Planned gifts provide an opportunity to have a positive, lasting impact on our community.  Below are some frequently asked questions that you might have about some of the most common types of planned, charitable gifts and their basic tax advantages as well as some common terms and their definitions. We hope this helps you better understand and plan how to make a gift to your favorite charities and causes.

Why do I need a will?
A will serves as a road map telling your personal representative(s) how to distribute your property and assets to other people and/or charities. Without a will, you are powerless over how your assets are distributed. Instead, the laws of the Arizona determine how assets are divided- which may not be the way you would have wanted.

What is a bequest?
A bequest is a gift by will to a specific recipient. A charitable bequest is a transfer of assets or property at death by will to a nonprofit organization or organizations for charitable purposes. "How do I make a charitable bequest?"  Contact your attorney to draft a will with a charitable provision or a codicil to your existing will. 

What are some of my bequest options?
There are many ways to structure your charitable bequest. Talk with your attorney about these options: a percentage of the residue of your estate, a specific asset or dollar amount, and contingent bequests.

I intend to make several charitable bequests in my will. Can I also make other charitable gifts during my lifetime that will pay an income back to me?
Yes, both a charitable remainder trust and a charitable gift annuity can pay you an income for a specified period of time or the rest of your life.

What is a charitable gift annuity?
A charitable gift annuity is a contract between you and a charitable organization. In return for your gift, the charity agrees to pay you a fixed amount (based on your age) for the rest of your life. At your death the assets held for the annuity transfer to the charitable beneficiaries you designated. The benefit of a charitable gift annuity is that you make a one-time gift and receive a fixed amount of income for your lifetime.

What are the tax advantages of a charitable gift annuity?
With a gift annuity, you can claim part of what you contribute to fund the annuity as a tax deduction and part of the income you receive each year is tax-free. Additionally, if you fund the annuity with an appreciated asset- such as stock, art, a car, jewelry, a house or building- you also escape some of the capital gains tax that you would owe if you had sold the asset.

Then, what is a charitable remainder trust?
A charitable remainder trust- much like a living trust- holds assets on your behalf. However, a charitable remainder trust can only be used to hold gifts that ultimately will benefit a charity. You and the trustee agree at the time the trust is established on a type of payment to you: either an annuity payment representing a fixed dollar amount or a unitrust payment representing a fixed percentage of the trust assets, which are revalued annually. At your death, the assets remaining in the trust are transferred to the charities you designated when you established the trust.

What are the tax advantages of a charitable remainder trust?
You can claim a charitable deduction for a portion of the amount you contribute to the trust- more specifically, for the calculated, present value of the remainder interest that ultimately will pass to charity. However, some of the income that you receive annually may be considered taxable income to you.

If I use stock, will either a charitable gift annuity or a charitable remainder trust be able to increase my income?
Yes. You may own stock that has greatly appreciated in value, but pays only a small dividend. By gifting that stock to a charity or charitable trust, you defer paying the capital gains tax, you realize a tax deduction equal to a portion of the value of the stock, and you could receive a much greater income than you realized from the dividends.

Is life insurance a good way to make a gift?
Yes. You can give a life insurance policy to charity and take an income tax deduction for this gift as well as a deduction for any additional gifts to the charity to allow it to pay any ongoing premiums. Alternatively, you can retain ownership of the policy and just name the charity as beneficiary, though no income tax deduction is available for this approach. In both cases, there are no estate taxes on the life insurance proceeds.

What about using some of the money in my IRA or other retirement plan to make a charitable bequest? Is this a good idea?
Yes. The combined impact of estate and income taxes can, in some cases, take up more than 70% of the assets in a retirement plan. However, if you fund a bequest to a charity from retirement plan assets, the full amount of the retirement plan assets can pass to the charity without estate or income taxes.

Are there other types of charitable gifts I should consider?
It is always best to consult with your favorite charity/charities before making a planned gift. The staff of the charity will be happy to explain the various types of giving opportunities they offer their donors. You should also seek advice from your attorney and/or financial planner.

How do I leave a gift in memory of a person or for a specified purpose?
A gift is a wonderful way to recognize someone who has made a difference in your life. This kind of memorial gift can be arranged in your will, the same way that you would leave a personal gift from your estate. You just need to make it clear that the gift is given in memory of a particular person or for a specific use.

Do I tell the charity I've left the gift?
This is up to you. Charities often like to know in advance so they can recognize your generosity. They can also tell you about specific opportunities for giving. Whether you let the organization know of your plans or not, is your decision to make.

Take the first step.
Think about to whom and why you'd like to leave a gift. Maybe you or someone you know has been helped by a particular organization. Maybe you're an active volunteer or believer in the mission. You might want to leave a gift in memory of a loved one or for a specific use.

If you need more help or you need to know more about a particular organization, do some investigating before leaving a gift. Call the nonprofit group of your choice. They can help you better understand what they do and what opportunities are available for giving.

Contact your professional advisor for help.  Your advisor can make sure you are getting the maximum tax and legal advantages allowed for your gift.