• Introduction to Planned Gifts
• Bequests
• Charitable Remainder Trust
• Charitable Lead Trust
• Charitable Gift Annuities
• Retirement Plans
• Real Estate
• Legacy Funds

Introduction to Planned Gifts

Developing an estate plan with the help of qualified advisors ensures that the distribution of your client's estate will be consistent with their wishes and philanthropic vision. The 2001 Tax Act resulted in such extensive federal tax changes that it is now essential that your client work closely with experts who are familiar with current tax law to achieve an effective charitable design for their financial and estate plans.

A planned gift to The Minneapolis Foundation can offer lifetime income with significant estate and income tax savings, as well as the satisfaction of realizing charitable goals. Donors who choose to designate their charitable gift to The Minneapolis Foundation, know that it will be used according to their wishes to help create new opportunities and promote vitality within their communities.

Characteristics of a Planned Gift:

• Creates a lasting philanthropic legacy
• Usually created with capital, not current income
• Involves professional advisors
• Can produce secure, lifetime income for donor or heirs
• May offer substantial income and/or estate tax savings

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A charitable bequest to The Minneapolis Foundation is a gift with direct impact for making positive change in Minnesota communities. It is the easiest way to make a charitable gift, and offers significant estate tax savings for your client, the donor.

Bequests can be created by will or revocable living trust, and may be designated in a variety of ways. A charitable bequest may be made with a gift of a specific sum of money, a percentage of the estate, or a particular asset such as stocks or real estate. The Minneapolis Foundation may be named as residual beneficiary of all or part of the estate, according to your client's wishes, or as a contingent beneficiary in the event the other named beneficiaries do not outlive your client.

Your clients may focus their gift toward general areas of interest such as Arts and Culture, Community Health, Social Justice, Education, Environment, or Neighborhood and Community Development. The purpose and distribution of the bequest may involve multiple interest areas and fund types. Your clients may also set up funds that allow children or others to make grant recommendation.

Click here for an example of standard testamentary language that may be helpful in directing a charitable bequest to The Minneapolis Foundation. We will be happy to review testamentary language and work with advising attorneys to design a bequest, and to set up a shell fund agreement to be sure your clients' goals are realized.

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The greatest opportunity to create a significant charitable contribution occurs when discussing major financial decisions or estate planning strategies with your client. In writing or revising a will, when considering the sale of a business or appreciated assets, or when planning for retirement, a Charitable Remainder Trust ("CRT") can be a valuable tool for generating lifetime income, while also providing substantial tax savings. What remains in the trust beyond the lives of the income beneficiaries becomes the gift to the charitable institution named in the trust. At The Minneapolis Foundation, CRTs have become the method of choice for client-donors with charitable intent who also seek income security.

Here's how it works: an irrevocable CRT is created using cash, appreciated stock, real estate, or other assets valued at $100,000 or more. The trust assets and receipts are invested and managed by the trustee as a single fund that generates life-long income to the client-donor or a designee. The charitable design of the trust allows for substantial income tax and estate tax deductions, and bypasses capital gains for any appreciated assets used in its creation. Designing and investing a trust for growth, rather than income, will result in reduced tax on your client's income payments.

In order to help evaluate a charitable remainder trust for your client please contact us directly to discuss the specifics. Upon signing the trust agreement and transferring the asset, the client-donor will begin to receive income payments according to the terms of the trust, and realize the significant tax advantages provided by this charitable gift.

Upon the death of your client and any secondary designees, the remainder of the trust passes without probate to The Minneapolis Foundation. At the Foundation your client's gift may be directed to a specific program or community or be unrestricted, depending on the terms of the trust agreement. A popular design plan used by many clients is to create a Donor Advised Fund with the remainder of the trust. A Donor Advised Fund will allow your client to provide philanthropic resources that can be advised by future generations. The added value to your client's family is the lifetime charitable legacy the gift fund will provide in the community.

Click here for a sample fund agreement.

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A Charitable Remainder UniTrust (CRUT) provides lifelong income to your client or the named beneficiaries. This is determined as a percentage of the fair market value of the trust, as re-valued annually - usually between five percent (the minimum required by law) and seven percent. With the help of skilled estate planners, a CRUT can be a versatile instrument that provides income, addresses specific events or family needs in your client's estate plan, and earns significant tax savings for your client. CRUTs are one of the most popular estate planning tools used by savvy donors with charitable intent, and are often incorporated into a will to benefit a surviving spouse or partner.

View an illustration of a Charitable Remainder UniTrust.

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A Charitable Remainder Annuity Trust (CRAT) is similar to a CRUT (see above) in scope, but provides lifelong income in a fixed dollar amount rather than as a percentage of the trust value, even if the trust earns less (or more) than that amount. The payment amount to your client remains the same, despite volatile trends in the stock market. Senior clients find this option especially appealing for the predictable and secure lifelong income it provides.

View an illustration of a Charitable Remainder Annuity Trust.

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The basic premise of a Charitable Lead Trust is the reverse of a charitable remainder trust. With a CLT, your client creates an irrevocable trust in which the Foundation receives an annuity from the trust for the duration of your client's lifetime, or a specified number of years, after which the remaining principal of the trust is distributed to the designated beneficiaries. The CLT is most beneficial to individuals in high federal gift and estate tax brackets who seek favorable tax savings by benefiting charity when transferring assets to named beneficiaries. The delayed transfer of assets to your client's beneficiaries under the terms of this trust significantly lowers applicable estate and gift taxes, preserving your client's estate for the benefit of family or heirs. The added value to your client is the ability to enjoy the satisfaction of charitable giving in their lifetime.

One of the most important changes in the 2001 Tax Act is the gradual elimination of federal estate tax by the year 2010. Gift tax and transfer tax, though lowered, have not been repealed. However, a sunset provision was included in the legislation that will repeal all of the changes effective 2011, unless Congress acts to continue the tax cuts.

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Donors for whom security is paramount and those concerned about market risk and outliving their assets often find Charitable Gift Annuities attractive. In exchange for a charitable gift, The Minneapolis Foundation enters into a contractual agreement to pay a lifetime fixed annuity to one or two persons. The annuity payments are general obligations of the Foundation's unrestricted assets. The minimum gift required is $5,000 and annuitants must be age 55 or older when payments begin. Payments may also be deferred for one or more years, giving donors a high rate and a higher charitable deduction. The Foundation follows the rate schedule recommended by the American Council on Gift Annuities. Rates are based on nearest age(s) of the annuitant(s) and are higher for more elderly donors.

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Diligent investors spend years of careful retirement planning to generate a sizable nest egg that they plan use for their retirement years and then to leave behind to loved ones. This is usually in the form of IRA's or other qualified retirement plans, savings bonds or long-term certificates of deposit with accrued interest. Often, these investments add up to become the largest assets in the estate. Income in Respect of a Decedent, or IRD, is how the Internal Revenue Service classifies these assets once you die. What is IRD? Simply put, IRD is income generated from an inherited asset on which the inheriting party must pay income taxes. Assets subject to IRD include: deferred annuities, immediate annuity payments made to beneficiaries, IRAs, pension plans including 401(k)'s and similar plans, EE bonds, and any other income that would have been taxable to the deceased owner.

IRD is included in the recipient's personal income for the year in which it was received and can cause a jump into a higher tax bracket. The income taxes due on IRD can cause an additional significant loss of inheritance on top of the estate tax cost. Careful attention to IRD is required when designing an effective tax-wise estate plan.

Thoughtful planning can significantly reduce the taxes on IRD assets. By using IRD assets for charitable gift planning, your client can make a significant gift to charity from an asset that would otherwise be subject to both income and estate tax. A significant charitable gift can be made at the cost of only a nominal reduction in the inheritance for the heirs. In some cases, IRD can be used to fund a CRT to provide an income stream to heirs.

At The Minneapolis Foundation, IRAs and other IRD assets may be used to create a Charitable Remainder Trust (CRT), Donor Advised Fund (DAF) , or other fund type that best meets the needs of your client's estate plan.

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Often a potential donor's assets include highly appreciated real estate -- from a home or recreational residence to raw land or developed commercial properties. The rules governing charitable gifts of real estate can be confusing, and the tax consequences and potential liabilities inherent in such gifts can sometimes be disconcerting. Most individual charities find it difficult to accept gifts of real estate, but The Minneapolis Foundation is equipped to evaluate such gifts and suggest appropriate ways to balance your client's needs and charitable intentions. We are familiar with the regulations and limitations that affect real estate gifts, and are happy to discuss various options with you.

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• life income gifts
• retained life estate
• bargain sale

Legacy Funds

Your clients can support the causes they care about well beyond their lifetime. Individual gifts are pooled with those of other generous donors to make a greater impact in an area of particular interest or to meet the needs of the community. The Minneapolis Foundation will steward those gifts to ensure they are continually put to effective use in accordance with the established fund priorities and to meet changing needs.

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