Planned or Deferred Gifts Policy

Deferred giving enables a donor to arrange charitable contributions in a manner that maximizes your personal objectives while minimizing the after-tax cost.

Life Income Gifts 

You may want to make a substantial gift to the N C A&T University Foundation but may feel you cannot afford to give up the annual income produced by the asset. Our Gift Planning Program offers four ways to make such a gift while retaining an income for life:

  • Charitable Gift Annuity
  • Deferred Gift Annuity
  • Charitable Remainder Unitrust
  • Charitable Remainder Annuity Trust

The benefits vary, but all arrangements have the following attractive features:

  • Satisfaction of providing for the University’s future:
  • Income for life or a period of years paid to you and/or another beneficiary, such as a spouse or another family member;
  • Income tax charitable contribution deduction for the portion of the transfer that represents the gift to the University;
  • Elimination or reduction of capital gains tax if the gift is in the form of securities or real property that has appreciated in value;
  • Potential for increased income;
  • Assets professionally managed for you: and
  • Reduction or elimination of estate taxes.

Gifts of Life Insurance

Life insurance can offer a method of making a substantial gift to the N C A&T University Foundation. There are several ways to use non-term life insurance for charitable purposes. If you wish to provide the University with support through this program, you can contact your insurance carrier and express your interest in obtaining a policy for that purpose. If you own a life insurance policy that is no longer needed, consider it as a perfect vehicle for a charitable gift!
There are several ways to use non-term life insurance for charitable purposes. For example, the donor can:

  • Donate or liquidate a whole life policy no longer needed for family protection, and the proceeds will benefit the University.
  • Give a portion that is not fully paid up and take a deduction for the "present value" of the policy (approximately the cash surrender value or the cost basis, whichever is less). If the donor then continues to pay the premiums to maintain the policy in force, he or she will be able to deduct the annual premium payments as an income tax charitable deduction.
  • Use life insurance as a "replacement" asset. The donor gives appreciated property to the N C A&T University Foundation now and replaces the dollar value of the asset with life insurance directing that the proceeds go to family. The income tax savings from the gift may be sufficient to pay for the "replacement" insurance.

Bequests

The Federal Estate Tax can easily take 37% to 55% of one’s estate at the time of death. That’s a higher tax bite than the income tax! We hope that you will consider a charitable bequest in your will-to benefit the N C A&T University Foundation while you save estate tax dollars at the same time. The N C A&T University Foundation can be named as a beneficiary in a will in any one of a number of simple ways such as an outright gift of funds, or tangibles such as real and personal property could be specified. The University could also be named as a remainder beneficiary to receive funds only after specific sums have been paid to individual beneficiaries.

A bequest may be included in a new will or added to an existing will through a simple codicil. In many cases you can easily add us to your will through a simple amendment called a codicil; thus your entire will does not have to be redrafted.

Description

  • Specific bequest-states a specific amount or specific asset. It may be a gift of cash, securities or a gift of real estate or tangible personal property (for example, artwork, antiques, jewelry or coin/stamp collections).
  • Residuary bequest-names the N C A&T University Foundation to receive all or a percentage of the remainder of the estate after specific bequests have been fulfilled.
  • Contingent bequest-takes effect only if all primary beneficiaries named in the will are predeceased. Declaring the N C A&T University Foundation a contingent beneficiary can prevent the property from going to the state if there are no heirs.
  • Testamentary trust-designates that part or all of the estate is left in a trust, with income and/or principal paid to the N C A&T University Foundation.
  • Pooled Income Fund-designates a gift made, by will, to the N C A&T Pooled Income Fund to pay income to a survivor or survivors, with the principal ultimately paid to the N C A&T University Foundation.

Benefits

  • Satisfaction of providing for the University's future; and
  • Potential estate tax savings Designation
  • Expendable or endowment:
  • Unrestricted to be used where the need is greatest; or
  • Restricted to be used to support a particular program or school or to provide for some University capital need.

The staff in the North Carolina A&T University Foundation Office is happy to work with you and your advisers in preparing a specific language to be included in your estate plan.

To receive a charitable deduction, name the N C A&T University Foundation both the owner and beneficiary of the policy. If the policy presently has cash value, you can take a charitable deduction approximately equal to the cash value at the time of the gift. In addition, if annual premiums are still to be made and you continue to pay them, those premiums will become tax deductible each year.
You can receive a charitable deduction if you follow the instructions listed above under the Gift of Life Insurance section above.

Charitable Trusts

Gifts of cash or stock to the N C A&T University Foundation made in the form of a "life income gift", can actually increase your income. A life income gift allows you to transfer assets over to the N C A&T University Foundation now, and yet continue to receive the income from the cash, stock, or other property contributed. It will allow you to:

  • increase your income for life;
  • receive a generous charitable contribution deduction this year; and
  • if you contribute stock, avoid any capital gains tax on the appreciation.


A life income gift is often made through a "unitrust" or an "annuity trust". With a unitrust, you and your beneficiary receive annually a fixed percentage of the fair market value of the assets in trust. With an annuity trust, you and your beneficiary are paid an agreed upon fixed amount from the trust annually in addition to tax benefits. Please check with your accountant, attorney, or financial consultant for additional information on how these general rules apply to your situation.

Charitable Gift Annuity

A charitable gift annuity is a contract between you and the N C A&T University Foundation, Inc. You transfer cash or securities to the Foundation in exchange for quarterly payments in the form of a guaranteed fixed annuity to you, another designated beneficiary or both. Although there is no age minimum for establishing an annuity, the amount you receive is determined by a variety of factors including the age of the income beneficiary.

The maximum rate of return for the annuities is 9.4 percent, which represents the amount an 80-year-old beneficiary receives. Any donor older than 80 years also receives the 9.4 percent maximums rate. A minimum initial contribution of $5,000 is required, and you can enter into subsequent contracts with contributions of $2,000 or more. When the annuity matures, the principal is available to the Foundation and can be designated for the unrestricted use of the University or for a specific area.

Example:

Mrs. Franklin, age 70, transfers a $10,000 cash to fund a gift annuity. In the example below, she receives a 7.7 percent return.                                

 Gift amount:  $10,000
Income per year      770
Tax-free portion         369
Taxable portion         401
Income Tax charitable deduction       $4,139

                                   
If, instead of cash, Mrs. Franklin chooses to donate appreciated property worth $10,000 with a cost basis of $5,000, the specifics of her gift are as follows:

Gift amount  $10,000
Income per year    770
Tax-free portion    184
Taxable portion 401
Capital gain portion    184
Income tax charitable deduction *   4,139
Life income portion          $5,861

* The discount rate used in calculating these figures is 7.6%, which is the rate for October 1997

Benefits

  • Satisfaction of providing for the University’s future;
  • Guaranteed annual income, a substantial portion of which is tax-free;
  • Immediate income tax charitable deduction for a portion of the transfer that represents the gift to the University;
  • Elimination or reduction of capital gains tax if funded with appreciated assets; and
  • Potential estate tax savings.

* Note: Regulation of gift annuities varies from state to state. For this reason, the gift annuities described here may not be available in all states.

Deferred Gift Annuity

The deferred charitable gift annuity makes it possible for you to claim an immediate income tax deduction, yet defer the receipt of income for a term of years. You determine the date the annuity payment start.
A minimum initial contribution of $5,000 is required to fund a deferred charitable gift annuity. Also, you can enter into subsequent contracts with contributions of $2,000 or more. When the annuity matures the principal is available to the N C A&T University Foundation and can be designated for the unrestricted use of the University or for a specified area.

Examples:

Mr. Green, age 50, transfers $50,000 cash to fund a deferred payment gift annuity and requests that he begin to receive quarterly annuity payments at age 65 when his taxes may be lower because his income will likely be lower.

 Gift amount    $ 50,000
 Income per year    8,150
Tax-free portion     1,010
Taxable portion      7,139
Income tax charitable deduction:   $ 29,736

If, instead of cash, Mr. Green chooses to donate appreciated property worth $50,000 with a cost basis of $25,000, the specifics of his gift are as follows:

 Gift amount        $ 50,000
Income per year   8,150
Tax-free portion  505
Taxable portion   7,139
Capital gain portion       505
Income tax charitable deduction $ 29,736

With a charitable gift annuity, capital gains is due on a portion of the $25,000 appreciation payable over his life expectancy at the rate of $505 per year beginning at age 65.

If Mr. Green dies before the entire gain is paid, his estate is not responsible for the balance.

* The discount rate used in calculating this figure is 7.6%, which is the rate for October 1997.

Benefits:

  • Satisfaction of providing for the University’s future:
  • Guaranteed deferred annual income, a substantial portion of which may be tax-free;
  • Immediate income tax charitable deduction for the portion of the transfer that represents the gift to the University;
  • Elimination or reduction of capital gains tax if funded with appreciated assets; and
  • Potential estate tax savings.

Note: Regulation of gift annuities varies from state to state. For this reason, the gift annuities described here may not be available in all states.

Charitable Remainder Trusts

The charitable remainder trust is similar to other types of trusts except that it has a charitable beneficiary. You transfer property irrevocably to a trust and specify how trust income and principal are to be distributed. The trust may be created to become effective during life or at death.

You are allowed an income tax charitable contribution deduction equal to the present value of the N C A&T University Foundation’s remainder interest in the unitrust , which is determined by reference to Treasury Regulations. The deduction is based on the fair market value of the asset transferred, the payout rate chosen, and the age and number of beneficiaries.

Unitrust

The primary feature of the unitrust is that it provides for payment to the income beneficiary in an amount, which may vary. The payment must equal a fixed percentage of the net fair market value of the trust assets valued annually. You determine the fixed percentage upon creation of the unitrust, and it must be at least 5 percent. The unitrust payment must be made annually or at more frequent intervals to you and/or other beneficiaries for life. Or, the unitrust can be set up for a term of years not exceeding 20.

The annuity trust shares many common features with the unitrust with the following exceptions:

The annuity trust provides for fixed income payments that cannot be less than 5 percent of the initial fair market value of the gift in trust, and additional contributions are not permitted.

Remainder Minimum

In the Taxpayer Relief Act of 1997, Congress passed a law requiring a minimum 10 percent charitable remainder interest for unitrust and annuity trusts established after July 28, 1997. The value of the remainder now must be at least 10 percent of the net fair market value of the property transferred in trust. For unitrusts, the 10 percent interest is measured on each transfer to the charitable remainder trust. A charitable remainder trust that meets the 10 percent test on the date of transfer will not subsequently fail to meet the test if interest rates have declined between the trust’s creation and the death of a measuring life.

Remainder Designation

 The N C A&T University Foundation is grateful to be named as a remainder beneficiary of a charitable remainder trust, and the University adds these gifts to its list of future expectancies. In order for the fair market value of a charitable remainder trust to be recorded in our academic gift totals and added to a donor’s gift record, the remainder designation must be irrevocable; this means that the donor relinquishes the right to change the remainder beneficiary.

Trustee

When you set up a charitable remainder trust, you are free to name a trustee of your own choosing. You can name an individual such as a friend, a family member, a legal advisor or a financial advisor; an institutional trustee like a bank or trust company; or you can even name yourself as the trustee. It is also possible under certain limited circumstances to name the N C A&T University Foundation. The Foundation is a tax-exempt 501 (c)(3) North Carolina nonprofit corporation, and its sole purpose is to support North Carolina Agricultural & Technical University.

Charitable Lead Trust

You may want to support the N C A&T University Foundation by donating the income from a capital asset for a period of years. And, in doing so, obtain substantial tax benefits.

The lead trust is a reverse of a charitable remainder trust. The income generated room assets placed in trust is paid to the University for a period of years, and at the end of the term the property either returns to you or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren). By establishing such a trust, you, in effect, "lend" the asset to the N C A&T University Foundation for the term of the trust.

Example:

Mr. Jackson creates a charitable lead trust and funds it with income-producing real estate currently valued at $250,000 and directs that the trust pay the N C A&T University Foundation $20,000 annually for 15 years. At the termination of the trust, the assets are distributed to his children. Under the Treasury tables, the N C A&T University Foundation's interest in the trust, which is not deductible for income tax purposes, is valued at $175,451 and the children’s remainder interest at $74,549 (or $250,000 less $175,451).

Assume that at Mr. Jackson’s death, the trust assets have appreciated to $500,000. For purposes of determining his transfer tax liability, only the value of the gift to the children at the time the trust was created ($74,549) will be included. The balance of $425,451 ($500,000 less $70,121) will escape transfer tax. Had Mr. Jackson not established the lead trust, then the entire $500,000 would have been taxed in his estate.