Planned giving is a very special tool of philanthropy. It's reserved for those individuals and families with both a clear vision and a sense of deep conviction – for both the near and long term. Whatever form your planned gift takes, keep in mind that it is a wonderful way to support the Phi Psi Foundation.
Contributing life insurance to the Foundation is an attractive way to make a substantial gift. In order to claim a charitable income tax deduction, the Foundation must both own the policy and be its sole beneficiary. You may then deduct the fair market value of the policy. Your insurer can help you calculate the amount of your expected deduction and help complete the appropriate documents.
Retirement Plan Assets
Many donors spend much of their lives paying into qualified retirement plans – money that is considered "income with respect to descendent" for tax purpose, before it is passed to heirs as part of an estate. Therefore, it is twice taxed: first, under income tax rates and secondly under gift and estate tax rates. The reason for such income tax treatment is because the plan was funded with pretax dollars and grown in a tax-sheltered fund. A gift provision from the remainder of a pension or retirement plan can often be the most economical way to make a gift, allowing for other assets to pass to heirs under better tax rates.
A charitable gift annuity is a contractual agreement between a donor and the Foundation whereby we agree to pay you a fixed annual income for life in exchange for money or assets transferred to the Foundation. The amount of the annuity (annual income) is determined by the amount of the gift and the age or life expectancy of the person(s) to receive the annual income. Annuity payments can begin soon after the gift, or can be deferred to a specific age or to coincide with retirement or other significant planned life change. Annuity contracts are governed by the laws of the state in which the donor resides.
Charitable Remainder Trusts
A trust is a stand-alone financial instrument used to hold assets for someone else's benefit. In the case of Phi Kappa Psi, you will be creating an irrevocable trust in the Foundation's name, but specifying that you (or someone else) receive income from the trust until your death. You may also provide that the payments continue until the death of both you and your spouse. You may fund the trust with cash or with appreciated securities or real estate. Contributing appreciated assets eliminates capital gains taxes at the time of the donation, as described previously.
The trust may subsequently sell the assets to increase the amount of income available for distribution, but the capital gains tax would be spread out over your lifetime and would be payable in installments only as you received cash from the trust.
When you establish a charitable remainder trust, you receive an immediate tax deduction based on the estimated value the Foundation will eventually receive. This amount varies depending upon your age, the age of any other beneficiaries and the annual payout amount.
With a charitable remainder unitrust, you must specify at the outset what percentage of the trust's assets will be paid to you (or your beneficiaries) annually. Then, depending upon the trust's investment performance, you will receive more or less money each year. You may make additional contributions to the unitrust at any time, receiving a commensurate charitable deduction. A unitrust takes advantage of rising financial markets because your yearly payout increases with the value of the trust. Similarly, however, if its value decreases, so does your annual payment.
A charitable remainder annuity trust differs from a unitrust in that the annual payment you receive is set as a fixed dollar amount, not a percentage of the trust's assets. That means you (or your designated beneficiary) are guaranteed the same income every year, regardless of how the trust's investments perform. Also, no additional contributions to an annuity trust are permitted. To give more, you must create a new annuity trust. An annuity trust provides a constant, reliable income stream, shielding you from market fluctuations. This means, however, that the amount you receive will never be adjusted for inflation.