Planned Giving

Hartford Foundation staff has extensive training and experience in planned giving. Please contact Donna Roseman for free (and confidential) gift illustrations tailored to your clients' particular situations, as well as sample drafting language for many types of gifts.

The information on this page is also available as a handout for your clients. Click here for the complete list of available handouts.

Overview

Planned Gifts can be tremendously flexible tools for achieving both philanthropic and financial goals, such as saving income and estate taxes, preserving or increasing retirement income, protecting a spouse, and passing assets to heirs at reduced cost. Among the many types of planned gifts are the following:

Charitable Remainder Trusts (CRT)

Your client (or another named beneficiary) can receive income payments for either a specific number of years or for life with a gift to a charitable remainder trust of at least $100,000 (preferably more for efficiency and economy of scale*). Assets remaining after the income stream ends will create, or augment, your client's fund at the Hartford Foundation for the benefit of area nonprofits forever.

There are two basic types of CRTs: a charitable remainder unitrust and a charitable remainder annuity trust. A unitrust entitles the donor or other life beneficiary to receive a payout each year of a percentage of the annual value of the trust. An annuity trust fixes the annual payout when the trust is created so that payments remain constant and are not subject to fluctuations based on the value of the trust’s assets.

Variations of these basic types of CRTs include the "flip trust" and the "net income with make up" trust which allow planning flexibility when your client uses illiquid assets such as real estate to fund the trust.

Your client's tax benefits from lifetime CRTs include an immediate income tax deduction and removal of the asset, and its appreciation, from his/her estate. If the CRT is created using appreciated assets, the capital gains associated with the sale of the asset are also generally both reduced and deferred.

Alternatively, a CRT may be established by will, or by a revocable trust functioning as a will substitute, to provide an income stream to a spouse or other individual** after the donor's death.

* A client may also receive life income benefits from a charitable gift annuity with assets in amounts both large and small, so long as the remainder will equal at least $10,000. See description below.

** Be sure to consider gift tax implications of an income stream for someone other than a donor or spouse.

Charitable Lead Trusts (CLT)

A charitable lead trust reverses the concept of a charitable remainder trust. With a lead trust, the charity's interest "leads" the individual's. The donor transfers assets to a trust for a designated number of years, the lives of one or more individuals, or a combination of the two. Payments are made annually to one or more charities for the duration of the trust, and then at its termination, the remaining assets are paid to named individuals, frequently the donor's children or grandchildren.

Lead trusts function best with gifts of $1,000,000 or more, and offer an attractive way to make current charitable gifts while at the same time transferring assets at substantially reduced gift and estate tax costs. If the donor wants grandchildren to be the ultimate beneficiaries of the trust's assets, with proper planning, the generation-skipping transfer tax exemption can be used.

Charitable Gift Annuities (CGA)

A charitable gift annuity is simply a contract between the Foundation and a donor. With a gift that can be much less than required for a remainder trust, most frequently either cash or marketable securities, the Foundation agrees to pay a fixed amount each year to the donor or his/her designated beneficiary**. The payments may be structured to begin when the gift is made or deferred until a later date.

The amount of the annuity is based on the age of the designated beneficiary(ies). At the death of the annuitant(s), the principal remaining is kept by the Foundation to create, or add to, a charitable fund.

Tax benefits include an income tax deduction in the year the CGA is created. Additionally, a portion of each annuity payment is deemed a return of capital, and is therefore tax free to the donor. Further, if the gift is made with appreciated securities, a portion of the capital gain is free of tax and the remaining capital gain is spread across the anticipated life of the annuitant - essentially deferring the tax over a number of years. Finally, the assets used to create the CGA, and their appreciation, are removed from the donor's estate.

** Be sure to consider gift tax implications of an income stream for someone other than a donor or spouse.

Pooled Income Funds (PIF)

Similar to a charitable gift annuity, and suitable for gifts over $5,000, a pooled income fund pays the donor, or his/her designated beneficiary, annual income. However, instead of a pre-determined guaranteed annual payment made by a CGA, a PIF pays a variable income rate based on the market performance of a pool of funds from multiple donors. In low return years, this means lower payouts to the donor, however, there is potential for growth over time.

When the last life income beneficiary dies, the funds pass to the Foundation to create, or add to, a charitable fund.

Charitable QTIP Trusts

If a donor wants most of the tax advantages associated with a CRT but more income flexibility, consider a charitable Qualified Terminable Interest Property (QTIP) trust. Instead of paying a fixed percentage or amount to the donor's named beneficiary, this trust allows the trustee broad discretion to use principal for unexpected family needs. Upon the death of the last person named in the trust, the remainder will create, or increase, the donor's charitable fund at the Foundation.

Real Estate Gifts with Shared Use

The Hartford Foundation can accept a gift of a home, vacation home, apartment building, commercial property, or undeveloped land. In some cases, the donor may be able to retain a life use of the property, and continue living in it, after the donation. In those cases, the donor maintains the property during his or her use. The Foundation would sell the property after the donor dies or moves and establish, or supplement an existing, charitable fund with the sales proceeds.

One of the key tax benefits to this type of gift is the current income tax deduction. If the donor has owned the property for more than one year, s/he may deduct the fair market value of the property and may be able to avoid capital gains taxes.