Gift Plan Details: Bequests

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	1.	If I make a bequest to a 501(c)(3) organization, is any part of that bequest deductible from taxes on the balance of the estate? If an individual includes a bequest to a 501(c)(3) charity in his or her will, and the funds are distributed to the qualifying charity, the estate should be able to claim a federal estate tax charitable deduction equal to the amount distributed, provided the estate is subject to estate tax. If the estate is not subject to the federal estate tax, there is no federal tax benefit to including a charity in the will. For individuals who want to include charities in their plans but are not subject to the estate tax, many advisors recommend naming the charity as a percentage beneficiary of the individual’s qualified retirement plan (IRA, 401(k), 403(b), etc.) because such a gift avoids the federal income tax which would otherwise be due if the beneficiary of qualified retirement plan assets is an individual other than the donor’s spouse. Because planning with retirement assets and wills can be complex transactions with significant legal and tax implications, it is always suggested that you confer with your own advisors before making any changes to your plans.
	2.	Our donor is holding EE Bonds which have reached maturity and would like to use them as a charitable gift to our organization. What are the benefits and pitfalls? With most assets, there are times when they are more attractive and less attractive as charitable gifts. For EE Bonds, when given during the donor’s lifetime, it triggers all of the income which has accrued on the bond and it is taxable to the donor when the charity redeems them, even though the bonds have been donated to the charity. This makes it one of the least attractive assets to give while the donor is alive, particularly compared to assets such as appreciated stock. However, EE bonds are a terrific gift if transferred to charity by bequest. if the donor’s will specifically names your charity as the beneficiary of the EE bonds, then the donor’s estate is entitled to both an income tax charitable deduction for the income attributable to the bonds (IRD) and an estate tax charitable deduction for their value. The tax treatment is similar to naming a charity as the beneficiary of a qualified retirement plan account, where such a gift avoids both income and estate tax. An article by Chris Hoyt at: http://www.pgdc.com/pgdc/transferring-us-savings-bonds-charities explains these rules and will be helpful to your donor’s advisors. They should fully research this issue before the donor sets up the gift, as the tax laws are always subject to change. This advice often will cause donors to elect to hold EE bonds which are no longer accruing interest (30 years from issue date) to give through a bequest. If the donor were to redeem the bonds, pay the tax and reinvest the proceeds, what would be the result? If your donor is not near the end of his/her life, the donor may find that paying the income tax and reinvesting the remaining proceeds is a superior option to holding matured EE bonds until death. But that is a question for the donor and his advisors to determine.
	3.	How does a charitable bequest work? Donors include a provision in their will directing that a gift be paid to your organization after their death or the death of one of their survivors. Donors face two sets of choices when they write a charitable bequest: First, they can give your organization either a specific amount of money or item of property (a "specific" bequest), or they can give a percentage of the balance remaining in their estate after taxes, expenses, and specific bequests have been paid (a "residual" bequest). Second, they can direct you to use their bequest for a particular program or activity at your organization (a "restricted" bequest), or allow you to use it at your discretion (an "unrestricted" bequest). Donors can also direct that a bequest be paid to you if one of their heirs does not survive (a "contingent" bequest).
	4.	Which is preferable -- a specific or a residual bequest? Generally, individuals are cautious when they specify an amount of money that is to be paid in the future by their will. In many cases, however, their estates are larger than they anticipated, making a percentage of the residue a better gift for your organization than a specific, dollar-amount bequest.
	5.	Prospects are telling me that they can’t make a bequest because they’ve already written their will. What response can I give them? Suggest a codicil, a document that adds a bequest to your organization, then confirms all other provisions of the existing will. It's simple and inexpensive to prepare.
	6.	What’s the difference between a will and a revocable trust? Nothing, in terms of a charitable gift to your organization. Individuals with a will own their property during lifetime; their will directs how that property is to be administered and distributed after death. A revocable trust takes title to property during lifetime, but distributes it similarly to a will after death.
	7.	I need a quick reference guide on the details and funding options for planned gifts. Help! You've come to the right place. Purchase The Ultimate Quick Reference Planned Giving Pocket Guide that also comes with a fold-out "cheat sheet" titled When How and Why to Plan a Gift. At $24.95, it's a bargain. (Quantity discounts for staff, board members and volunteers.)

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