Planned Giving
Other Planned Gifts
Some of the most powerful gifts ever made to Carolina came through donors’ wills. For example, hundreds of young Tar Heels will receive need-based scholarships in just the next few years because Wade Cavin ‘38, who came to Chapel Hill on a scholarship himself, left one-third of his estate for that purpose.
And there are other promising ways to give that donors are just beginning to explore. With a charitable lead trust you can, in effect, lend your assets to Carolina for a period of time, then have them returned to your heirs, with much-reduced estate tax. Or you can make Carolina the beneficiary of your tax-deferred retirement plan, with potentially excellent results for Carolina and your estate.
Besides life income gifts, you have the option of making several other planned gifts. These include:
Bequests
A will is a statement about what matters most in your life. By making a will, you can ensure that your intentions are clearly expressed, and that they will be followed by those administering your estate.
Bequests can take various forms, and we describe each below. The sample language in each example is for unrestricted bequests. If you prefer to designate your bequest for a specific purpose or to one of the University's affiliated foundations, we would be happy to prepare specific language for you to share with your attorney.
Specific bequest - states a specific amount or asset amount. It may be a gift of cash, securities, real estate or tangible personal property (i.e., artwork, antiques, or coin/stamp collections).
Example: I give [specific dollar amount or asset] to The University of North Carolina at Chapel Hill Foundation, Inc., to be used for the unrestricted needs of the University of North Carolina at Chapel Hill.
Residuary bequest - names Carolina to receive all or a percentage of the remainder of the estate after specific bequests have been fulfilled.
Example: I give [X percent] or [the remainder] of my residual estate to The University of North Carolina at Chapel Hill Foundation, Inc., for the unrestricted needs of the University of North Carolina at Chapel Hill.
Contingent bequest - takes effect only if all primary beneficiaries named in the will are predeceased. Declaring Carolina a contingent beneficiary can prevent the property from going to the state if there are no heirs.
Example: If [name of beneficiary] predeceases me, I give such property to The University of North Carolina at Chapel Hill Foundation, Inc., for the unrestricted needs of the University of North Carolina at Chapel Hill.
Benefits
Because a will disposes of your property, it reflects your philosophy in relation to the lives of those mentioned in the will. It may also testify to your concern for the welfare of others. When you name the University in your estate plans, we know that you have included Carolina in a special group of family, friends and organizations that you hold most dear.
Benefits of a bequest to Carolina include the satisfaction of providing for the University's future and the potential tax savings. Also important is that you can designate your bequest as you wish - to the unrestricted needs of the University or directly to a particular school or unit on campus.
It is very important that the bequest be correctly stated in your will. The staff in the Office of Gift Planning is happy to work with you and your advisers in suggesting specific language for your gifts to Carolina.
Also, informing the University of your intention to benefit Carolina greatly helps the University in its long-range planning and, most importantly, allows us the opportunity to thank you now for your generosity. It also qualifies you for membership in The Charles Gerrard Society.
Testamentary Trust
With a testamentary trust, you direct that part or all of the estate is left in a charitable remainder trust, with income to be paid to one or more beneficiaries. Upon the death of the surviving beneficiary, the principal will be transferred to Carolina to be used as you designate.
A testamentary trust is particularly attractive to someone who wishes to provide adequate income for a spouse or other relative but wants the remainder to come to the University. In addition to providing for loved ones and helping Carolina, this type of gift frequently produces tax advantages. Some benefits of a testamentary trust are:
- Easily included in a new will or added by codicil to an existing will;
- May reduce or eliminate the amount subject to estate taxes;
- May be managed by an individual or financial institution of your choice, or, in certain circumstances, by The University of North Carolina at Chapel Hill Foundation, Inc.
Charitable Lead Trust
The charitable lead trust is the reverse of a charitable remainder trust. The income generated from assets placed in trust is paid to the University for a period of years. At the end of the trust term, the principal either returns to you or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren).
By establishing such a trust, you, in effect, "lend" the asset to Carolina for the term of the trust, and you may claim a charitable tax deduction for making a lead trust gift.
Life Insurance
A gift of life insurance can be made to Carolina. You have several options:
make Carolina the beneficiary of an existing policy and earn an estate tax charitable deduction;
make Carolina the owner and beneficiary of an existing policy, thus removing it from your taxable estate and earning an immediate income tax deduction approximately equal to the cash value of the policy (future premiums are tax deductibility).
take out a new policy with Carolina as the owner and beneficiary (all premiums payments are tax deductible).
use in conjunction with a life income gift to "replace" for your heirs an asset that you have given to Carolina.
Retirement Plan Assets
Tax-deferred retirement plan assets are great sources of retirement income but not always a good choice for making gifts to children and grandchildren. Friends of Carolina may consider using retirement plan assets to make a significant and meaningful gift that will support Carolina into the new millennium and beyond. And, because of the estate tax treatment of retirement plan assets, the "cost" of the gift to your estate and heirs is often relatively small.
Retirement plan assets include assets held in Individual Retirement Accounts and assets held in accounts under 401 (k) Plans, Profit Sharing Plans, Keogh Plans and 403 (b) Annuity Plans. Income taxes on retirement plan assets are deferred but not avoided. Retirement plan assets owned at death in a taxable estate are subject to estate tax at federal rates of up to 46% (for 2006). What’s more, upon receipt of the retirement plan assets by a child or grandchild, they are subject to income tax at federal rates up to 35% in addition to applicable state taxes. As a result, the combined taxes on retirement plan assets can exceed 65% of the total value of the account(s).
Retirement plan assets left to Carolina qualify for the unlimited estate tax charitable deduction, and they are not subject to income tax when received by Carolina. As a result, the retirement plan assets are available in their entirety to support your favorite programs at Carolina. The bottom line is that for each $100,000 in retirement plan assets you leave to Carolina, the effective after-tax “cost” to your estate and heirs could be $35,000 or less.
Naming Carolina as a beneficiary of your retirement plan account is one of the easiest ways to make a planned gift, and in many ways is similar to making a bequest. Simply call your plan administrator and request a Change of Beneficiary form. In the beneficiary section, list ‘The University of North Carolina at Chapel Hill Foundation, Inc.’ as the primary beneficiary for all or a portion of the account. If you would like your gift directed to a specific school, unit or department, just include “for the benefit of . . .” after the Foundation’s name. Then return the form to your plan administrator and send a copy to us for our records. That’s it.
Another Alternative: Charitable remainder trusts provide income to one or more beneficiaries for life with the remainder interest going to charity upon the death of the income beneficiaries. A great way to fund a charitable remainder trust is with retirement plan assets owned at the time of death.
The decedent’s estate receives an estate tax deduction for the present value of the University’s interest in the retirement plan assets. The trust itself is tax-exempt so no income taxes will be due when the retirement plan assets are received by the Trustee. A charitable remainder trust funded with retirement plan assets is a great way to reduce estate taxes, provide a lifetime income stream to one or more beneficiaries and to make a gift to Carolina – all at the same time. When the trust terminates, the remaining assets will be paid to the University and used for the purposes designated by the donor.
If you have questions about any of these gifts, please contact:
Candace Clark
Associate Director of Planned Giving
Office of University Development
candace_clark@unc.edu
(919) 962-3967
