| require little more than your signature. We can provide you with information such as instructions for transferring a gift of stock, sample language for your will or trust, or personalized projections of the tax savings and income you may recognize from specific gifts. The staff of Shimer College has more than a dozen years of planned giving experience. Please allow us to put that knowledge to work for you. There are two types of gifts that can be made to Shimer College:
Current gifts are those that Shimer College may use immediately. These can be restricted or unrestricted gifts, and can be designated for use by either the campaign or the annual fund.
Deferred gifts are those that are given or recorded currently, but which provide a benefit to the university only in the future. These too can be restricted or unrestricted. Current Gifts include:
Cash
The simplest of all gifts, cash is always welcomed! Gifts of cash are fully deductible if you itemize, up to a maximum of 50% of your adjusted gross income. Amounts in excess of the 50% level can be carried over and used as deductions for up to five additional years. Publicly Traded Securities
If you have marketable securities that have grown substantially in value, the tax laws make it possible for you to make an important gift at a remarkably low after-tax cost. Such a gift of appreciated securities generally qualify for an income tax charitable deduction equal to the value of the gifted securities, and it may serve to avoid the long-term capital gain tax on your unrealized capital gain. You can deduct up to 30% of your adjusted gross income in the year of your gift. Any amount given in excess of 30% can be carried over and deducted for up to five subsequent years.
Under normal circumstances, a sale of appreciated securities results in a tax on your full gain – in other words, you keep only part of the profit. But if you give those same appreciated securities to Shimer College, there is no tax on your gain, even though your “profit” is counted as part of your charitable deduction. If you have held the securities for more than one year, your deduction is equal to the full fair market value of the securities. Generally, you may deduct up to 30% of your adjusted gross income and, as with gifts of cash, any excess can be carried over and used for up to five additional years.
Closely Held Stock Individuals who own c-corporation closely held stock may obtain special financial benefits. Such ownership can represent a special opportunity for entrepreneurs. The benefits of a gift of closely held stock share many of the characteristics of appreciated publicly traded securities. The income tax deduction and the capital gain tax savings that apply to a gift of publicly traded securities are applicable to a gift of closely held stock. There are potentially additional benefits if the university sells the stock to the closely held corporation or to a third party, which may or may not be another shareholder. Why is this so? Corporate owners frequently hold stock with a low cost basis, stock that has significantly appreciated as the business entity has grown. In many cases, the corporation has paid few, if any dividends. The owner of the stock, who usually controls the corporation, may wish to distribute retained earnings for a personal use, but hesitates because doing so causes the owner to be doubly taxed, as a recipient of a dividend, on income already taxed at the corporate level.
Alternatively, an additional benefit to this gift arrangement may be realized through the subsequent sale of the stock, by Shimer College, back to the corporation. The donor would thereby maintain control of the corporation. The corporation’s redemption of the stock reduces accumulated earnings and the accompanying tax liability, and the stock is removed from the donor’s taxable estate. It is important to note, however, that neither the sale nor redemption of the shares can be arranged prior to making the gift to Shimer. As long as Shimer is not legally bound to sell the shares it received, the donor will note be treated as though he or she had received a dividend or realized a capital gain. Therefore, if such an owner has three goals – unlocking the value of corporate assets, avoiding double taxation, and making a gift to Shimer College - all parties may enjoy substantial benefits. It is important, however, to carefully work with appropriate professional advisors and with the college before a decision can be made about the suitability to you and to the college of such a gift. Please feel free contact us to explore the potential for making such a gift. Immediate Gifts of Retirement Plans
Historically, gifts from retirement plan account triggered substantial taxation. Individuals were obliged to liquidate the assets in pension accounts, IRA’s and other retirement funds. There is a small window in this requirement that removes the obstacle. The Pension Protection Act, signed in August of 2006, allows IRA owners age 70 ½ and older to transfer as much as $100,000 directly to Shimer. This is a two-year provision and is available only in 2006 and 2007. The transferred amount is excluded from the IRA owner’s taxable income and can count toward the minimum required distribution in each year, which means that an individual who might have been pushed into a higher income tax bracket by being obliges to accept a required minimum distribution can avoid the extra taxation, and make a fine gift to the college. There are simple conditions. The transfer must be made directly from the IRA account to Shimer and must be for an outright gift. Planned gifts, such as gift annuities and trusts do not qualify. Again, there is not an income tax deduction for the transfer; the amount is simply not included in the IRA owner’s income. Outright Gifts of Real Estate An outright gift of real estate can be an effective way for an individual to make a substantial commitment to Shimer College, and simultaneously to realize important tax and income benefits. It is possible to significantly reduce the amount of income, capital gain, and estate taxes that would be otherwise payable. And lastly, the disposal of the property can eliminate the responsibilities of managing it. There are many types of real estate which can be suitable for a gift to Shimer, including gifts of a personal residence, vacation home, farm or ranch, commercial property, building lot, agricultural land, and undeveloped or unimproved land. The property can be deeded to the college, and then sold, unless there was a special reason for holding the property. The donor would benefit from an income tax charitable deduction for the appraised full fair market value of the donated real estate, and any unused deduction can be used in up to five succeeding years. Deferred Gifts include: Wills and Living Trusts
A will can be the foundation of a well-drafted estate plan. It divides and distributes property, can provide security for family members, minimize taxes and estate costs and, through a bequest, can create a lasting legacy for Shimer College. There are a number of ways in which this can be accomplished. Many people use a living trust as a substitute for a will or in conjunction with one.
Specific Bequest – The specific bequest gives a specific item or a specific piece of property to the college. Such bequests are fulfilled before cash and residuary bequests.
Cash Bequest – A cash bequest is an excellent alternative to the specific bequest. The cash bequest states that Shimer will receive a certain specified sum of money from your estate. Such bequests are fulfilled after specific but before residuary bequests.
Residuary Bequest – This bequest is made from the assets remaining in your estate after all specific and cash bequests, taxes, settlement costs and debts are satisfied. Typically this is stated as a percentage, if an individual wishes to divide the residue of his or her estate among different beneficiaries. A living trust differs from a will in that it is created for the purpose of holding ownership of an individual’s assets during a lifetime, and for distributing those assets after death. The individual who creates the trust may either serve as trustee, controlling the assets event thought the assets themselves belong to the trust. The donor can also name an individual who will serve as trustee. Shimer College can be named as a beneficiary of such a trust.
For suggested bequest language, click here.
Deferred Gifts of Real Estate If there is a wish to retain all or part of a property but make future plans for Shimer, there are alternatives that make this possible. The first is to make a gift of a partial interest in a property, known as an “undivided fractional interest” in the property, if disposal of the entire property is not the preferred option. The appraised portion of the fractional interest is deductible for income tax purposes. A gift of this kind can be especially useful in providing a deduction to offset a capital gain generated by the subsequent sale of the entire property. And upon the ultimate sale, the donor and Shimer College share proportionally in the proceeds. Alternatively, a retained life estate can be created. A home, vacation home, or farm can be deeded to the college, but the donor and the donor’s spouse, retain the right to use and enjoy the property for your lifetimes of both. The donor receives an immediate income tax charitable deduction for the interest deeded to Shimer, and the property will not be subject to estate taxation. Retirement Plan Accounts
Today, many people find that one of the more significant assets in their estates is their retirement plan investments. Yet it is one asset that is costly for owners to pass on to heirs after his or her lifetime. Retirement plans, under certain circumstances, can be subject to taxes of nearly 80 percent when the owner dies and the final distribution is made. There may be accumulated funds in a company pension plan, Individual Retirement Account, 401k, 403b or other private fund which are beyond an individual’s needs or potentially subject to the federal excise tax on over-funded retirement plans. There is also the possible imposition of some or all of the following: income tax that would have been due had the owner received the distribution, estate and inheritance taxes, and generation skipping transfer tax. It may be convenient and tax wise in such a case to make a current or future charitable gift from those accounts. Qualified retirement plan accounts provide a simple way to make a significant gift to Shimer College. If you have an IRA or participate in any other qualified retirement plan, you can designate Shimer as the beneficiary of any remaining funds you do not use. Life Insurance
Many individuals find that life insurance is an effective way to make a future gift to Shimer College. Shimer can be names the owner and beneficiary of a new policy or an existing policy that you no longer need. The charitable deduction, if you itemize, will generally depend on the cash value of the policy. Alternatively, Shimer can be designated as the primary or contingent beneficiary of a policy without making it the owner. In that case, the proceeds can be removed from the individual’s estate tax purposes. Thank you for your interest in Shimer College. Our hope is to provide you with useful information , but please bear in mind that all of this information is presented in summary form, and all donors should rely on the advice of persona counsel for tax and legal advice. We will be happy to work with you and your representatives.
For more information, please contact: John Meech Senior Program Officer Shimer College Advancement Office
3424 South State Street Chicago, IL60616-3893 312-235-3540 800-998-9705 Fax: 312-235-3502 Send an email to John Meech
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