Planned Giving - Silicon Valley

  • Planned Giving
     

Gift plans create opportunities for both our donors and the American Red Cross. Determining what gift is right for you is just as important as making the gift. There are many options from which you can choose. The correct plan for you balances what you wish to accomplish for yourself, your family, and your charitable interests in your overall estate and financial plans.

Learn about giving strategies that allow you to make a meaningful charitable gift while possibly enhancing your, and your family's, future financial well being.


Bequests

This is one of the simplest and most used methods of making a planned gift – from your estate after your death when you no longer need the assets.

How to include the American Red Cross in my will?

Many of our supporters make charitable gifts by naming the Red Cross as a beneficiary in their wills. The federal government encourages these gifts or bequests, by allowing an unlimited estate tax charitable deduction.

To make a bequest to the Red Cross, the following language will be helpful to your lawyer:

I give, devise, and bequeath to the American Red Cross for the benefit of the Silicon Valley Chapter the sum of ______ (or otherwise describe the gift or specify a percentage of the estate).

There are three ways you can make a bequest:

1

Specific Bequest

You designate a specific dollar amount, specific percentage, or specific property to the American Red Cross.


2

Residual Bequest

My estate will pay all debts, taxes, expenses, and specific bequests. The remaining amount, the residue, will be transferred to the American Red Cross.


3

Contingent Bequest

If all of my beneficiaries predecease me, my estate shall pass in its entirety to the American Red Cross.


When you are a planned gift donor, the Red Cross will honor you with membership in the Legacy Society. If you have already made a plan to give to the Red Cross in your will or estate plan, please contact one of the planned giving officers.

We realize that with your special gift, you consider us to be part of your family, and we want to do our best to keep you informed as to how your gift will be used and to give you the opportunity to tell us of your wishes.


Gift of Retirement Plan

Many individuals today have large qualified retirement plans such as an IRA, 401(k), or Keogh plan. These assets have been growing tax-free for years. Once the owner begins to receive payments from the qualified plans, the distributions are taxed. The plans are also included in the owner's taxable estate. A retirement plan may be an excellent source of funds for making a gift to the American Red Cross. One way to make a gift of your retirement plan is to create a charitable remainder trust through your will. It works like this: Your IRA assets will be transferred to a charitable remainder trust. There is no tax due because the charitable remainder trust is a tax-exempt entity. The trust will provide life income to the beneficiary (for example, your child) with an eventual gift to the Red Cross. The beneficiary will pay income tax on the distributions from the trust. Your estate will receive an estate tax charitable deduction for the value of the Red Cross's right to eventually receive the trust assets.

Charitable Lead Trust

Individuals with very large estates can use a charitable lead trust to benefit the American Red Cross and pass principal back to family members with little or no tax penalty. It works like this: You transfer assets to a trust that provides payments to the Red Cross for a term of years. Then the trust principal goes to your children, grandchildren, or others free of, or at greatly reduced, federal gift and estate tax. (Please note that a generation skipping tax (GST) is imposed on large transfers to grandchildren and others who are more than one generation younger than you.)

Pooled Income Fund

Your gift of money, marketable securities, or both to the American Red Cross's pooled income fund is invested together with similar gifts from other supporters. Each year, you receive your share, which is taxable as ordinary income, of the fund's earning.

Gift of Life Insurance

Some of our supporters no longer need their life insurance that was purchased years ago to provide for children or other family members. If that is your situation, please consider donating the policy to the American Red Cross. You may claim a charitable deduction for approximately the policy's cash surrender value, and the proceeds are completely removed from your estate.

Charitable Remainder Annuity Trust

The charitable remainder annuity trust pays you a fixed dollar amount annually for life. The fixed payments are determined by the payout percentage selected at the beginning of the trust and for five subsequent years if you cannot fully use the deduction in the first year. You can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
  • For example: Mrs. Edwards irrevocably transfers $100,000 to create a charitable remainder annuity trust that will provide her with life income payments. Included in the trust agreement is the stated payout percentage of 7. She will receive $7,000 annually for her life ($100,000 x 7%). If income earned by the trust exceeds the fixed payment of $7,000, the excess is reinvested.

Charitable Remainder Unitrust

The charitable remainder unitrust pays you a fixed percentage of the fair market value of the trust assets, as revalued each year. Like the annuity trust, you can claim a charitable deduction on your income tax form the year that you create the trust and for five subsequent years if you cannot fully use the deduction in the first year. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
  • For example: Mr. Edwards irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.

Life Income Gift

How do I establish a life income gift?

Family obligations and the need to provide for retirement, coupled with the high cost of living, make it difficult for many people to consider substantial charitable gifts now. But there is a way to have the satisfaction of making a meaningful lifetime gift without significant sacrifice. In fact, you can get current income tax and financial benefits. It is called a life income gift. You irrevocably transfer some assets to the Red Cross now, and in return, you (and a survivor, if you wish) receive income for life. As a result, the assets are used to carry out our mission.

By making a life income gift to the Red Cross, you will receive the following benefits, in addition to the pleasure of knowing the good work your gift will do. The benefits include:

  • A charitable deduction in the year you make the gift for the present value of our right to eventually receive the assets.
  • You free up appreciated investment to maximize yield, diversify, or both--often without paying tax on the capital gain.
  • Your effective yield is increased by substantial income tax savings.
  • Income can be taxed more favorably in some plans.
  • You unburden yourself of investment concerns.
  • Your probate and estate administration costs may be reduced.

Contact Us

For details on this program, sample rates, and other giving opportunities or if you have already arranged for a bequest or other planned gift, please contact Bill Ruettinger, J.D., Sr. Gift Planning Officer, at william.ruettinger@redcross.org or 415-427-8989.

Frequently Asked Questions

1. What assets can I use to make a gift to the American Red Cross?

Generally speaking, during your lifetime you can make an outright gift of cash, securities or other property (e.g., real estate, personal property).

Through your will or with a distribution from a retirement plan or life insurance policy, your gift can be designated to the American Red Cross in accordance with your wishes.

2. What sort of gift plans also return income to me?

You have the option of making a gift that returns income to you, your spouse, or other individuals, such as a charitable gift annuity, or charitable remainder unitrust or annuity trust.

3. What tax deduction will I receive for my gift?

Your tax benefits will depend on several factors: the type of gift, the time at which it is made, whether it is outright or deferred or has any income payments. In general, though, here are some guidelines:

  • Outright gifts to the Red Cross generate a full income-tax charitable deduction. Outright gifts of appreciated securities are deductible at fair market value, with no recognition of capital gains -- a great tax benefit!
  • Gifts of personal property, like art, books and collectibles are fully deductible so long as they are relevant to our mission. We can advise you on this point.
  • Bequests do not generate a lifetime income tax deduction. They are exempt from estate tax.
  • Similarly, life insurance distributions to the Red Cross are not income-tax deductible, but are exempt from estate tax. If you have made us the irrevocable owner and beneficiary of a policy during your lifetime, you may deduct annual gifts that offset premium payments (for more details on this point, see Question 4 below).
  • The charitable deduction for a gift that returns income to you, such as a charitable gift annuity or a charitable remainder trust, is the fair market value of the gift asset minus the present value of the income interest you retain.

4. I want to set up a life insurance policy, name the American Red Cross Silicon Valley Chapter as beneficiary, but retain ownership of the policy. Can I deduct the premium payments I make?

No. The IRS would not consider that a "completed gift" – they'd say that, as the owner of the policy, you could change the beneficiary designation to a friend or family member. We must be made the irrevocable owner of the policy for gifts offsetting premium payments to be deductible.

5. I’ve heard that transferring gifts of IRA assets to charity are advantageous. Why?

Qualified retirement plans such as IRAs, 401(k), 403(b), and Keoghs allow individuals to defer paying taxes on a portion of their income until the assets are withdrawn during retirement years. However, after a person's death, these accounts are often exposed to income and estate taxes, at a combined rate that could rise to 75% or even higher on large taxable estates. The tax will be paid at some point—by your estate and your heirs unless contributed to charity. In other words, by giving retirement assets to charity you receive double benefits. Your estate and heirs will not be taxed on the portion that goes to charity and you will support the Red Cross!

6. Can I transfer my IRA to the American Red Cross to set up a life-income gift, and avoid income tax on the transfer?

New legislation gives donors aged 70½ and older an opportunity to direct lifetime distributions from their IRAs to us without incurring income tax liability on the withdrawal. The provision will be in effect for just the 2006 and 2007 tax years. Distributions can total $100,000 per year, and must be made outright — they cannot fund a life-income gift. Just give us a call (831-462-2881) and we'll be happy to give you more information about this new charitable incentive.

Donors younger than 70½ can make a withdrawal from their IRA or other type of retirement plan, pay income tax on the withdrawal, and donate the proceeds to us. These gifts can be made outright or can fund a life-income gift and will generate a charitable deduction for the donor.

7. I'd like to donate a painting. Will you determine its value for my income tax deduction?

The IRS requires that donors of artwork and collectibles secure an independent appraisal of the items to establish fair market value. The appraisal has to be related to the gift, too – an insurance appraisal won't suffice. We can assist you on this point.

8. I'm interested in establishing a charitable gift annuity. What financial provisions will you make for the income payments to me and my spouse?

Your charitable gift annuity will be treated as a general obligation of the American Red Cross, backed by all of our assets. We have an unbroken record in making timely payments to our annuitants, and that ongoing responsibility is a key element in our financial policies.

9. If I create a bequest or life-income gift, will you continue to ask me for annual contributions?

Your planned gift is a significant addition to our long-term financial strength and our ability to meet the challenges and opportunities the future will bring. However, today's efforts are supported through annual gifts and we greatly appreciate and encourage any annual support you may want to consider.

Frequently Asked Questions (For Professional Advisors)

1. What is the Federal tax identification number for the American Red Cross of the Silicon Valley?

The federal tax identification number is 53-0196605.

2. Can the American Red Cross serve as Executor for an estate?

The American Red Cross National Headquarters and local Red Cross Chapters cannot serve as Executor for any estate due to potential liability and conflict of interest issues.

3. What are the ways in which a donor can designate their gift to the American Red Cross Silicon Valley Chapter through their will?

A donor can bequeath a sum certain or a percentage of their estate for either specific or general purposes. The gift can be designated to the American National Red Cross and/or a local American Red Cross Chapter.

4. Who can answer the bequest and legacy questions of an executor/trustee?

Please contact Bill Ruettinger, J.D., Sr. Gift Planning Officer, at william.ruettinger@redcross.org or 415-427-8989.