Planned and Legacy Giving

This page is intended as an overview and introduction to planned and legacy giving to Vision of Hope.

Please remember that effective estate planning requires time, effort and a good attorney. The contents of this page are not intended as legal, accounting, or investment advice.

Our glossary of estate planning terms might be helpful as you review this information.

Estate planning overview

Get a complete overview of wills, living trusts and basic estate planning by requesting a copy of Vision of Hope’s free estate planning organizer. The organizer also contains an estate planning inventory form to help you understand the value of your estate. Contact Sister John Martin Fixa, OP, at (510) 533-5768 or johnnie@msjdominicans.org to request a copy of the organizer.

How do I include Vision of Hope in my will or living trust?

The most common way people remember Vision of Hope in a will or living trust is through a charitable bequest. You do not have to rewrite your current documents. You simply add an amendment, called a codicil, to your will or living trust. Here is some suggested language you can have your attorney review:

” I give devise and bequeath to Dominican Sisters Vision of Hope (tax I.D. 94-3356021), located in Oakland, California, the sum of ________________________________ dollars ($ _______________) for the benefit of its general purposes.”

(You may instead state a percentage of your estate, or describe real or personal property, including exact location. You may also specify the specific Vision of Hope program you wish to support.)

Your bequest is entirely under your control during life and becomes irrevocable only at death.

What’s the advantage in making Vision of Hope a beneficiary of my retirement plan?

A designation in your IRA or other retirement plan may be a very cost-effective way of making a gift to Vision of Hope. If you leave your retirement plan to your children, they will have to pay income tax on either a lump sum distribution or the income stream from the plan. Vision of Hope does not pay this tax. Here’s an example of what this can mean to your heirs:

A widower died a few years ago. He left his $300,000 house to charity and his $300,000 retirement plan to his relatives. He should have done just the opposite. The relatives had to pay income tax on the $300,000 in the retirement plan, an $80,000 cost to them. If they had received the home, and the charity had received the retirement plan payment, no one would have paid income tax.

How can I give my home and keep it, too?

A charitable life estate agreement allows you to give a personal residence or farm to Vision of Hope while retaining the right to live there for life. Donors who enter a life estate agreement receive an immediate income tax deduction. The deduction is based on the present value of the home discounted by the estimated length of time the charity must wait to receive the home. To put it simply, a person age 70 will receive a larger deduction than will a person age 50, all other things being equal.

The IRS grants the deduction even though the donor continues to enjoy full use of the home. But the IRS also expects the owner to have full responsibility for the care and maintenance of the home. That’s why life tenancy agreements simply continue things as they are currently, with the donor dealing with maintenance, property taxes, insurance and the like. The major benefits to the donor, then, are continued use of the home, an immediate charitable income tax deduction, the avoidance of probate, the avoidance of estate tax on the property, and the satisfaction of making a substantial gift to Vision of Hope during one’s lifetime.

What kind of donors should consider a charitable remainder trust?

Donors who want income for life, bypass of capital gains tax on stock or real estate, reduced taxes and the satisfaction of providing for a good cause like Vision of Hope.

First, a few words about charitable trusts generally.

Anything you place in a charitable trust–cash, stock, real estate–is invested by the trustee to pay you income for the rest of your life and, if you wish, pay your heirs for life or for a term of years. After the death of all income beneficiaries, what remains in the trust passes to Vision of Hope.

Your trust may provide you with some important tax benefits:

1. An immediate income tax deduction for a percentage of your gift. We will be happy to give you an idea of the size of your deduction. We simply need to know the ages of the income beneficiary(ies) and the payout rate of the trust.
2. No tax on the sale of appreciated property. From the donor’s point of view, this is often the most important tax benefit. Sometimes thousands of dollars that would have gone in capital gains taxes remain in the trust generating income to the income beneficiaries.
3. The trust principal is not subject to estate tax. Property that might otherwise be subject to federal estate tax, which can be has high as 45%, is preserved from estate tax entirely.

Appreciated real estate is often an excellent asset to place in a charitable trust. Mature investment properties are frequently earning only two, three, or four percent of their fair market value per year. When these properties are sold and the proceeds reinvested by the trust, earnings often increase significantly.

Under ordinary circumstances, owners face substantial capital gains taxes when they sell rental properties or commercial real estate. In some cases personal residences are also subject to capital gains taxes even after the $500,000 exemption has been used. In any case, because your charitable trust will be selling the property, there will be no capital gains taxes due when the real estate is sold. Thus the entire net proceeds from the sale can be reinvested to produce more income for you.

Gifts of appreciated stock are ideal for funding a charitable remainder trust because the stock can be reinvested by the trust for greater income while bypassing capital gains taxes at the time of the sale.

Some people find it useful to give an undivided percentage interest of real estate to a charitable trust rather than all of it. For example, a donor contributed 75% of a vacant lot into a charitable trust. When the lot was sold, about $70,000 came directly to her from the sale while $210,000 remained in the trust. Some of her $70,000 was taxable, but she used the income tax deduction generated by her gift to the trust to offset the tax due on the gain built into the $70,000 she received.

There are two basic types of charitable remainder trusts. An annuity trust will pay you a fixed dollar amount for the rest of your life. A unitrust will pay you a fixed percentage of the trust principal each year, so if the value of the trust principal increases over time, your income increases with it. By law, your trust must pay you at least 5% of principal. You may choose a higher payout rate if you wish, but the higher the payout rate the lower your income tax charitable contribution deduction. Also, selecting the highest rate possible may not work in your best interests for another reason. If trust principal declines under the strain of meeting the higher rate, your income will decline with it. On the other hand, a lower payout rate may allow the principal to grow, and your income will grow with it. Additions can be made to a unitrust at any time, but you can contribute to an annuity trust only once.

Finally, your trust must have a trustee. If you have an individual trust tailored to your circumstances, the trustee can be a commercial institution such as a bank or trust company, an individual with professional experience in trust management, a relative, or yourself. There are some complications in acting as trustee yourself, but it can be done if you understand and comply with IRS regulations. Our organization will be happy to supply you with a list of on possible trustees or information on being your own trustee.

The basic advantages of charitable trusts are not difficult to understand:

• diversification of your assets without incurring capital gains taxes
• lifetime income
• immediate income tax benefits
• reduction of estate tax
• the satisfaction of providing for a good cause

There are even ways these trusts can benefit your heirs that we have not covered. But the first thing you should do is find out if a charitable trust makes sense for you.

Vision of Hope will provide you with tax and income calculations tailored to your particular situation. This will give you and your advisors the information needed to make an informed decision as to whether a charitable trust meets your financial and philanthropic objectives. All information is provided confidentially and without cost or obligation. Our organization deeply appreciates your willingness to help continue its work.

Gifts that pay you: Charitable Gift Annuities

The oldest and best known of charitable gifts that pay donors income for life is the charitable gift annuity described here. Charitable remainder trusts also pay donors income for life, give them an immediate income tax deduction and relief from capital gains tax. The charitable gift annuity is also guaranteed by the issuing charity. The payments are fixed and so completely predictable. The charitable gift annuity allows you to make a gift to a good cause while giving you a current income tax deduction and payments for life. In this way, some donors discover they can make a far more generous future gift to Vision of Hope than they thought possible.

A gift annuity is simple to create. You fund your annuity with a gift of cash or stock. You are then paid a guaranteed fixed amount monthly, quarterly, semiannually or annually for life. You must be at least 65 when the payments begin and your annuity must be created with gifts having a total value of at least $10,000.

Your gift annuity can provide payments for one or two lives. Both plans generate an immediate charitable tax deduction and partially bypass capital gains tax. In addition, part of your payment will be tax-free and all of your gift will pass to Vision of Hope free of estate tax.

Vision of Hope Gift Annuity Program: Vision of Hope’s gift annuity program appeals to those who prefer predictable payments to variable income. A Vision of Hope gift annuity provides fixed guaranteed payments to donors along with the satisfaction of making a significant future gift to the agency. Annuity rates vary with age. The older you are, the higher your rate. Payments once establish remain the same for life.

The following are some current single-life annuity rates.

Here’s an example: Mary Edwards, age 75, establishes a one-life gift annuity contract with $10,000. In exchange for her gift, Vision of Hope pays her $670 annually for life. $445 of her $670 payment is tax-free for twelve years. She also receives a $4,484 charitable income tax deduction.

For an estimate of your rate and deduction, confidentially provided, call Vision of Hope’s planned giving specialist Phil Murphy at 415-457-7482 or pgphil@earthlink.net.

Can you provide me with an estimate of my tax and income benefits?

Yes, we can provide you with estimates of the tax and income benefits you will receive if you take out a charitable gift annuity, or create a charitable remainder trust. We need to know the birth dates of those who will receive income from these charitable tools and the kind of gift you have in mind (cash, stock, real estate). These calculations are for educational purposes only and should be reviewed by qualified independent advisers of your choosing.

For more information about the variety of planned giving opportunities available to you, contact Sister John Martin Fixa, OP, at (510) 533-5768 or johnnie@msjdominicans.org