Giving to Urbana University

There are a number of methods of giving to Urbana University. Contact Bob Keller, Vice President for Institutional Advancement at bkeller@urbana.edu or telephone 937-484-1282 for more specific details.

Cash Gift

This is the simplest and most popular type of charitable contribution. A gift of cash is considered to be made on the date it is delivered or mailed.

Gift of Appreciated Property

An excellent alternative to a cash gift is a gift of property. Charitable gifts of certain property assets will provide greater tax benefits than cash gifts of equivalent value.

The most favorable tax benefits for the donor are generated by contributions of appreciated long-term capital gain securities and real estate. In addition to receiving a charitable deduction for the full fair market value of such a gift, the donor escapes any potential tax on the capital gain element in the contributed property and any sales commission which would be payable upon the asset sale.

Gift of Closely Held Stock

A business owner who contributes closely held stock will be allowed a charitable contribution for the fair market value of the stock. An extra benefit is that the donor will escape the potential capital gains tax on any appreciation in the stock value.

There is an attractive alternative benefit available to the donor who does not wish to give up control over any part of his or her closely held stock. In this arrangement, the donor makes an outright gift of the closely held stock and, at a later date, the charity sells the stock back to the donor. As long as the charity is not obligated to sell the stock back to the donor, the transaction should not produce adverse tax results.

Income-Producing Gift

Financial and estate planning flexibility has been extended in recent years because of the growing popularity of charitable remainder trusts, which were introduced by the Tax Reform Act of 1986.

The charitable remainder trust is similar to other types of trusts, except that the amount distributed at its termination is paid to a charity beneficiary. The donor transfers property irrevocably to a trust and specifies how the trust income and principal are to be distributed and for what period of time. The exact deduction for many types of life-income gifts is calculated from Treasury tables, subject to monthly revision.

Unitrust

A unitrust provides for payment to the income beneficiary in an amount that may vary. The payment must equal a fixed percentage of the net fair market value of the trust assets (valued annually). The donor determines the fixed percentage upon the creation of the unitrust. It must be at least 5%.

The unitrust payment must be made annually or at more frequent intervals to the donor and/or another beneficiary for life. The donor is allowed a charitable deduction equal to the present value of the charitable organization's remainder interest in the unitrust which is determined by Treasury regulations.

Annuity Trust

The annuity trust shares many common features with the unitrust; the difference being the manner of calculating the payment to the income beneficiary. The annuity trust provides for a fixed payment amount. This amount must equal a sum not less than 5% of the initial fair market value of the gift in trust.

A deduction for the present value of the charitable remainder interest and avoidance of capital gains tax on the transfer of appreciated long-term, capital gains property are among the benefits available to the donor of the annuity trust. The fixed payout feature of the annuity trust may make it particularly suitable to meet the financial needs of an older beneficiary.

The income interest for the charity must be in the form of an annuity or a fixed percentage of the value of the trust property (determined annually). A donor is not en tided to a charitable deduction for federal income tax purposes on the creation of a charitable lead trust, unless the trust income of the donor remains taxable.

Gifts through Wills

A will is a very powerful instrument. It provides an individual with the opportunity to:

• Preserve as much of the estate as possible through the well thought-out use of tax-saving devices and opportunities.
• Specify which property is to be contributed to whom.
• Direct when such distributions are to be made.
• Select the individual or institution to carry out the wishes of the decedent.
• Contributions through a will have become a key part of philanthropy in the United States. These types of gifts allow an individual to make major contributions that are, in many cases, larger than possible during the donor's life. Every year, thousands of individuals take advantage of this opportunity.

Income for a Beneficiary through a Will

A charitable bequest can be arranged to provide income for a selected beneficiary (spouse, children, dependent relative or friend, etc.) by directing that the bequest be used to establish a charitable remainder annuity trust, a unitrust or a charitable gift annuity. If such a gift is made by will, the principal will pass to the University only after the donor and life-income beneficiary have died.

Gifts of Life Insurance

Most people own some form of life insurance. An overlooked role of life insurance is the one it can play in planned charitable giving. It can be a direct funding form of a gift, permitting the donor to make a major gift for a minimal annual payment.

Charitable Organization as Beneficiary

A donor can name the University as the primary or secondary beneficiary of a life insurance policy. The donor continues ownership of the policy and has access to the policy's cash value.

Since the donor retains ownership of the policy, no charitable income tax deduction in allowed for the value of the policy upon designation to the University or for subsequent premium payments.

Charitable Organization as Owner

A donor can receive immediate tax benefits by making an irrevocable assignment of an insurance policy to Urbana University. Upon assignment, the donor is allowed an immediate federal income tax deduction for the lesser of the policy's fair market value or the net premiums paid.

Purchasing Life Insurance as a Gift

The donor elects to make a major gift or create an endowment. Through the use of life insurance, the donor can leverage the gift substantially. For example, instead of giving $100,000 directly; a 55-year old could give $4,000 per year for five years which will pay up the $100,000 policy.

Once a year, for five years, the donor will give the charity an amount needed to pay the premiums on a life insurance policy.

This policy will be on the life of the donor or anyone else that he/she may designate. The charity will then pass those dollars to the insurance carrier as premiums for the policy.

The charity will be the owner, payer, and beneficiary of the policy. At the insured's death, the proceeds will be paid to the charity.

Life Insurance as a Gift

Advantages to the Donor:

• Your gift is simple to make, simpler even than a bequest in your will.
• Premium fully tax-deductible.
• Your gift cannot be challenged by your heirs.
• The eventual size of your desired gift can be much larger than possible via any other giving method.
• Your gift relieves your estate of the need for liquid assets.
• Younger donors can make substantial gifts.
• If your employer matches gifts by employees, your contribution may be multiplied.
• Your pledge (premium) payment schedule may be as brief as you like.

Advantages to the Charitable Recipient:

• The gift is guaranteed.
• The gift is not subject to challenge by donor's heirs.
• The gift is liquid.
• The size of the eventual gift is even larger than otherwise possible.
• Younger donors can participate.
• The recipient charity owns this asset.
• The recipient charity may design a pledge mix of current cash and deferred insurance.