end of the quarter in which you make your gift. Recommended age is 65 or older.

Deferred Payment
The deferred payment gift annuity allows younger donors to defer the start of payments until they have reached retirement age. Like an immediate payment gift annuity, you can take a charitable deduction in the year you make your gift. Because payments are deferred, however, you or your designated annuitants will receive substantially higher income payments later. This type of gift works best for income beneficiaries between the ages of 40 and 60.

What are the advantages?
• Guaranteed fixed income for life
• Rates of return up to 9% for single life (slightly less for two lives)
• Charitable income tax deduction for a portion of your gift
• Tax-advantaged income (your payments will be part tax-free under most circumstances)
• Reduced capital gains tax (you pay capital gains tax only on the gain attributed to your retained income interest)
• Potential reduction of estate tax liability
• The satisfaction of making a substantial gift to Lewis during your lifetime

Example
Bill, age 75, plans to contribute a maturing $25,000 certificate of deposit. Since he needs continuing income, Bill decides to use the cash for a charitable gift annuity that we will issue at the suggested rate of 5.8 percent. Payments will be made quarterly. At the time of purchase, the charitable midterm federal rate (a figure used in calculating the charitable deduction) is 2.0 percent.

Although Bill’s annuity rate is 5.8 percent, his actual earnings will be higher. Because Bill itemizes income tax deductions, he earns a federal income tax charitable deduction of $11,066. With a marginal income tax rate of 28 percent, the tax savings of $3,098 will reduce the net cost of the gift to $21,902. His annual payments of $1,450 will mean an effective rate of total return of 8.6 percent, which is Bill's annual payment expressed as a percentage of the net cost, increased by the benefit of payments that are largely tax free: three-fourths of every dollar Bill receives will be considered a return of his contribution in the contract and will not be subject to income tax.

* Effective R.O.R. stands for Effective Total Rate of Return.  This percentage will vary depending on a number of factors including donor age, tax bracket, and whether or not the donor itemizes deductions.

** The charitable deduction is the amount a donor may deduct in the year the charitable gift annuity is established.

Click here for a PDF of current suggested single-life annuity rates. Click here for a PDF of current suggested joint-life annuity rates.

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Charitable Remainder Annuity Trust

Summary of Gift Plan
The donor funds a qualifying trust under Code §664, providing a fixed annuity (minimum 5% of the original value of the principal, maximum 50%) for one or more individuals. The trust may last for the lifetimes of the beneficiaries or a term of years (maximum 20 years). When the trust ends, the principal passes to one or more qualified charities. No additional contributions are permitted to the trust.

Income Tax Deduction
The present value of a charity's remainder interest (10% minimum required) is deductible, based on the ages of income beneficiaries (or a fixed term up to 20 years), applicable federal rate (§7520 rate) and an unvarying dollar amount to be paid each year. A 5% probability test limits the maximum payouts.

Capital Gains Consequences
No capital gains are recognized upon a transfer of appreciated assets to the trust, or upon a sale by the trustee. Part of the beneficiary's income may be taxed at low capital gains tax rates under the four-tier tax reporting system.

Federal Taxation
Charitable remainder trusts are tax-exempt. Payments are taxable to income beneficiaries under a four-tier, worst-in-first-out system: (1) any current and accumulated ordinary income (15% dividends considered last); (2) capital gains, beginning with short-term gain, then 28% gain (collectibles), 25% gain (recapture of depreciation), and finally 15% gain; (3) "other" (tax-exempt) income; (4) corpus (tax free). The trust pays a 100% tax on its unrelated business taxable income.

Transfer Taxes
One-life trust for donor: corpus is included in the gross estate, but a 100% charitable deduction is available. Two-life trust for donor and spouse: gift and estate tax marital/charitable deductions eliminate tax; adding additional beneficiaries voids the marital deduction. A trust for a non-spouse creates a taxable gift for income interest. The donor can retain the right to revoke, by will, the income interest of the survivor beneficiary, avoiding a taxable gift, but the survivor's interest is taxable in the donor's estate. The value of the testamentary trust is included in the donor's gross estate, but remainder interest gives rise to an estate tax charitable deduction.

Tax Returns
Donors must file gift tax returns (Form 709) for all lifetime trusts, even where a donor is the sole income beneficiary [Code §6019(3)]. Form 8283 is needed with the donor's tax return except for cash transfers. The trustee must file Form 5227 and Form 1041-A annually and Form 4720 is required if the trust is liable for excise taxes.

Best Funding Assets
Appreciated property, generally, and cash work best. Transfers of mortgaged real estate will disqualify the trust. Unproductive, hard-to-sell assets may be unsuitable for annuity trusts if the trustee is unable to make the required annuity payments. S stock is prohibited.

Special Consideration
Annuity trusts are most appealing where the income beneficiaries are in their mid-70s and older and prefer the security of a fixed income. Low §7520 rates (AFR) limit deductions and payouts for annuity trusts.

Charitable Remainder Unitrust – a flexible, income-producing gift

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Charitable Lead Trust – An amazing wealth transfer vehicle

What is a charitable lead trust?

WARNING: Consult your legal and tax advisors before making any material decisions based on this information.

Remainder Interest in Residences and Farms

Summary of Gift Plan
The donor deeds a personal residence or agricultural property to a charity and retains a life estate for one or more individuals or for a fixed term of years. A residence need not be the donor's primary residence. The transfer is not made in trust and may not include personal property.

Income Tax Deduction
A donor may deduct the present value of the charity's remainder interest in depreciable and nondepreciable portions of property, using the remainder interest factors for one or two lives or a term of years, based on the §7520 rate, and taking into account the estimated useful life of depreciable property and "salvage value."

Capital Gains Consequences
Capital gains taxes are avoided unless the property is subject to in-debtedness, which brings bargain sale rules into play. For principal residences, the $250,000 exclusion may offset gain from a bargain sale.

Federal Taxation
There is no change in taxation of the life tenant following the contribution on income realized from property.

Transfer Taxes
The value of the property is included in the donor's gross estate, but a 100% estate tax charitable deduction avoids tax. Gift tax and estate tax marital deductions shelter transfers to a spouse; other transfers are subject to gift tax or estate tax.

Tax Returns
Donors file gift tax returns in all cases. Form 8283 must be filed with the donor's tax return for the year of the gift.

Best Funding Assets
Any residence occupied by the donor: principal residence, vacation property, condominium, etc. Farm property includes land and improvements used for the production of crops, fruits, or livestock. Donors may give remainders in undivided fractional interests.

Special Considerations
If the owner of the life estate can no longer use the property, it can be sold to a third party, with a division of the proceeds between charity and the life tenant, or the donor can give remaining life estate to charity outright or for a charitable gift annuity.