You can help ensure the homeless and neglected teens in our community are provided with the support they need to lead successful, independent lives, by including the Homeless Youth Foundation (HYF) in your estate planning.

This information is for educational purposes only and should not be considered legal or professional advice. Please consult your tax advisor for more information on the benefits of planned giving in your particular circumstances.

Below are planned giving vehicles that will help us achieve our mission while minimizing the tax obligation of your estate:

Charitable Gift Annuities

Charitable gift annuities are one of the most frequently used vehicles to benefit nonprofit organizations and their donors. The non-profit organization realizes an instant influx of capital through the gift of cash, securities, real property, etc. which has been donated. In return, the donor(s) receives a steady income for life to themselves and to a possible beneficiary (such as a spouse).

Donors will normally qualify for a current income tax deduction and may minimize or eliminate capital gains on the donated property. The Donors may also experience a higher yield on the income realized from the Charitable Gift Annuity than their current investments are providing.

Charitable Lead Trusts

Charitable lead trusts are the inverse of the Charitable Remainder Trust. Instead of the receiving a benefit after the donors pass, the charity receives an income stream during the life of the donor(s) or for a predetermined number of years. After the passage of the predetermined time, the corpus of the trust is transferred back to the donors or to other beneficiaries whom the donors have selected in the trust.

The tax deduction available to the donors is based upon the value of the benefit conferred upon the charity, which is determined by such factors as the length and amount of the income stream, whether the remainder beneficiary is a charity and current interest rates as published by the IRS.

Gifts of Real Property

A gift of real property allows donors to leave all or some portion of a personal residence, farm, ranch, or other land, upon death, to the HYF. This type of gift, usually accomplished through the use of an irrevocable trust, provides a tax deduction at the time of the gift for the value of the Homeless Youth Foundation’s interest in the property.

Real Estate

Most real estate donations are made through the vehicles or programs previously described. The majority of donors who choose this option of giving are usually older and own their homes outright or owe very little on their mortgage. Therefore the charitable income tax deduction can be enormous. The donor(s) also have the option of relinquishing the property immediately, living in it for a predetermined number of years, or staying there for the remainder of their lifetime.

Deferred Gift Annuity

The deferred gift annuity is closely related to a charitable gift annuity and in many ways resembles a typical (IRA). Like the Charitable Gift Annuity, the donor transfers assets to the non-profit organization currently. Instead of receiving payments from the charity immediately, the annuity payments do not start until some predetermined time in the future, such as a typical retirement age. Since the property is transferred currently, the donor receives a current income tax deduction. The income tax deduction is greater with the Deferred Gift Annuity because the benefit received by the donor does not begin until some time in the future and is therefore discounted accordingly.

The earlier in life the donor(s) contribute to a given charity, the greater their rewards in the future. Most people who utilize this vehicle will postpone withdrawing until they reach retirement age and their income (and therefore their tax bracket) is lower.

This program should be especially attractive to those who receive an inheritance prior to retirement, lottery winners, gamblers who hit the big one, young athletes who turn professional and receive a signing bonus, or young entrepreneurs who are on the fast track. Much like a retirement account or pension, contributions to a Deferred Gift Annuity can provide certainty of income later in life.

Endowments

Endowment funds are a source of giving that a charitable organization may accept through any type of program the donor(s) may choose to utilize. Most common are: trusts, annuities, monetary gifts or transfers of real estate, securities, etc. The gift is literally meant to last forever. The principal of the donation remains unspent and the interest income generated can be used for a variety of projects as specified by the donor(s).

In return for their generosity, the donor(s) will have facilities such as buildings, stadiums, or other similar structures named after themselves or loved ones. They will then encourage others to make contributions to enhance their particular cause.

Gifts of Tangible Personal Property

Tangible personal property are the belongings one has acquired and typically located within the families’ home, on their existing property. Some examples include automobiles, airplanes, art, boats, clothing, software, computers, furniture, antiques, coins, stamps, sports memorabilia, jewelry, equipment, RV’s, etc.

The monetary and tax benefits derived from donating such items to a charitable institution will vary, depending on that organization’s intended use of such items. Another point to be considered is whether the donated items are short term property (that held less than one year) or long term (that held longer than one year). In virtually all instances, donated personal property must be appraised, usually at the donors’ expense.

Securities

Securities include publicly traded stocks, mutual funds, bonds, notes, etc. These can all be gifted in a similar fashion as cash donations. If held longer than one year the donor may claim a tax deduction up to 30% of his adjusted gross income. The donor should beware that if the stocks have decreased in value, he/she would be wiser to sell them first so the deduction of a capital gain loss would be to his/her benefit, not the charities.

Charitable Remainder Trusts

Charitable remainder trusts are established to provide an annual payment to the donor(s) for life or a predetermined number of years. After such time, the property contributed to the trust is transferred to the charity.

Donors who establish and fund a Charitable Remainder Trust receive a current income tax benefit, even though the charity may not receive the property until after the donors pass away. The income tax deduction can be nearly 50% of the value contributed and, depending on the source of the gift, may result in no capital gains taxes having to be paid. In some cases, the income tax savings can be used to purchase a life insurance policy on the donor(s) to replace the wealth for other beneficiaries, thus benefiting the charity AND other intended beneficiaries while cutting out burdensome taxes.

Gifts of Life Insurance

Gifts of life insurance are probably the least utilized method of gifting for charitable institutions. With the wide variety of policies available to the general public, charitable organizations usually refrain from involving themselves unless the policy has been paid in full. If that is the case, the charity and donor(s)/beneficiaries will both reap great rewards with an influx of funds and generous tax write-offs, respectively.

Life Income Gifts

Life income gifts are comprised of charitable deferred gift annuities, charitable gift annuities, charitable remainder trusts, pooled income funds or any combination of these specific programs. In all cases the donor(s) make a contribution and receive a flow of income for the remainder of their lives. The charitable organization retains the remainder of the gift after the donor(s) passing.