The future of the Eau Claire Community Foundation and its ability to benefit the residents of the greater Eau Claire area is assured by the continued generosity of our donors.
When it comes to making a long-term impact, there are many giving options to choose from besides simply writing a check. Through planned giving, you can arrange a gift with your clients that helps further our mission and provides tax or other financial benefits.
Bequest in Your Will ⋁
Called a charitable bequest, this type of gift offers these main benefits:
- Simplicity. Just a few sentences in your client’s will or trust are all that are needed: "I give to the Eau Claire Community Foundation (dollar amount or percentage) of my estate (or all the residue of my estate) for (general charitable purposes or specified purposes or charities). The Fund shall be governed by the Foundation’s governing documents, and all amendments and policies adopted by the Board of Trustees." For more information about this option, please click on How to Leave a Bequest.
- Flexibility. Because the gift is not made until after your client’s death, your client can change his or her mind at any time.
- Versatility. Your client can structure the bequest to leave a specific item or amount of money, make the gift contingent on certain events, or leave a percentage of his or her estate to ECCF.
- Tax Relief. If a client’s estate is subject to estate tax, a gift to ECCF is entitled to an estate tax charitable deduction for the gift’s full value.
How It Works
Putting Your Family First
When planning a future gift, it’s sometimes difficult to determine what size donation will make sense. Emergencies happen, and clients want to make sure their family is financially taken care of first. Including a bequest of a percentage of the estate ensures that the gift will remain proportionate no matter how the estate’s value fluctuates over the years.
IRA and Retirement Plan Beneficiary Designations ⋁
Want to help clients get the most value from their nest egg, protect their family from heavy taxes, and give back to their community? Suggest naming the Eau Claire Community Foundation as a beneficiary of a client’s retirement plan assets.
How the Client Benefits
Leaving retirement plan assets to the Eau Claire Community Foundation shields family members from taxes on the retirement assets and frees the client to give them other assets that are not as heavily taxed.
How It Works
Most retirement plans, including 401(k)s and IRAs, are income tax–deferred, meaning that income tax is not paid until the funds are distributed in life or upon death. This taxation makes retirement assets among the most costly assets to distribute to loved ones.
Because they are subject to income taxes when received by individual beneficiaries, retirement assets make ideal gifts to tax-exempt charitable organizations. The income taxes on retirement assets left to loved ones can be as high as 39.6 percent. This means that an IRA worth $100,000 will be worth only $60,400 by the time it reaches them.
On the other hand, naming a charity as the beneficiary of retirement assets upon death generates no income taxes. The charity is tax-exempt and eligible to receive the full amount and not pay any income taxes. In the above example, this means the Eau Claire Community Foundation would receive the full $100,000.
Consider these options:
1) Designate the Eau Claire Community Foundation as the primary beneficiary for a percentage (1- 100 percent) of retirement plan assets.
2) Designate a specific amount to be paid to ECCF before the remainder is divided among family beneficiaries.
3) Make ECCF the contingent beneficiary to receive the balance only if individual beneficiaries, as primary beneficiaries, don’t survive the plan participant.
To implement these wishes, assist the client in advising the plan administrator of his or her decision and sign whatever forms are required.
To implement your wishes, simply advise your plan administrator of our decision and sign whatever forms are required.
Jennifer plans to leave $250,000 to her niece, Heather, and $250,000 to the Eau Claire Community Foundation. Among her assets, Jennifer owns a $250,000 IRA. If she leaves the IRA to Heather, it will be subject to income taxes at Jennifer’s marginal income tax rate (35 percent).
To avoid her niece having to pay these taxes, Jennifer names the Foundation as the beneficiary of her IRA and leaves less tax burdened assets to Heather.
Because the Eau Claire Community Foundation is tax-exempt, income taxes are eliminated.
To name or change a beneficiary, simply contact the administrator of the IRA or retirement plan for a change of beneficiary form. If your client would like to name the Eau Claire Community Foundation as beneficiary, simply decide what percentage of the plan's value (0–100 percent) your client would like us to receive and name ECCF, along with the stated percentage, on the beneficiary form. Then, return the form to the administrator of the plan.
A Second Option
A client can also consider creating a charitable remainder trust for heavily taxed retirement plan assets. Such a trust could be set up to receive the retirement plan proceeds at death. The trust would pay income for life to one or more family members of the client’s choice, after which the remaining assets will pass to the Eau Claire Community Foundation.
Life Insurance ⋁
Gifts of Life Insurance
Life insurance is an asset a client may not think of donating to the Eau Claire Community Foundation until you explain how powerful, practical, and simple it can be.
How You Benefit
When ownership of a life insurance policy is assigned to the Foundation and ECCF is named its beneficiary, the following good things happen:
- The client receives an income tax charitable deduction, available under most circumstances for the cash value and any donated premium payments.
- The client realizes tax savings from use of the deduction, which you can help them invest for future income.
- The client’s future estate tax liability is reduced
How it Works
When a client owns a life insurance policy with accumulated cash value, he or she is essentially sitting on a pile of money. When the original purpose for the protection no longer applies – such as to educate children now grown or to provide financial security for a spouse now deceased—life insurance can be redirected to help support a worthwhile cause.
One option is simply to name the Eau Claire Community Foundation as the primary beneficiary. (Naming ECCF as a beneficiary while the client retains ownership of the policy does not qualify the client for an income tax deduction.) Or, ECCF can be named as the beneficiary and the client can assign ECCF ownership of the policy as a current charitable gift. Doing so provides tax benefits as outlined below.
Donating a New Policy
Perhaps your client doesn’t own an existing policy but still realizes how beneficial giving life insurance can be. If so, in most states, a client can purchase a single payment insurance policy and name a qualified charity like the Foundation as the beneficiary and owner of the policy rather than paying premiums. Even greater leverage is possible when two donors, usually spouses, purchase a two-life second-to-die policy. With two lifetimes before the payment of death benefits, a future gift to ECCF will cost the client even less.
Insurance Death Benefits ⋁
Gifts of Life Insurance Death Benefits
ee how easy it is to make a charitable donation using life insurance.
How We All Benefit
Naming the Foundation as the beneficiary of a life insurance policy provides your client the satisfaction of making a very generous donation and leveraging the full value of the policy.
Alternatively, when a life insurance beneficiary is not a qualified charity, the amount the beneficiaries receive in the end could potentially be less due to estate taxes. But when Eau Claire Community Foundation is named as a beneficiary, ECCF receives the full amount, and estate taxes are eliminated. (With this arrangement, your client will not receive a charitable income tax benefit during his or her lifetime because he or she is not giving away the policy ownership. Your client’s estate will receive an estate tax charitable deduction.)
How it Works
Once a life insurance policy has served its original objective, a client might consider giving it a new life with a charitable purpose. Naming the Eau Claire Community Foundation as a beneficiary while retaining ownership of the policy is actually the easiest way to use life insurance to make a future gift to ECCF. Here are the two main options:
1) The Eau Claire Community Foundation can be named either as the sole beneficiary or a partial beneficiary of the policy.
2) The Foundation as the contingent beneficiary, will receive the death benefits only if the primary beneficiary dies before the insured.
Contact your insurance company for its change of beneficiary form for the life insurance policy. If you would like to name the Eau Claire Community Foundation as a beneficiary, simply decide what percentage of the policy's value (0–100 percent) you would like us to receive and name us, along with the stated percentage, on the beneficiary form. Then return the form to your insurance company.
What about Term Insurance?
As the name implies, term life insurance is usually purchased with a particular time frame in mind. When a policy outlives its useful time frame, rather than let it lapse, a client could simply name Eau Claire Community Foundation as the beneficiary.
If a client continues the premium payments, the Foundation will receive the full face value at the client’s death.
When group term insurance is provided by an employer, it could be to your clients benefit to donate all coverage over $50,000 or even name the Eau Claire Community Foundation as the sole beneficiary. The client receives no tax deduction for naming a charitable beneficiary, but the client will not have to pay the income tax on the portion of the insurance greater than $50,000 each year. The client gets all the benefits of giving while avoiding the tax.
Charitable Gift Annuities ⋁
Charitable Gift Annuities
A charitable gift annuity is a contract (not a "trust"), under which a charity, in return for a transfer of cash, marketable securities or other assets, agrees to pay a fixed amount of money to one or two individuals, for their lifetime.
- The payments are fixed and unchanged for the term of the contract.
- A portion of the payments are considered to be a partial tax-free return of the donor's gift, which are spread in equal payments over the life expectancy of the annuitant(s).
How it Works
The contributed property (the gift), given irrevocably, becomes a part of the charity's assets, and the payments are a general obligation of the charity. The annuity is backed by the charity's entire assets, not just by the property contributed. Annuity payments continue for the life/lives of the annuitant(s) no matter what the investment experience of the gift annuity fund.
Every state has regulations regarding charitable gift annuities. Usually regulation is under a state’s Insurance (or Securities) Laws. Charities may be required to comply not only with regulations in the state in which the charity does business, but also in the state of residence of the donor.
Charitable Remainder Trusts and Charitable Lead Trusts ⋁
A charitable remainder trust (CRT) is an irrevocable agreement in which a donor transfer assets to a trust in return for a stream of income.
- A qualified CRT is exempt from income tax and the donor can claim an income tax charitable deduction.
- If the assets contributed are highly appreciated, they may be sold tax free.
How it Works
An initial income stream is provided to chosen individuals (including the donor) with the remainder to charity, such as the Eau Claire Community Foundation. The IRS has specific requirements regarding the income payout, which may be as an annuity - a specific dollar amount each year, or as a unitrust - a specific percentage of the assets each year, and the amount determined under IRS tables to be available for the charity. To make sure these requirements are met, if your client is interested in a CRT benefiting the Eau Claire Community Foundation, in addition to contacting the Foundation, you should recommend including the client's tax and legal advisors in the discussions. The client's age and applicable interest and inflation rates also affect the benefits of a CRT for any client.
A charitable lead trust (CLT) is also an irrevocable agreement, but the charity receives the income stream and the family or other individual beneficiaries receive the remainder. The importance of involving tax and legal professionals is the same as with a CRT.
Real Estate ⋁
Imagine avoiding the hassle of selling a piece of property, with no worry about getting a fair price and at the same time realizing valuable income and estate tax deductions. This can be accomplished for your client by considering using real estate to make a charitable gift to the Eau Claire Community Foundation.
How You Benefit
In addition to freeing the client from the costs and responsibilities of ownership, making an outright gift of property that has been owned for more than a year offers these benefits:
- Client obtains an income tax charitable deduction equal to the property’s full fair market value. This deduction reduces the cost of making the gift and frees cash that otherwise would have been used to pay taxes.
- Capital gains tax on the property’s appreciation is eliminated.
- The gift reduces your client’s future taxable estate.
How it Works
A client can donate property outright, place it in a trust, or give it on death by will or trust. Following are details on the most straightforward way to make such a gift, direct donation of real property.
The amount of the tax deduction for charitable contributions is limited to 50 percent of adjusted gross income and may be limited to 20 or 30 percent of adjusted gross income, depending on the type of property given and the type of organization it is given to. Any unused amount may be carried over for up to an additional 5 years.
In most situations, a gift to the Eau Claire Community Foundation allows maximum benefit to your client. The Foundation does not offer legal advice to individuals regarding their estate plans. We encourage donors considering a bequest to the Foundation to work with their legal and financial advisors.