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Planned Giving

Charitable Trusts, Life Estates, Life Insurance, and other Planned Gifts often create ideal situations for Donors and are frequently the sustainable influence for local charities.

Planned Giving alternatives allows the Donor to setup parameters during their lifetime which support the causes and charities they believe in.  Additionally, certain types of Planned Giving can substantially reduce estate taxes, taxes paid on capital gains, or provide charitable deduction for federal income tax.

Planned Giving is ideal for those individuals who wish to have a positive influence on the community long after they are gone.

Charitable Remainder Trust

A Charitable Remainder Trust pays to the Donor (and/or another beneficiary) either a fixed or variable income for the beneficiary’s life, or for a fixed term not to exceed twenty (20) years, or a combination of the two. When the trust term expires, the remainder is then distributed to a charitable beneficiary.

Charitable Remainder Trusts offer a great deal of flexibility. Payments can be made to the donor for life and then can be directed to a spouse or another beneficiary after the donor’s death. A Charitable Remainder Trust can be set up during one’s lifetime or may be established by a will.

Charitable Remainder Trusts do not pay ordinary income tax. The income distributed to individuals is taxable to the income recipients. The principal is held for charitable purposes. If donors place highly appreciated securities in the trust, the trustee can sell them without having to pay the capital gains tax realized on the profits of the sale. Low-yielding stocks can be sold and the proceeds reinvested to produce higher income for the income beneficiary.

By creating a Charitable Remainder Trust, the donor can enjoy a number of benefits, including professional management of the assets in the trust and a degree of financial protection. In addition, the donor can receive a charitable income tax deduction depending on their age, length of the trust term, payout rate, frequency of payments, and applicable federal discount rate. Creating one of these trusts frequently enables donors to realize greater spendable income.

The Scranton Area Foundation may serve as trustee of a Charitable Remainder Trust or as the beneficiary. Choosing the Foundation as the beneficiary gives the donor increased flexibility on the use of the charitable remainder.

Charitable Lead Trust

A Charitable Lead Trust is the reverse of a charitable remainder trust. This type of trust can be created by a deed of a trust or a will. Donors can stipulate that an annuity or uni-trust payment be made to a fund for any duration of years, after which the principal is paid to the donors or to any other non-charitable beneficiary.

Donors do not receive a charitable deduction for federal income tax purposes with the creation of a lead trust unless they choose to be taxed on the trust income (i.e., the income that will be paid to The Scranton Area Foundation). Some people find that the chance to take a federal income tax deduction in the initial year outweighs the disadvantage of paying taxes on the trust’s income in later year. Donors can avoid a negative tax impact by funding the lead trust with tax-exempt securities.

A Charitable Lead Trust does not tax the donors and their spouses on the trust’s income and transfers the remainder of the assets to other family members allowing the ultimate transfer of the property to be made at a lower transfer tax cost. This mechanism is especially useful for property with capacity for appreciation. Charitable Lead Trusts are most sensible for a donor whose family can afford to relinquish the income from the gifted property during the term of the lead trust.

It is possible to establish a Charitable Lead Trust either during your client’s lifetime or in a will. A Charitable Lead Trust created in a will can substantially reduce the estate taxes payable at the time of death because of the charitable deduction for the Foundation’s charitable interest in the annuity or uni-trust payment. The value of the charitable interest depends on the length of the trust and the amount or percentage to be paid out each year. The saving in estate taxes means that family members may receive substantially more than if the property were left to them at your client’s death.

Similarly, if a Charitable Lead Trust is created during your client’s lifetime, generally the income tax is eliminated on the income from the assets placed in the trust. Donors can also reduce the gift tax on the property eventually passing to their children or grandchildren.

Life Estates

Life Estates provide a way for Donors to gift a residence or farm to The Scranton Area Foundation. the Donor is entitled to a charitable income tax deduction for the present value of the remainder interest while escaping potential capital gains tax on the property’s appreciation.

Life Estates provide a way for Donors to gift a residence or farm to The Scranton Area Foundation. the Donor is entitled to a charitable income tax deduction for the present value of the remainder interest while escaping potential capital gains tax on the property’s appreciation.

The Donor deeds the property to The Scranton Area Foundation and retains the right to live in the home or on the farm until the donor’s death. When the Life Estates terminates, the real estate is sold and the proceeds are used to support the organizations or purposes the client identified.

Life Insurance

By assigning a Life Insurance policy to The Scranton Area Foundation, the Donor can support the causes and charities they believe in. People often purchase Life Insurance when they need protection either for their family, business, or estate. Later in life, they may find that they do not need as much insurance. As a result, they sometimes find it desirable to use insurance policies to make charitable gifts.

Donors receive a federal income tax deduction for the amount of the cash surrender value in the year of the irrevocable transfer of the policy to the Foundation. Any type of fund may be established with an insurance policy. Life Insurance enables Donors to make a much larger gift than they might have thought possible, and a gift of insurance may not reduce their current stream of income.

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