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Planning a Gift to the Seminary During One's Lifetime
A. Life Insurance Policies
A donor can transfer ownership of an existing whole life insurance policy with a cash surrender value. This may be attractive to someone who has had a policy for some time but who does not require the benefits at death, such as a person with no dependents, or one who has other assets to leave beneficiaries.
Alternatively a donor can apply for a new life insurance policy and transfer the policy to the Seminary Foundation.
Tax implications differ in these two cases. For an existing policy, the donor is liable for tax on the difference between the cash surrender value and the adjusted cost basis of the policy at the time of transfer, though in many cases the tax credit from the donation will offset the tax liability. In the case of a new policy, the Seminary Foundation receives the donor’s death benefit and there are no tax consequences for the deceased or the estate. In both cases the donor is eligible for a tax receipt on premiums paid by the donor after the policy is transferred.
B. Charitable Gift Annuities
Through a charitable gift annuity to the Seminary Foundation, the donor can give a lump sum during his/her life but still receive a periodic income while they are alive. This can be accomplished in two ways.
The donor may elect to give the Seminary Foundation his/her intended donation and the Foundation makes level annuity payments to the donor based on the calculated value of the annuity.
Alternatively, the donor can apply for and pay for an annuity from a life insurance company and gift the balance of what he/she planned to give to the Seminary Foundation.
The method of calculating the amount eligible for a charitable donation tax receipt is different in each of these cases. In sum, in the first case the charitable donation receipt is in the amount of the lump sum donation less the cost of the annuity. In the second case, the charitable donation receipt is in the amount of the net donation received by the Foundation.
C. Charitable Remainder Trusts
The donor names the St. Peter’s Seminary Foundation as the capital beneficiary of an irrevocable inter vivos trust, which has been established by the donor making a contribution to the trust. While alive the donor receives the trust income and pays the income tax which results from that income. At the donor’s death the remainder of the trust passes to the Seminary Foundation. The charitable receipt is determined by a detailed calculation that takes into account the present value of the future gift, discounted for the types of assets held, and the time period of the donor’s life expectancy.
The Foundation would be pleased to work with a donor’s legal and financial advisors to determine how these instruments could be used to the mutual benefit of the donor and the Seminary.
Again, we urge you to obtain independent advice, and to discuss this matter with family members who may need to be aware of your plans.
For further information, or to discuss a legacy gift of life insurance, or through charitable gift annuity or charitable remainder trust, please contact Dr. David Howie at 519.432.1824 ext. 240 or firstname.lastname@example.org.