Gift Options and Planning Assistance
Gifts of cash are the most common form of contribution to America's Second Harvest of South Georgia, Inc. A gift of cash is simple and is not subject to gift or estate taxation. A contribution postmarked before December 30 is deductible for that tax year even if America's Second Harvest of South Georgia, Inc. receives it in January, provided the account against which the check was written had sufficient funds to cover it at year’s end.
Gifts of cash are fully deductible, on an annual basis against up to 50% of your adjusted gross income (AGI). If the cash gift exceeds 50% of your AGI in the year of the gift, the unused amount may be carried forward and deducted until the gift amount is exhausted, or up to five years, whichever comes first. The amount of the gift is removed from your estate.
Example: Mrs. Morris’s adjusted gross income is $50,000 this year, and she contributes $35,000 to America's Second Harvest of South Georgia, Inc. she may deduct $25,000 this year and carry forward $10,000 to deduct next year.
These gifts are made during the current year and are gifts America's Second Harvest of South Georgia, Inc. is able to use immediately. Fiscal year gifts are often called immediate gifts. Current fiscal year gifts may be applied to help operations based on needs or programming expenses, or both. Current gifts may also be designated for specific projects, programs, funds, or other purposes. When gifts are so designated, they are called “restricted gifts”. Current fiscal year gifts of more then $5,000 qualify the donor as a “Hunger Fellow” and current fiscal year gifts that are $10,000.00 or greater qualifies the donor for the “Lifetime Hunger Fellow” award.
Gifts of appreciated stock or bonds have the same positive benefit to America's Second Harvest of South Georgia, Inc. as gifts of cash, but is usually more beneficial to you, the donor, than a gift of cash. With a gift of marketable securities which have been held longer than one year, you receive a charitable deduction equal to the full fair market value (FMV) of the securities. The FMV is determined by the average of the high and low sales prices of the securities of the gift date. A deduction of securities is limited, in any one year, to 30% of the adjusted gross income (AGI) of the amount of the gift, with the same five-year carry-over provision. You avoid gift and estate taxation which cash gifts are subject to, and you also avoid paying taxes on capital gains on the appreciation in the value of securities. This can be of major benefit to you if you have held securities over a number of years and if the securities have grown in value.
Example: Mr. Smith has $90,000 AGI this year. He donates long-term (held for over a year) stocks this year. He paid $10,000 several years ago for the stocks, and they are now worth $50,000. On the gift date, the stock traded on the New York Stock Exchange (NYSE) at a low of $51,000. Whether America's Second Harvest of South Georgia, Inc. sells the stock or not does not change the valuation on the gift date. He may deduct $27,000 this year and carry over $23,000 to deduct next year. He also avoids taxes on capital gains he would have had to pay on the $40,000 appreciation, or growth, in the stocks if he had sold them himself.
The rules for gifts of real estate are essentially the same as for gifts of securities. Subject to acceptance by America's Second Harvest of South Georgia, Inc., any type of real estate may be donated. On real estate owned longer than one year, you receive a charitable deduction for the full fair market value of the real estate. You are limited in your deduction for up to 30% of your AGI in the year of the gift, with the usual five-year carry-over provision. You avoid taxes on capital gains on the paper profit you have in the property. There are no gift taxes, and you have removed the property from your estate, which may reduce estate taxes. Almost any type of real estate may be contributed: undeveloped land, farms, commercial buildings, vacation homes, or your residence.
Potential gifts of real estate are evaluated by America's Second Harvest of South Georgia, Inc. on a case-by-case basis. America's Second Harvest of South Georgia, Inc. must consider insurance, maintenance, property tax liability, potential environmental risks, and other potential risk factors, including special tax provisions which apply to certain types of real estate prior to acceptance of the gift.
Note: see the Deferred Gifts section for other ways to make gifts of real estate including life estate agreements, charitable remainder trusts, and bequests. Tangible Personal Property, rare books, art, antiques, precious stones, gems, and coin or stamp collections, as well as equipment or other items which can be put to use immediately, such as computer equipment, are considered tangible personal property. These donated items must have been held for over a year. There are two main categories of tangible personal property: (1) items related to the organizations purpose, and (2) items not related to the organizations purpose. Gifts of related-use items allow the donor a deduction of the appraised value of the gift, limited to 30% of the donor’s adjusted gross income per year, with the usual five-year-carry forward provision. Gifts of non-related–use items limit the donor’s deduction to the item’s cost. Every potential gift item of tangible personal property is evaluated on an item-by–item basis. America's Second Harvest of South Georgia, Inc. must determine if the gift is related–use property or not.
Bargain sales are transfers of property, such as securities or real estate, to America's Second Harvest of South Georgia, Inc. for less than the full fair market value. A bargain sale consists of a sale portion and gift portion. In most cases, America's Second Harvest of South Georgia, Inc. pays you an amount equal to your cost basis the asset. This way, you are able to recover your original investment. The appreciation portion of the asset is considered a gift to America's Second Harvest of South Georgia, Inc., and you receive a tax deduction for this amount. You will owe taxes only on the part of the gain attributable to the bargain sale. The gain to be recognized is determined by the simple calculation below.
Example: Mr. Jones owns real estate recently apprised at $100,000. He bought the land many years ago for $20,000. He offers to sell the land to America's Second Harvest of South Georgia, Inc. for $20,000. America's Second Harvest of South Georgia, Inc. agrees to this bargain sale. The results are as follows: 1. Mr. Jones receives $20,000 from America's Second Harvest of South Georgia, Inc. 2. He can take a charitable-contribution deduction of $80,000 (the appreciation portion, which he is giving to America's Second Harvest of South Georgia, Inc.). 3. He must report a $16,000 capital gain, based on the formula above.
A donor creates a Charitable Lead Trust by transferring ownership of an asset to a trust. The trust gives the income, to America's Second Harvest of South Georgia, Inc. each year for a period of years (usually 15 to 20). At the end of the period of years, the trust assets are given back to the donor or to other beneficiaries. The lead trust typically is used with assets with a potential for continued high appreciation. The trust permits the assets to be transferred to other family members in the future with a low transfer cost. Utilizing the lead trust, the donor potentially will leave a significantly larger inheritance to heirs than could have been left via a will or other trusts.
Two forms of life insurance are typically donated: (1) paid-up whole and universal life insurance policies, and (2) newly issued whole and universal life insurance policies. Paid-up policies are covered in the Current Gifts section of this brochure, because a paid-up policy has a cash value which may be used immediately, if necessary, by America's Second Harvest of South Georgia, Inc. Newly issued whole and universal life insurance policies usually have little or no cash value. Therefore, they provide no benefits until significant cash value builds within the policy or the insured passes away. Consequently, newly issued policies are covered in the section on Deferred Gifts, which follows. For whole and universal life insurance policies, you should name America's Second Harvest of South Georgia, Inc. as both owner and beneficiary. Your tax deduction is equal to the lesser of either the replacement cost or the cost basis of the policy. If any further premiums are paid by you, those payments are also tax-deductible. The amount of the premium should be paid to America's Second Harvest of South Georgia, Inc.
The organization will then pay the required premium. Even though term life policies do not provide a charitable income tax deduction, we encourage you to remember America's Second Harvest of South Georgia, Inc. as a beneficiary of your term policy. If a person simply makes America's Second Harvest of South Georgia, Inc. a beneficiary of a life insurance policy, no income tax deduction is allowed. However, upon the death of the insured, the policy proceeds going to America's Second Harvest of South Georgia, Inc. will be an estate-tax charitable deduction. Deferred Gifts are often called “planned gifts” because they are integrally connected to your financial and /or estate plans. Deferred gifts may range in size from very small bequest to multi-million dollar trusts. They are called deferred gifts because, even though they are given today, America's Second Harvest of South Georgia, Inc. will not realize their benefit until some years in the future. Deferred Gifts are divided into (1) Life Income Gifts, and (2) Estate Gifts. Life Income Gifts Provide either an income or the use of same asset for the duration of your life and /or the lives of others. Afterward, the asset goes to America's Second Harvest of South Georgia, Inc. Estate gifts are those gifts normally associated with your will or final distribution of your estate. Knowledge of deferred gifts is excellent long-range budget planning tool for America's Second Harvest of South Georgia, Inc.
You may make a gift of cash, securities, and /or real estate to America's Second Harvest of South Georgia, Inc. and retain the right to receive income from those assets for as long as you live. You can also include your spouse or another beneficiary in the gift contract so they will continue to receive life income if you predecease them. At your death and/ or the death of the last remaining beneficiary, America's Second Harvest of South Georgia, Inc. receives the remaining principal. Pooled Income Funds were designed to allow you to give away assets, such as stocks or bank savings, while keeping the right to receive interest and /or dividend income for you and/or others.
America's Second Harvest of South Georgia, Inc. may use the remaining principal only after your death (and the death of one surviving beneficiary, if one is designated). A pooled income fund gift provides several financial and estate planning benefits: (1) You retain income for life (if you donate a dividend-paying stock you may approximately double the quarterly income you were receiving). (2) You avoid tax on capital gains on the appreciated securities. (3) You remove all or most of the assets donated from your estate, thereby reducing potential estate taxes. (4) you receive an income tax deduction based upon your age (usually around 40% of the amount donated). (5) You eliminate your day-to-day investment decisions and worries. (6) Eventually, your gift will be a significant benefit to America's Second Harvest of South Georgia, Inc.
Example: Mrs. George, age 65, gives stocks worth $10,000 to America's Second Harvest of South Georgia, Inc. Pooled Income Fund. She bought them several years ago for $2,000. By giving the stocks, she avoids taxes on the capital gains of $8,000. She also receives an income tax deduction of $4,000 based on her age. She will begin receiving income checks for approximately $150 each calendar quarter for the rest of her life. If she had kept her stocks, they would have provided her, typically, only about $50 each calendar quarter. When she passes away, the remaining principal will go as she designates. Note: minimum gift is $1,000 securities and/or cash. Gifts range from $4,000 to $300.000. No maximum gift limit.
A Charitable Gift Annuity is a simple agreement between you and America's Second Harvest of South Georgia, Inc. In exchange for your gift of cash, securities, or certain types of other assets (possibly real estate or timber rights), America's Second Harvest of South Georgia, Inc. will agree to make fixed, periodic payments to you and/ or another beneficiary for life. A portion of the payment to you may be tax-free, or taxed at the more favorable rate for taxes on capital gains. You will be entitled to an immediate federal income tax deduction for a portion of you gift. The amount of the deduction will be based upon the amount of the gift, your age and/or another beneficiary, and the annuity payment rate. The amount of the payment from the Charitable Gift Annuity is guaranteed for life and will be backed by assets of America's Second Harvest of South Georgia, Inc.
Example: Ms. Crane, age 89, has stock that she purchased many years ago. The stock, for which she paid $100,000, is now worth $350,000. She decides to establish a Charitable Gift Annuity with America's Second Harvest of South Georgia, Inc. with a gift of the stock. She wants to receive annuity payments for her life and then have the payments to go to her brother (age 81) for his life. The terms of the charitable table Gift Annuity provide for an annual payment of $30,800 for both lives. Ms. Crane will receive a federal income tax deduction for approximately $155,442. Her income tax deduction for this will be limited to 30% of her adjusted gross income. However, she will be able to take the unused deductions over the next five years, subject to the same 30% limitation; there will be no taxes on capital gains at the time of the gift, and she will be able to spread her taxes on capital gains over several years. She also takes the majority of the gift out of her estate.
Charitable Remainder Trusts are similar to pooled income funds in concept. There are two types of charitable reminder trusts: (1) Annuity Trusts and (2) Unitrusts. With both type of trusts, you receive a charitable contribution income tax deduction based on your life expectancy, you avoid taxes on capital gains on the sale of appreciated securities or real estate, and, potentially, you reduce estate taxes. The main deference between the two types of charitable reminder trusts is the way your annual income from the trust is determined.
Annuity Trusts, the assets given to a charitable remainder annuity trust are valued the date the trust is created. An annual payout is determined then and cannot be changed. You and/ or the income beneficiary (ies) receive this same dollar amount each year for life. Any named beneficiaries will also receive the same amount for life. After your death and the death of any beneficiaries, the remaining principal is given to America's Second Harvest of South Georgia, Inc.
Example: Mrs. Greer cerates an annuity trust with $250,000. She will receive $17,500 each year for the rest of her life, even in years when the trust does not produce sufficient income to cover the required distribution. The annuity trust must pay out $17,500 even if this income must come from the principal.
When you create the trust, you receive an income tax charitable contribution deduction based on your life expectancy and the life expectancy of any beneficiaries (such as a spouse). You avoid taxes on capital gains on any appreciated property such as stocks or real estate. The amount of the trust is removed from your estate for estate tax purposes. Depending on the existence of named beneficiaries of the trust, some of the expected life income may be included in your estate. After your death, and the death of any other income beneficiaries, your interests at America's Second Harvest of South Georgia, Inc. will perpetually receive support in your memory. Annuity trusts are usually created with assets worth $ 250,000 or more. Once created they may not receive additional gifts.
Unitrust the assets given to charitable remainder unitrusts are valued each year and an annual income payout is made based upon a fixed percentage of the market value. This allows for a variable payout from year to year, in contrast to the fixed dollar amount payout from the annuity trust. The unitrust is often used when inflation and its effect on the future purchasing power of those on a fixed income is a concern. The unitrust is always used with gifts of real estate. Unitrust may allow additional gifts in future years.
Example: Mr. Willis Creates a trust worth $250,000. The trust has a 7% payout rate. This year he receives $17,500 income or 7% of $250,000.In a year, the principal grows to $255,000. Next year, he will receive 7% of $255,000, or $17,580. However, unitrust income fluctuates with the market value of the investments in the trust. If the principal is worth $245,000 the next year, he will receive 7% of $245,000, or $17,150.
The same basic tax benefits that applied to the annuity trusts also apply to the unitrust. Unitrust are usually created with assets worth $250,000 or more. Charitable Reminder Trusts and life Insurance Trusts in addition to making significant charitable gifts possible, both charitable remainder trusts (annuity and unitrust) are excellent financial and estate planning tools. Their drawback, however, is that the assets donated to the trust are irrevocably taken from potential heirs and given to charity.
A combination of a charitable reminder trust and an irrevocable life insurance trust is a very popular
A Life Estate Agreement (Retained Life Estates) allows you to give your home or farm to America's Second Harvest of South Georgia, Inc. today but retain the right to live in the home or use the farm for life. You may also stipulate that your spouse may live there for his/ her lifetime. You receive an immediate income tax deduction based upon your age (s) and the useful life of the property, and you remove the home or farm value from your estate. You must continue to maintain the property, insure it, and pay property taxes. After your death, America's Second Harvest of South Georgia, Inc. becomes owner of the property and may use the property for America's Second Harvest of South Georgia, Inc. purposes or sell the property to generate funds.
Example: Mr. and Mrs. West (ages 75 and 76) make a gift of their personal residence and the surrounding land. They reserve the right to live on the property for the rest of their lives. Before they decided to make the gift, they asked their daughter if she would like to inherit the house. She said no because she and her husband live and work in a city many miles away, where they plan to retire. The Wests receive an immediate income tax deduction and have removed the value of their house and land from their estate, although they retain the right to live there.
Estate Gifts may be a few hundred dollars or millions of dollars. Like all other gifts they may be “unrestricted” for use where need is greatest, or “restricted” to a particular program. Your estate gift allows your assets to continue helping America's Second Harvest of South Georgia, Inc. long after you are gone. A Bequest (gifts by will) may be particularly attractive as a gift option if you are unable to make a current (outright) gift but would like to contribute to America's Second Harvest of South Georgia, Inc. in a meaningful way. Bequests may be restricted or unrestricted. “Specific” bequests are most common. You leave specific amount of money, a specific asset, or a specific percentage of your estate to America's Second Harvest of South Georgia, Inc. “Residual” bequests go to America's Second Harvest of South Georgia, Inc. only after all debts, expenses, taxes, and other bequests have been paid. “Contingent” bequests are ways for you to contribute to America's Second Harvest of South Georgia, Inc. even if you have young children. The contingent bequest takes effect only when all other bequest options fail.
Example: “if my child should predecease me, then I leave my entire estate to America's Second Harvest of South Georgia, Inc. for the benefit of the unrestricted fund.
Your will may direct that a portion of your estate will go to a pooled income fund or a charitable remainder trust. The pooled income fund or charitable reminder trust will than pay life income to a named beneficiary. After the beneficiary’s death, America's Second Harvest of South Georgia, Inc. will receive any remaining funds. Taking out a new Whole Life Universal Life Insurance Policy is another way to make a significant gift to America's Second Harvest of South Georgia, Inc. Paid-up policies are discussed in the current gifts section. The policy may be structured in such a way that you only pay premiums for new years, and each year’s, premium payment is tax-deductible. If you are considering such a life insurance policy, we suggest that you contact America's Second Harvest of South Georgia, Inc. before beginning the insurance policy paperwork.
America's Second Harvest is not engaged in rendering legal, financial or tax advisory service. For assistance and advice in specific cases, we recommend consulting an attorney or financial consultant.