For many donors, a bequest is the simplest and most realistic way of making a significant gift to Meredith College. The bequest may be in the form of cash, securities, real estate, tangible personal property or other assets.You may provide for Meredith College by creating a new will, adding a codicil to your present will, including Meredith College in your revocable trust, or designating Meredith College as a beneficiary of your retirement plan. To ensure that your exact intentions are carried out, wills, codicils and trusts should be prepared by or with the assistance of an attorney.
General Bequest Language
"I give, devise and bequeath to Meredith College, an educational institution incorporated under the laws of the State of North Carolina, located at 3800 Hillsborough Street, Raleigh, North Carolina 27607 ________ percent of my estate or ________ dollars."
Bequests exist in different forms:
Meredith College receives all or a percentage of the remainder of the estate after the payments of any specific bequests and estate-related expenses.
Meredith College receives a specific dollar amount or a specific asset such as securities, real estate, or tangible personal property (e.g. works of art).
Meredith College receives the bequest only in the event of the prior death of other beneficiaries.
The trust provides one or more heirs with income for life, after which the assets pass to the school.
Charitable Remainder Trust
A charitable remainder trust distributes income to a donor and/or other beneficiaries for their lives or a specified term of years, not to exceed 20, with the balance of trust assets to be distributed to Meredith College at the conclusion of the trust. Charitable remainder trusts offer many opportunities to address specific goals for donors. For example, they can provide supplemental income during retirement and can be especially attractive as a way to convert appreciated, low-yielding assets into a high-yielding diversified portfolio without incurring capital gains tax.
There are two forms of remainder trusts. The unitrust pays a set percentage of the current value of the unitrust, determined annually. The payout rate is selected by the donor but must be at least five percent. The annuity trust pays income based on a percentage of the initial value of the trust and never changes. This trust provides a fixed amount each year, regardless of fluctuations in the market. The donor can serve as trustee of the trust, or can select a trustee. Meredith College, in conjunction with our planned giving partner, First Citizens Bank, can serve as co-trustees.
Example: Barbara and Ralph, both age 65, would like to create a $100,000 charitable remainder unitrust with stock that they bought 15 years ago for $40,000. Because the stock's dividend was yielding only 3 percent, they realize that it may be possible to increase their income and benefit Meredith College. They create a unitrust with a 6 percent annual payout. In doing so, they qualify for a charitable deduction. They also avoid the capital gains tax by making the gift rather than selling the stock. During the first year of the trust, they receive $6,000 ($3,000 more than when they owned the stock), and they continue to receive 6 percent of the trust assets annually for life. In time, Meredith will receive the remainder of the trust.
Charitable Lead Trusts
There is a way to pass assets to your family with significant estate tax savings while at the same time making a gift to Meredith College. It is called a charitable lead trust. Under a lead trust, income is payable to Meredith College for a number of years with the principal (very likely appreciated), on the termination of the trust, passing to your children or grandchildren either free of or at greatly decreased gift and estate taxes. The lead trust is a flexible plan and can be one of the few ways to control exactly when an inheritance is received.
Example: Gail, age 75, has been advised that her estate could be subject to a significant estate tax. She has four grandchildren, ages 10 through 22, to whom she would eventually like to give some money. After conferring with her advisors, she decides to create a 15-year $100,000 lead trust with a 7 percent annual payout to Meredith College. Her gift will, in time, endow a scholarship at Meredith, as the College will receive $7,000 per year ($105,000 in total) over the 15-year life of the trust. Gail is not taxed annually on the trust income paid to Meredith. For gift (or estate) tax purposes, only the remainder interest calculated under guidelines prescribed by the IRS is subject to gift tax.
Meredith College is designated as a beneficiary of your retirement plan. Retirement plans are currently subject to estate tax and federal income tax of as much as 80% if not left to a spouse or charity. This tax consequence makes a retirement plan among the least desirable assets to leave to your heirs, but one of the best vehicles for benefiting the College.
Life Income Gifts
For many alumnae and friends, the desire to make a gift to Meredith College is coupled with a continuing need for income from their assets. Fortunately, Meredith College's life income gift program makes it possible for a donor to achieve both of these objectives and receive substantial tax benefits as well. Life income gifts to Meredith may be made to Meredith through charitable gift annuities or charitable remainder trusts. These gifts may have the following benefits:
Since there are many technical requirements to satisfy in making life income gifts, it is particularly important that you seek your own tax and legal advice.
Charitable Gift Annuity
The charitable gift annuity is a simple contract between you and Meredith College. The College agrees to pay you a lifetime annuity in exchange for a charitable gift. The amount of the annual fixed payment is generally determined by the amount of the gift and the age of the beneficiary or beneficiaries. The minimum gift to establish a charitable gift annuity is $10,000.
Example: Jean, age 75, transfers $25,000 in stock (originally purchased for $10,000) to Meredith College in exchange for a 7.9 percent annuity payment of $1,975 a year for life. For the next 12 years (her IRS-determined life expectancy), $500 of her payment will be treated as a tax-free return of principal, $750 as capital gains income and only $724 as ordinary income (these amounts vary depending on age of donor and percentage of payout). In addition, Jean is also able to claim an income tax charitable deduction.
Charitable gift annuities may also be structured to defer income until a future date. These gifts, called Deferred Charitable Gift Annuities, can be excellent retirement planning vehicles. Because the income is deferred until a later date, the annuity amount is increased. The donor also receives a larger deduction.
A gift of paid-up life insurance might be attractive if you own a policy that is not needed to ensure your family's financial security. To receive a charitable deduction for such a gift, you should name Meredith College as both owner and beneficiary of the policy. Your tax deduction is generally what it would cost to replace the policy at your age and state of health at the time of the gift, but never more than your investment in the policy. This deduction is normally close to the cash surrender value of the policy.
Retained Life Estate
Contribute your personal residence or farm to Meredith and continue to occupy or use the property until death.
In naming the College a beneficiary of a charitable gift, please note that the school should be named as: Meredith College, a non-profit corporation, organized and existing under the laws of the State of North Carolina, and with a principal business address of 3800 Hillsborough Street, Raleigh, NC 27607.This is a summary of legal and tax matters. Since Meredith College cannot give tax and legal advice, you are encouraged to consult your own advisors.