Friends and alumni of North Central sometimes ask for a simple list of ways they can make a planned gift for North Central's endowment. While there is really no simple explanation for these various types of gift transactions—and there are many variations—the explanations here may help start your thinking. For more information, please contact the Office of Institutional Advancement at 630-637-5212 or firstname.lastname@example.org.
Current gifts of securities or life insurance can be simple and might include:
- Common stock - You can avoid capital gains tax and get a deduction based on the full market value.
- Bonds - Treasuries or corporates can be given.
- Real estate - You can give the whole parcel or just a remainder interest (while you retain the income or life interest).
- Life insurance - Give an old policy no longer needed or a new policy with North Central as owner/beneficiary.
It can be as difficult to plan for your demise as it is to plan your life. There are a multitude of decisions that will involve your family, your attorney, your tax and financial advisors and, hopefully, North Central College. We're always pleased to discuss these matters with you and provide whatever assistance we can. From a simple specific bequest to a complex trust arrangement, we are here to help.
- Will bequests - You may give either a set amount or a percentage.
- Trusts - Combining family interests with charity can benefit your spouse, children, estate and North Central College.
Income payments on gift annuities or trusts can be deferred to aid in your retirement planning. A life insurance replacement trust can be created to offset charitable gifts made from your estate.
Deferred gifts come in a variety of forms, but the basic idea is the same for all of them. You contribute principal assets to a fund or account of one sort or another, and you (or someone else you designate) receive back an income stream for your life, their life or a set term of years. You may also receive a tax deduction when you make or establish the deferred gift arrangement. The gift is considered deferred because North Central College does not have the unrestricted right to assets until after your death or a set term of years. A deferred gift may be in annuity or trust form.
There are many variations on these themes and some of these gift transactions may work better for some donors than others. Substantial tax and financial benefits can be available, though, for contributors seeking multiple benefits from their gift planning.
Charitable Gift Annunity
A charitable gift annuity offers an attractive net after-tax return that varies with your age.
The charitable gift annuity program at North Central College was created as a service for the College's alumni and friends who want to make a substantial gift to North Central while still retaining income from the gift property during their lives. A charitable gift annuity is a combination of gift and investment. You, the contributor, transfer cash or stock to the College in exchange for the College's promise to pay you a guaranteed set income for the rest of your life.
The gift annuity payments may be for one or two lives. Payments may start immediately or be deferred for a designated number of years. An actuarially determined portion of what you transfer to North Central should be the amount you can deduct as a charitable contribution from your income tax. An actuarially determined portion of the annuity income payments to you may also be free from income tax.
In addition to this two-pronged tax benefit, you'll receive a lifetime income at attractive rates. A 72-year-old donor, for example, could receive an annuity payback rate each year of 7.2 percent of the amount transferred to the College. This same donor could receive an immediate charitable contribution federal income tax deduction of approximately 45 percent of the principal amount transferred for the gift annuity and approximately 53 percent of the annual annuity paid back to the donor might not be subject to income tax.
In charitable trusts, you can give away the remainder and keep the income, or give away the income and keep the remainder. There are many varieties that can be individually tailored to suit you.
Charitable trusts have been the most dynamic and growing form of deferred gifts at the College over the past 15 years. Contributions you make into an individual trust can avoid capital gains tax, provide you with a substantial actuarially determined tax deduction, and provide a lifetime (or term of years) income stream for you and your loved ones. A stock gift to a charitable remainder trust, for example, can actually increase your spendable income in comparison to a sale and reinvestment of the stock.
You can also devise a plan to "reverse" the trust arrangement by giving the income stream to the College and having the principal asset(s) return to you or your family at a subsequent point in time. A contribution to such a charitable lead trust can provide substantial income and estate tax savings.