The incredible bequest in the cover story provides much food for thought and poses questions that may never be fully answered. Like many people, LeRoy Engel had supported the American Red Cross during his lifetime but decided to make "the ultimate gift" through his will.
Bequests continue to represent the vast majority of "planned gifts" received by the Red Cross. Why is it so attractive for friends to make important gifts through their estate plans?
- It's the logical time. Many people say to themselves: "I can make a gift of great significance through my will without worrying about my financial security."
- It's simple to accomplish. You can include a gift to the American Red Cross any time you make or update a will or living trust; you also can assist Red Cross programs just by making us a beneficiary of CDs, brokerage accounts, IRAs or life insurance – simply request anew beneficiary form.
- It's immensely satisfying. Supporting the life-saving work of the American Red Cross in a meaningful, enduring way can be a source of great pride as people reflect on their own lives and their hopes for future generations.
- It can save taxes. Bequests to the Red Cross can be surprisingly cost effective. State or federal "death taxes" can be wholly avoided on amounts you bequeath.
The Appeal of Endowment
Often called "the gift that keeps on giving," the principal of endowment funds remains untouched and only the income is applied to assist Red Cross programs.
Would you like to leave a lasting legacy to the American Red Cross? An endowment gift may be just the answer.
The American Red Cross in the 21stcentury greatly needs endowment funds. We can predict with absolute certainty that wars, fires, floods, hurricanes and other disasters are going to occur in the future – somewhere, sometime – and we must build the financial resources to provide the infrastructure necessary when needed.
How can you establish an endowment? Many friends of the Red Cross choose to continue their lifetime support through their wills or life insurance.
Endowment Gifts Come in All Sizes
You don't need $1 million to establish an endowment. The average gift received by the American Red Cross from estates is less than$40,000, and all amounts are appreciated. Lifetime contributions are welcome, but many friends find that their estate plans are the ideal place to establish endowments.
Gifts by will. You can include endowment bequests when you make or revise your will. If you don't have a will, you should schedule an appointment with an attorney to have one prepared. If you do have a will, review it periodically to make sure it still reflects how you wish your estate to be distributed. If not, you can amend your will through a codicil or have an entirely new will written. Charitable bequests take many forms:
Outright bequest. This is a gift of a particular amount of money or item of property.
Residuary bequest. The residue of an estate is the amount remaining after all specific bequests have been distributed; the exact amount will not be known until the final accounting is completed. The residue may pass as a percentage or fractional bequest.
Contingent bequest. You can name the Red Cross as a secondary beneficiary to receive property in the event you outlive your primary beneficiary.
Next step? Call an attorney to draft the proper documents, and please contact your local gift planning representative for our correct legal name (your attorney will need it).
Revocable living trusts. Friends who have established living trusts can arrange endowment gifts to the Red Cross in the same manner as a will.
Next step? Call the advisor who drafted your living trust for help in making a simple amendment.
Gifts from financial accounts. It's possible to pass bank account proceeds to an individual or organization without making or changing a will. Many states allow so-called P.O.D. (pay on death) accounts that let you name a beneficiary of almost any financial account: savings, checking, credit union savings, etc. You can indicate that your deposit will be "payable on death" to the American Red Cross and keep the right to change or revoke the arrangement at any time.
Next step? Your account manager can provide you with the necessary beneficiary forms.
Retirement plan benefits. Qualified organizations generally can be named as death beneficiaries of retirement savings plans. So friends who participate in pension plans, Individual Retirement Accounts (IRAs), 401(k) plans, 403(b) plans and other qualified retirement savings plans have an opportunity to make important gifts through a simple beneficiary designation. Naming the Red Cross as death beneficiary also may be good tax planning. Income taxes – and possibly "death taxes" – that may come due at death are wholly avoided.
Next step? Contact your employer or the account custodian for the proper form.
Life insurance. Life insurance, in addition to providing family protection and peace of mind, can offer a multitude of other benefits, including significant benefit for the American Red Cross. You can keep lifetime ownership rights in a policy but name the Red Cross the death beneficiary. Your estate will be entitled to a charitable deduction for the proceeds passing to us. If you'd prefer, you can name us as contingent beneficiary of a life insurance policy. We would receive the proceeds only if your primary beneficiary died before you. Or you can make the Red Cross the co-beneficiary and share insurance proceeds with another.
Next step? Call your life insurance agent and request a change of beneficiary form.
Stocks and bonds. Securities that are being held for you in a brokerage account can be transferred to us at death through a "T.O.D" (transfer on death) designation. Your broker can provide you with simple forms. Securities transferred to the American Red Cross avoid all income taxes and death taxes and pass outside probate, as well.
Next step? Contact your brokerage firm for the necessary paperwork.
If you would like more detailed information on any of the topics discussed, visit our website, www.redcrosslegacy.org.