Most people understand that they can leave money to a charity in their will. But did you know that a planned gift can also protect your assets, provide for your family, and guarantee you income for life? You can even make a significant impact through a gift that costs nothing in your lifetime.
Developments sat down with James Krogmeier, the associate vice president of gift planning at the University of Arizona Foundation, to learn more.
Q. What is one of the biggest misconceptions about making a planned gift?
I think people are afraid that planned giving has to be complicated, and it doesn’t. It’s just another way for them to extend their giving and support the programs that are important to them. Some of the options are ways to make gifts more tax efficiently, or to use assets or accounts that they hadn’t otherwise thought about.
Q. What is one thing that you wish more people understood about planned giving?
One thing we’ve seen more of over the past couple of years is people doing their wills themselves or using online will services. That might not be as helpful as they hoped. Using an attorney is not necessarily that scary, and probably not as expensive as people think it is. And it really is money well spent.
For a planned gift to the University of Arizona, we can give people suggested language for their attorney to use, and we can work on a gift agreement so we can make sure that we have all the instructions that they want us to have in order to carry out their gift.
Q. Is there a type of planned gift that is not as well known that people are intrigued by?
Charitable gift annuities. A donor can make a one-time lump sum gift now, and we promise to pay them income for the rest of their lives. And that promise is backed up by all the assets of the Foundation.
It is not really accurate to compare it to the type of annuity you would get from a life insurance company because there is a sizable charitable gift built into it. But at the same time, there is an attractive income that goes back to the donor. And with the volatility we’ve seen in the stock market, it is more attractive to a lot of people right now.
Q. Are there any other planned gift options that you want potential donors to know about?
Donors using their IRA as an estate gift is fantastic. It’s easy to put in place – it’s just completing a new beneficiary designation form. They could probably do it online. They might not have to revise their will or their trust. And it’s super tax efficient. If they left that money to their kids or family members, those people would have to pay income tax on it. But the UA Foundation and SBS get full value for every dollar in there.
Q. Speaking of IRAs, how can people donate through their IRAs while they are alive?
If you have an IRA and you’re at least 70 ½ years old, it is very tax efficient to make charitable gifts directly out of your IRA. Your IRA is a big reservoir of tax-deferred income. Anything you take to benefit yourself, you’re going to have to pay income tax on. But if you use it to make charitable gifts, you avoid all that tax liability, but the charity still gets full benefit of the money. So, it’s a way to get an attractive tax benefit without having to itemize your tax return.
This story was included in the winter 2022 Developments newsletter