The following vehicles outline different ways that you, as a donor, can support the Academy and its work through estate planning or via a planned gift.
Fixed Amount or Percentage of Estate
The Academy receives a specific dollar amount or percentage of your estate. This is the most common type of bequest. The advantage of a percentage bequest is that it does not have to be altered as the size of one's estate changes or to adjust for inflation.
Personal and Real Property
The Academy receives a specific asset, such as a parcel of land, house, a work of art, a retirement account, or securities.
Testamentary Charitable Remainder Trust
Named beneficiaries receive income for life from a trust fund established by the donor. All or part of the principal goes to The Academy upon the death of the income beneficiary or beneficiaries.
Testamentary Charitable Lead Trust
The Academy receives income in the form of a fixed dollar amount or a percentage of trust assets paid at least annually from a trust that takes effect upon a donor's death. Upon the expiration of the trust term, the principal passes to the donor's named beneficiaries (e.g. children or grandchildren).
Charitable Remainder Trusts
A Charitable Remainder Trust can be established with cash, appreciated securities, real estate, or other marketable assets. Managed by a trustee, a charitable remainder trust provides income until your death (or the death of a beneficiary), or for a specified term of years. When the trust expires, the principal becomes available to the Academy.
If you contribute appreciated securities, there is no capital gains tax on their transfer to (or subsequent sale by) the trust. It is, therefore, possible to ÒgiveÓ the capital gains tax otherwise due the government to the Academy and to have that money working for you by generating income. You are entitled to an income tax deduction for part of the gift, subject to the same contribution ceilings for outright gifts of cash or securities. Most donors also experience an increase in annual income as a result of the gift. If, for example, the trust is funded with highly appreciated securities paying a nominal annual dividend, the trust could sell the securities and invest in a more diversified portfolio managed to produce higher annual income.
There are two different types of Charitable Remainder Trusts. An Annuity Trust pays a fixed dollar amount each year. This dollar amount is established when the annuity trust is created, and it does not change from year to year. A Unitrust pays income according to a fixed percentage of the total trust value, as revalued each year. As a Unitrust's value changes, payments to the beneficiary also change. It is usually expected that a properly managed Unitrust can provide some protection from inflation. But it should be recognized that there is some risk that payments may go down.
In the past, trusts were often tools for the rich. Today, they serve the middle class well, too. Do the following benefits of a Charitable Remainder Trust fit your situation?
You receive income for life or for a specified number of years.
If you make your gift with low-yielding securities or non-income producing assets, your current income should increase. A trust can also delay the income for a child until the child reaches a certain age.
If you give appreciated securities or other appreciated assets, you avoid capital gains tax when you create the trust.
A charitable income tax deduction is available if you itemize. If you give appreciated assets, your annual charitable gifts are limited to 30% of your adjusted gross income (AGI). If you give cash, your annual charitable gifts are limited to 50% of your AGI.
You reduce your gift and/or estate tax.
You will support an important Academy program.
You may join the Academy's Planned Giving Society.
Gifts of Tangible Personal Property
Gifts of tangible personal property, such as art or antiques, are accepted by the Academy if they can be used or sold in support of the mission of the Academy. If you have owned the property for more than 12 months, you may claim an income tax deduction for its fair market value, even though the original cost may have been a fraction of its current value. For income tax deduction purposes for gifts of $5,000 or more the IRS requires a documented appraisal by a qualified, independent appraiser, arranged and paid for by the donor. The proposed gift will also be subject to the Academy's policies for acceptance. In certain cases a gift of tangible personal property may be used to create a life income arrangement, such as a charitable remainder Unitrust. In such situations, the property is donated to the School, and proceeds from the sale of the property are used to create the planned gift.
Charitable Lead Trusts
A Charitable Lead Trust is the inverse of a Remainder Trust. It is a powerful estate-planning tool for taking advantage of the generation-skipping transfer tax exemption and transferring wealth between generations. A trust is established and the Academy receives income in the form of a fixed dollar amount or percentage of trust assets paid annually. Upon the expiration of the trust term, the principal passes to the donor's named beneficiaries (for example children or grandchildren).
Gifts of Real Estate
Most real estate has appreciated at a rate higher than inflation, making it an ideal asset for many methods of charitable giving. A home, undeveloped lot, commercial property, or other real estate can be contributed outright, converted to a new source of income through a deferred gift agreement, or transferred directly to the Academy with arrangements for life tenancy. Depending on the giving method, you can benefit from income tax savings, capital gains tax savings, or estate and gift tax savings, while also possibly increasing your annual income.
As a general rule, properties that have indebtedness are not suitable as gift assets. For income tax deduction purposes the IRS requires a fully documented appraisal by a qualified, independent appraiser arranged and paid for by the donor. The proposed gift will also be subject to the Academy's policies for acceptance.
As with gifts of personal property in certain cases a gift of real estate may be used to create a life income arrangement, such as a Charitable Remainder Unitrust. In such situations, the property is donated to the Academy, and proceeds from the sale of the property are used to create the planned gift.
Gifts of a Personal Residence or Farm with Life Tenancy
It is possible to transfer ownership of a residence or farm to the Academy while retaining use of the property during your lifetime, as well as your spouse's lifetime. The property need not be your primary residence; it can be a second or a seasonal home. Donors with life tenancy remain responsible for all maintenance and costs of upkeep, including insurance and taxes.
This is an excellent way to support the Academy, while also receiving a current income tax deduction. The deduction is less than the full-appraised value of the property and is based on the life expectancies of the donors, the estimated useful life of the property, and the separate values of the land and buildings.
Gifts-In-Kind
The Academy accepts gifts-in-kind if they can be used in support of the mission of the school. In most cases, these gifts take the form of inventory given through businesses owned by our friends. Gifts-in-kind are also sometimes directed to the Academy by alumni whose employers offer corporate giving programs.
Gifts of Life Insurance
You can name the Academy the beneficiary (or co-beneficiary) on an existing life insurance policy. In the event of your death, the Academy receives the proceeds of the policy as a bequest, generating federal estate tax benefits. If you also make the Academy owner of the policy and relinquish all incidents of ownership, you can claim an income tax deduction for the cash surrender value. You can also purchase, through relatively modest annual gifts, a new policy naming the Academy beneficiary and owner. Not only will you be able to transform a small annual gift into a large one; you can claim the amount of the annual premium as a charitable deduction for income tax purposes.
