A planned gift is a long term method of supporting the future of Fordham Prep. Annuities, trusts, bequests, life insurance and IRA’s are examples of planned gifts. Planned gifts can provide a tax savings to you and your heirs while supporting the mission of the Prep. By giving back through a bequest or planned gift, you are truly making the ultimate commitment to the future - a commitment that truly transcends though time.
Once you have indicated that you have made a bequest or planned gift, or otherwise made provisions in your estate plans for Fordham Prep, you will become members of the Shea-McDonough Legacy Society. As a member of the Society, your name will be published in recognition of your commitment and thereby encourage others to follow your example.
A charitable annuity is a simple gift that provides income to the annuitant for life. The rate of the annuity is based on the age and number of annuitants. A deduction for the present value of the gift to Fordham Prep may be taken in the year of the gift, and a portion of the income from the annuity is tax-free for a period of years, based on the life expectancy of the annuitant. You can delay the beginning of payments from your gift annuity. The deferral gives you both a higher income rate and a larger charitable deduction than you could receive from an annuity paying you immediately. The deferred gift annuity is especially attractive if you are still in high-income years, and are looking for both tax deductions and additional income during retirement.
One of the simplest ways of creating a planned gift is by including Fordham Prep in your will or trust.
Life insurance can make a great gift to Fordham Prep. 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 the School, 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.
Honor & Memorial Gifts
You may make a gift in honor or in memory of a family member, classmate, teacher, loved one, or other members of the Fordham Prep community. A gift in memory of someone you love or admire can be a particularly meaningful way to contribute to the school. Upon a special occasion or the loss of a family member or friend, many choose to create a restricted scholarship or an endowed scholarship in their memory.
Gifts of a personal residence can also be made with a retained life estate. The retained life estate allows the donor or a designee of the donor to live in their home for the rest of their life. After that time, the real estate is owned outright by Fordham Prep, without the complications of probate proceedings. This gift allows the donor to receive current income tax deductions for the discounted value of the property.
Securities & Stocks
There are many benefits to donating securities instead of cash. Appreciated securities held for more than twelve months benefit a donor in two ways. The donor is able to claim a charitable income tax deduction for the full market value of the securities. The deduction is limited to 30 percent of the donor’s adjusted gross income, but as with outright gifts of cash, the remaining value of the securities donated may be carried over and used for deductions for the next five years. Gifts of stock can yield a tax donation equal to the fair market value of the securities on the day the stock is sold. The donor does not pay the capital gains tax.
Donors specify a particular use for their contribution. Scholarships, endowments and gifts to a specific department of the school are considered restricted gifts.
How Planned Giving Recently Benefited the Prep
When Kevin ’67 and Connie Hackett sat down with their lawyer to discuss estate-planning matters with regards to their IRA account, their main goal was to figure out what would be the most tax-efficient way to benefit their heirs, while at the same time benefitting the charitable causes the they support.
“My lawyer said I should consider naming a non-profit as one of mine and Connie’s IRA beneficiaries,” said Hackett. The answer surprised the Hacketts. “When I asked why, my lawyer told me that when you name a non-profit as an IRA beneficiary, the money comes right off the top, lowering the tax burden on our other beneficiaries. I was totally unaware this was possible, but the fact that Connie and I can support Fordham Prep and still benefit our family is a win-win scenario.”
Hackett, who was a long-time member the Fordham Prep Board of Trustees and recently inducted into the Fordham Prep Hall of Honor, now wants his fellow Rams to take advantage of the tax break and support Fordham Prep. “The tax rate for IRA beneficiaries is fairly substantial and would place an unfair burden on them. Naming a non-profit as a beneficiary is not a difficult thing to do and my hope is that people realize that they can make a difference through a simple action,” says Hackett.
“Doing something like this has been on my mind for a while, as I recently realized I am not immortal. In my experience, the wise thing to do is to talk to your advisors or lawyer to figure out a way to provide for the Prep.”
Traditional IRA accounts are taxed three times when a person passes away.
• They are included in your estate for federal estate tax purposes when you die
• The taxable portion of the IRA balance (which is often the entire amount) is counted again as “income in respect of a decedent” (IRD) for federal income tax purposes. That means federal income tax will be owed when your estate or your heirs take IRA withdrawals
• State income tax may be due as well
After all these taxes have been paid, your heirs may receive only a very small fraction of your IRA money while tax collectors get the lion’s share.
A tax-smart solution is to leave some or all of your IRA money to charitable beneficiaries while leaving everything else to your heirs. The net result will be more after-tax cash for them.
By naming one or more tax-exempt charitable organizations as beneficiaries of your IRA, you leave that money to the charities after your death. Under our current federal tax system, that is the only way to leave IRA balances directly to charity. On the other hand, leaving IRA money directly to charities upon your death by designating them as account beneficiaries is tax-efficient. First, an IRA balance left to charity avoids the federal estate tax, since it is removed from your estate for federal estate tax purposes. Second, there’s no federal income tax due on the IRA money (the IRD rules do not apply). There is no state income tax either. Finally, no income taxes are due when your favorite tax-exempt charities take their withdrawals from the IRAs. So you avoid double or triple taxation in a simple way.
When all is said and done, this strategy allows you to leave more to your favorite charities, more to your loved ones and less to the tax collector. Designating your favorite charity as a beneficiary of your traditional IRA (and other tax-deferred retirement accounts) can be a tax-smart maneuver. With advance planning and the federal estate tax exemption, you have more opportunity to minimize both federal and applicable state income and estate taxes.
Source for parts of this article came from the CPA firm WSRP based in Salt Lake City, Utah.
"Planned giving is one of the best ways to protect your family and give back to an institution you care about deeply, like Fordham Prep!"
- Hon. Joseph J. DioGuardi '58, former New York Congressman
For additional information about making a planned gift to Fordham Prep or the Shea-McDonough Legacy Society, please contact Jose Gonzalez, Vice President for Engagement, Development & Communications, at (718) 367-7500 or firstname.lastname@example.org.
Neither Fordham Prep nor its employees and related parties provide tax or legal advice. You should consult with your legal counsel and/or your accountant or tax professional regarding the legal or tax implications of a particular suggestion or strategy including any estate planning strategies, before you implement. In addition, the information is current as of the date indicated and is subject to change without notice.