Planned Giving

A bequest is a gift made through your will or living trust. It can be a specific dollar amount, a percentage of your estate, or a residual gift (what's left after other expenses). Bequests are flexible and can be designated for a particular purpose, such as a scholarship or an endowment fund, or left to general use. Bequests are deductible for estate tax purposes, reducing the taxable value of your estate.

Planned giving offers a variety of tax benefits, depending on the vehicle you choose. Below are some key advantages:

A Charitable Gift Annuity (CGA) is a contract between a donor and a charity in which the donor transfers money or property to the charity in exchange for the charity's promise to pay a fixed amount to the donor and/or another individual for life. The amount of the annuity is based on the age(s) of the annuitant(s) and the annuity rate in effect at the time the contract is established. This fixed income stream is guaranteed for the lifetime of the annuitants, providing reliable financial support.

The donor receives an income tax deduction for the difference between the value of the transferred property and the present value of the annuity stream. In some cases, a gift tax deduction may also apply. Charities that issue CGAs must be registered with the relevant state agencies, such as the Connecticut Department of Insurance in Connecticut, and comply with each state's regulatory requirements. This type of gift provides both immediate financial benefits to the donor and long-term support to the charity, making it an attractive option for those looking to make a planned gift while securing a stable income stream.

A Charitable Remainder Trust (CRT) allows you to receive income from the trust during your lifetime, while ensuring that the remaining assets will ultimately benefit a charity, such as CCSU. You can claim an income, gift, or estate tax deduction for the present value of the remainder interest that will pass to charity. If the beneficiaries of the trust include someone other than the donor, a gift tax return is required to report the value of the interest passing to them. If created at death, the value of the individual interests will be included in the testator's taxable estate.

One of the key benefits of a CRT is its tax-exempt status, which means there is no recognition of capital gain when assets are sold within the trust. This feature makes it an ideal option for gifts of highly appreciated assets, such as stock, where the donor may want to avoid capital gains tax while achieving both charitable and financial goals. Additionally, the CRT provides a structured way to transfer assets to charity while preserving income for the donor or beneficiaries, making it a powerful tool for strategic giving and wealth management.

A Charitable Lead Trust (CLT) allows you to support charity while transferring wealth to your heirs. You create a trust that pays income to one or more charities for a set period (either a term of years or the lifetime of a beneficiary). At the end of the term, the remaining trust assets are distributed to your designated beneficiaries. There are two types of CLTs: the Charitable Lead Annuity Trust (CLAT), which provides fixed annual payments to charity, and the Charitable Lead Unitrust (CLUT), which offers payments based on a fixed percentage of the trust's revalued assets each year.

The CLT provides significant tax benefits, including an immediate charitable deduction based on the present value of the charitable interest. Additionally, since the assets placed in the trust are removed from your estate, this strategy can help reduce estate taxes, benefiting both the charity and your heirs. A CLT is an effective way to support Central while managing your wealth transfer and maximizing your charitable impact.

Remainder Interest in Personal Residence: A remainder interest in a personal residence allows an individual to retain the right to live in their

home or on a farm for the rest of their life, while giving a charity the right to receive the property upon the individual's death. This arrangement, known as a “remainder interest,” provides the donor with an opportunity to make a meaningful charitable gift while continuing to use the property during their lifetime.

The donor or testator is eligible for income, gift, and/or estate tax deductions based on the value of the remainder interest. This applies to any property used as a personal residence, including primary residences, vacation homes, co-ops, or even yachts. This type of charitable gift allows the donor to maintain the enjoyment of their property while making a significant impact on their chosen charity after their passing.

Retirement Plan Assets: Retirement accounts can be an effective way to fund charitable bequests upon death. To do so, the account owner simply names one or more charities as the primary beneficiary or beneficiaries on the beneficiary designation form. This ensures that the designated charitable organization receives the assets directly upon the owner's death.

The decedent's estate will receive a charitable deduction for the amount passing to charity. Because the charity is a tax-exempt organization, it does not pay income tax when it uses or sells the assets from the retirement account, allowing the gains in the account to completely escape taxation. In contrast, if the retirement account passes to an individual, the recipient may face both estate tax and income tax on the distribution, which can reduce the value of the gift.

Life Insurance Policies can be a powerful tool for planned giving, particularly if the policy is no longer needed by the insured's survivors. This type of gift allows donors to “leverage” their contribution, as the relatively small cost of the premiums can result in a much larger eventual donation through the policy's death benefit. To make a lifetime gift, the donor should name the charity as the beneficiary and assign all incidents of ownership to the charity, typically using the insurance company's forms.

The donor is eligible for an income tax deduction for the lesser of the policy's value (close to the cash surrender value) or the replacement value, as determined by the insurance company. The income tax deduction is limited to 50% of the donor's contribution base. If the policy is not paid up, the donor can continue to make contributions to the charity to cover the premiums, and those contributions are tax-deductible. Alternatively, to make a gift at death, the donor simply names the charity as the beneficiary. The estate will then receive a deduction for the amount of the death benefit passing to the charity.