Support UCPREF: Gifts at a Glance

1. Gifts of Cash
2. Gifts of Stock
3. Gifts of Real Estate
4. Gifts of Business and Partnership Interests
5. Gifts of personal property
6. Gifts by Will or Trust
7. Gifts of Retirement Plan
8. Gifts of Life Insurance
9. Charitable IRA Rollover
10. Your Gift is a Blessing

Gifts of Cash

Did you know that gifts of cash can be deducted against a larger portion of your taxable income than can gifts of other assets? Cash is the simplest donation and provides immediate benefits. Your gift can be made outright or can be used to fund one of our life income arrangements.

The IRS allows you to claim charitable deductions for gifts of cash up to 50 percent of your adjusted gross income ("AGI" -- the figure at the bottom of the first page of Form 1040). If you use property other than cash to make your gifts, you can only claim deductions of up to 30 percent of AGI. Any amounts not claimed as deductions in a given year may be claimed in later years, but if you are looking for substantial immediate tax deductions you may be better served giving cash instead of property:

(Example)*
Cash          Other Assets

Donor’s AGI $300,000 $300,000
Amount of Gift $200,000 $200,000
Asset Donated Cash Stock
Total Charitable Deduction $200,000 $200,000
Deductible against % of AGI 50% 30%
Deductible in 1st Year $150,000 $90,000
Net taxable income, 1st Year $150,000 $210,000
Net Tax in 1st Year @35% rate $52,500 $73,500
Carryover Deduction $50,000 $110,000

*This example is based on income tax rates that can change yearly. Contact our office for a personal illustration based on the latest rates.

Gifts of Stock

The most common assets donated (and the easiest to donate), are stocks and bonds which have appreciated in value since being acquired by the donor. The full fair market value of such stocks may be deducted for income tax purposes without paying any capital gains tax!  Consider the following:

• Don’t sell stock first!

Even though you give us the proceeds as a gift, the IRS will impose capital gains tax on your sale, wiping out the benefit of this arrangement.

• What if your stock has declined in value?

The fair-market deduction rule works against you with depreciated stock.  If you purchased stock for $50,000 and it's now worth $30,000, your charitable deduction will be limited to $30,000. You won't earn a capital loss either. It is better to sell depreciated stock, claim the resulting tax loss as a deduction, and make a deductible cash gift to UCPREF with the proceeds.

• How will your gift of stock be valued?

It's the average of the high and low prices for the stock on the date of the transfer to us. If the high bid was $80 and the low was $70 on the day you made your gift, your deduction will be $75 per share.

• When is your gift complete?

If your stock is held by your broker, it's the date the shares reach our account. If you hold the stock yourself and mail it to us, it's the postmark date on the envelope.

• How should you transfer securities to the Foundation?

If your broker holds the shares, he or she should call our office at (202) 973-7139 for transfer instructions. If you hold the shares yourself, mail them unendorsed, and in a separate envelope mail a stock power for each company, signed in blank, to.:

The United Cerebral Palsy Research and Educational Foundation
Office of Planned Giving
1025 Connecticut Avenue, Suite 701
Washington, DC 20036
E-mail: maisen@ucpresearch.org

• Can you deduct the full amount of your gift?

Yes, up to 30 percent of your adjusted gross income each year.  Thus, if your gross income is $100,000, you will be able to deduct up to $30,000 in gifts of stock. A gift in excess of the 30 percent in any given year is not wasted, however, because the IRS allows you to carry forward excess deductions for five years.

(Example)  You own stock with a fair market value of $100,000 that you purchased for $30,000.  If you contribute that stock to UCPREF, you will claim a charitable income tax deduction for the full $100,000. In addition, you will not be liable for tax on the $70,000 capital gains upon transfer of the stock.  By donating appreciated stock instead of cash, you have benefited individuals with CP by $100,000 and secured an income tax deduction in the same amount, at a cost to you of only $30,000.

Gifts of Real Estate

Did you know that you can make a substantial gift to UCPREF through a transfer of residential, commercial, or undeveloped real estate?  UCPREF is happy to consider gifts of residential, commercial and undeveloped real estate. As with donations of other appreciated property, gifts of real estate secure a charitable income tax deduction for you based on the fair market value of the property with no capital gains liability for the transfer to the Foundation

You can give real estate to UCPREF in several ways:

• Through an outright donation;
• Through the donation of a fractional interest;
• By transfer to a trust of which the Foundation is one of the beneficiaries (for example, the beneficiary of the right to income from the land, or the beneficiary of a remainder following the life interest of another beneficiary);
• By executing a deed and retaining the right of use (a life estate) during your lifetime;
• Through a part sale/part gift arrangement with us (a charitable bargain sale).

Gifts of real estate give rise to certain special considerations:
First, as is true with appreciated corporate stock, if the real estate has appreciated in value while you have owned it, there will be no capital gains tax if you give the property itself, as opposed to the proceeds of the property after you have sold it.

Second, we will gratefully review your gift offer and evaluate the condition and marketability of the proposed real estate, reserving the final say on acceptance.

Third, the IRS requires donors of real estate to secure an independent appraisal to establish the value of the gift.  We can assist you in following the IRS procedures for this appraisal.

Gifts of Business and Partnership Interests

One asset which may be used in charitable giving is an interest in the Donor’s business or partnership.  Because of the varying state laws and the varying nature of business structures, such gifts to UCPREF should be coordinated between the Foundation and the Donor’s attorney and accountant.

Gifts of Personal Property

Gifts of personal property, which could include such things as artwork, collectibles, and equipment, can be mutually beneficial to the giver and to CP research.

If you are considering such a gift, we will be able to guide you in meeting the technical requirements necessary to an effective charitable deduction and in securing an independent appraisal to establish the amount of that deduction.

Most gifts of personal property are made to UCPREF outright. In rare cases, it may be possible for the donor to arrange for life income to be paid to him or her in return for the gift. However, significant tax considerations make it advisable for you to consult your advisors and our office first before proceeding with such a plan.

If you are considering a gift of art or collectibles, email UCPREF or call at (202) 973-7139 for assistance.

Gifts by Will or Trust

Many supporters of UCPREF choose to give by will or revocable trust taking effect after death.  The advantages of such a gift are:

• It is not payable until death, so it does not affect your assets or cash flow during your lifetime.
• It is private -- your will is not filed or made public until your death, and
• It is revocable -- you can change the provisions in your will or trust at any time until death.
• A charitable bequest or trust distribution is deductible for federal estate tax purposes, and there is no limit on the deduction your estate can claim.  In addition, the gift is usually exempt from state inheritance taxes.

A bequest can deliver a specific gift to UCPREF ("I bequeath the sum of Ten Thousand ($10,000) Dollars"). Or, it can deliver a percentage of the balance remaining in your estate after taxes, expenses and specific bequests have been paid – what's known as the residue of your estate ("I bequeath Ten Percent of the residue of my estate"). Generally, giving a percentage of the residue allows for more flexibility in your long-term planning.

A charitable bequest or trust distribution is deductible for federal estate tax purposes, and there is no limit on the deduction your estate can claim. In addition, the gift is usually exempt from state inheritance taxes.

You can make your bequest in several ways...

Specific Bequest
Your bequest can be a specific dollar amount, asset, or percentage of your estate:

"I give all the General Motors stock I own at the time of my
death to UCPREF located in Washington, DC."

Residuary Bequest
Alternately, you can give all or a percentage of the balance remaining in your estate after expenses, taxes, and the specific bequests have been paid:

"Of the rest, residue and remainder of my estate I give Twenty-Five
 Percent (25%)  to UCPREF located in Washington, DC."

Contingent Bequest
Finally, your bequest can be payable to UCPREF if the initial beneficiary is unable to inherit it:
"If my nephew does not survive me, is otherwise unable to
inherit, or disclaims this bequest, I direct that it be paid to
UCPREF located in Washington, DC."

You May Be Wondering ...

What's the difference between a will and a trust?
A will is your instruction manual to your survivors about how you want your property distributed. It's a revocable, private document that only takes affect after your death.

A revocable trust (sometimes called a living trust) is a legal entity that holds assets during your lifetime and then transfers ownership of them -- or benefit from them -- to your designees.

There is no difference between wills and trusts with respect to how they are taxed. In some states, however, the probate and distribution process is simpler with a revocable trust. Your attorney can guide you in choosing which vehicle will work better for you.

What if I've already written my will or trust?
You can amend a will or trust to make a gift to UCPREF. Your attorney can prepare a new will or a codicil that adds a new bequest. Similarly, he or she can prepare an amendment to your revocable trust to add UCPREF as a beneficiary.

Gifts of Retirement Plan

Your largest asset may be your retirement plan: your 401(k), 403(b), IRA, Keough, or other such accounts. When you plan your estate, it may seem natural to automatically designate a child or other relative as the successor beneficiary of the account after your death than to use other assets to make a charitable gift to UCPREF.  This may not, however, be the best approach to giving.

The IRS considers the balance left in your retirement account to be untaxed income. The income tax is in addition to estate tax on the retirement account balance.  What is the result of this double taxation? For estates fully subject to the estate tax, up to 70 percent of the value of the retirement plan can be consumed in taxes before your child, relative or friend receives it:

Example*
Here's how it could work. Suppose the balance remaining in your IRA at your death is $500,000, that your estate is subject to 49% federal estate tax, and that your heir is in the 35% income tax bracket:
IRA: $500,000
Less 49% estate tax: (245,000)
Transfer to heir: $255,000

Less 35% income tax:   (89,250)
Net to heir: $165,750
Total tax %:            67%

*This example is based on a factor that changes yearly. Contact our office for a personal illustration based on the latest rates.

If the bequest is to UCPREF or some other charitable organization, both the estate tax and the income tax referred to in the preceeding example will be legally avoided!

When you consider a gift from your retirement plan, keep the following points in mind:

• Direct the gift to UCPREF via your plan's beneficiary designation form – rather than including the account in your taxable estate, then bequeathing it to UCPREF.
• Don't use the balance in your retirement account to satisfy a specific dollar-amount bequest already in your will. Your estate will be treated as having received taxable income in the amount of the bequest paid by the retirement plan assets.
• You may make UCPREF a partial beneficiary of your plan and direct the balance to your heirs.

How Do I Make a Gift of my Retirement Account Assets?
First, get the advice of your plan administrator and an attorney expert in retirement planning and charitable gifts.

Gifts of Life Insurance

You may be surprised to learn that your surplus, paid-up life insurance policies can be used to fund a gift to UCPREF. If, for instance, you acquired several life insurance policies when your family was younger, the coverage you now have may be more than you need. If you donate a policy, your charitable deduction will be the lesser of the fair market value of the policy (we can guide you in determining this) or your cost basis (your total premium payments).

There are other alternatives.  Your ongoing family obligations may make it difficult for you to accumulate capital. You may want to make a significant gift to UCPREF, but wonder how you will gather the resources to do so. One choice is to purchase a new life insurance policy as a gift and make deductible annual gifts to UCPREF in the amount of the premiums.  We will, in turn, pay the premiums to the insurer.  Or, you can transfer ownership of an existing policy which is not yet paid up. Your charitable deduction will be determined as though you had donated a paid-up policy.

It is important that you name UCPREF as the irrevocable owner of the policy and not just the beneficiary. The IRS does not allow deductions for your premium payments if you retain ownership of the policy.

If you have borrowed against a life insurance policy, a subsequent gift of the policy will create taxable income for you -- the difference between the loan balance and the fair market value of the policy.

New! Charitable IRA Rollover!

If you are age 70½ or older, new legislation now allows you to make cash gifts totaling up to $100,000 a year from your traditional or Roth IRA to qualified charities without incurring income tax on the withdrawal. This is good news for people who want to make a charitable gift during their lifetime from their retirement assets, but have been discouraged from doing so because of the income tax penalty. The provision is effective for tax years 2006 and 2007 only, so you must act by December 31 to take full advantage. Contact us for more information.  The new provision permits distributions from traditional IRAs or Roth IRAs. Such distributions were previously subject to income tax, but are now excludable. The following limitations and restrictions apply:

• The individual for whose benefit the plan is maintained must have attained the age of 70½ or older at the time of gift.
• Qualified charitable distributions may not exceed $100,000 in the aggregate in any taxable year.
• The provision applies to tax years 2006 and 2007 only. Qualified distributions must be made by December 31 of each year.
• Qualified distributions must be made directly to the charity by the plan trustee. Contact your plan trustee for information on how to initiate a transfer.
• Qualified charitable distributions may be excluded from gross income for Federal Income tax purposes. However, no federal income tax deduction is available. Certain states may not exclude gift amounts withdrawn from an IRA for state income tax purposes.
• Only outright gifts are eligible. Distributions to charitable gift annuities, charitable remainder trusts, pooled income funds and other split-interest arrangements do not qualify for special tax treatment.
• Qualified contributions may be counted toward the Minimum Required Distribution (MRD) for a donor’s IRA accounts.
• Qualified contributions are not subject to the deductibility ceiling (50% of AGI) or the 2% rule that requires that itemized deductions be reduced by 2% of AGI in excess of $150,500 for tax year 2006.
• Gifts from retirement accounts other than IRAs—such as 401k, 403b, and SEP accounts—are not eligible. Donors may be able to make qualified transfers of money from other accounts to their IRA, and then make a charitable gift from their IRA. Check with your tax adviser.
• Donors who do not itemize their Federal income tax returns may make qualified IRA gifts and exclude such gifts from their reportable income.
• Individuals who intend to leave the balance of their IRA to charity at death anyway.

Your gift is a blessing. 

More important than the tax and practical advantages which your donation will generate is the fact that it will work wonders with those whose needs are urgent and substantial - those suffering from Cerebral Palsy.  They have a need only you can meet.

PLEASE NOTE: This summary was prepared as an educational service to its clients and others and is not intended as legal or tax advice. Consult your own legal or tax advisor before making any decision based on this information.