Gift Giving Possibilities that Benefit Both the Giver and the Gifted

There are a wide range of giving options available in this country that have never before been offered by The Gangaji Foundation. These options benefit both the Foundation and the donor, and in many cases make it possible for those who cannot make a large outright gift to contribute substantially by means of a deferred gift.

The purpose of this paper is to announce these new gift-giving options and help you select the type of gift which best suites your circumstances, considering your age, your tax bracket, your present financial situation, and your future financial needs and plans.

One way to contribute is simply to make an outright gift to the Foundation, to be used for the many valuable programs offered and to provide general support. A second option would be to make a deferred gift for the Foundation's ultimate use, using a plan that assures you a current tax deduction plus other long term benefits. A third option you may want to consider is a bequest in your will.

Step 1: The Benefits

Your commitment to helping the Foundation and supporting satsang with Gangaji around the world is your most important reason for a contribution. Looking at the ways you will benefit financially from your contribution will be useful in choosing the type of gift that is ideal for you.

Possible ways that you benefit are:

Income tax savings. To encourage private contributions, our government allows charitable deductions on your tax return, provided you itemize.
Reduction of estate and probate costs. Gifts made either now or after your death avoid federal estate tax without any percentage limitations.
Life income plans. The federal government lets you designate your gift now and secure a current income tax deduction while you receive a life income for yourself and also for your spouse.
Unlocking appreciated investments. You may have assets that have grown in value but have a low yield now. You can contribute these to a plan that provides you an income for life while not incurring income tax on your capital gains.
Increasing your yield. Suppose you have low-basis securities that you want to divest. If you change low-basis securities for others of a similar nature, your yield on the new investments after commissions and capital gains tax will probably by less. However, with a life income plan, the tax savings resulting from your charitable deduction and capital gains tax savings can increase your effective yield.
With a life income plan, the trustee you select handles the investment responsibilities associated with the assets you contribute.

Step 2: An Outright Gift vs. a Deferred Gift

Outright contribution. This involves an immediate transfer of cash or property to the Gangaji Foundation. An outright contribution allows the Foundation to put your gift to work immediately to support our various programs and pressing needs. An outright gift also promises you the personal satisfaction of seeing the results of your generosity. The most common way to make a gift is by simply writing a check.

Other options to consider are: Gifts of securities, personal property, real property or a life insurance policy have added benefits. If the value of the property has appreciated, you can benefit from the complete avoidance of tax on the capital gain.

Deferred Gift. You may feel, like many donors, that you cannot make a major outright contribution at this time, as much as you would like to do so. Perhaps you may still need the property or are dependent upon the income it produces. If so, we suggest you consider a deferred gift. There are two types of deferred gifts:

1) a bequest in your will or a provision in a trust that distributes your assets to the Foundation after your death, and

2) a trust that assures you either life use or life income from the property.

Bequest. A bequest to the Foundation, whether it be cash, securities or real property, can reduce the taxes on your estate. You can designate your bequest to support a specific program offered by the Foundation, or give it as an unrestricted gift, thus allowing us to apply the funds towards our most pressing needs.

Charitable Trust. A trust is a planned gift that benefits both you and the Foundation. Along with an immediate charitable deduction, you can assure an income for yourself (and even another person) for life. After your death, the remaining funds become the property of the Foundation.

Here is how it works. You make an irrevocable transfer of money, securities, or other property to a trust, naming the Foundation as the only ultimate beneficiary or as one of several qualified charitable beneficiaries. The trust is designed to pay you a life income, based upon either a set dollar amount or a fixed percentage of the trust assets market value as revalued annually. If you'd like to receive a set dollar amount each year from a charitable remainder trust, regardless of any fluctuations in value of the trust investments, then you may want to choose an annuity trust. However, if you are confident that the value of the trust assets is more likely to increase than decrease, or if you're concerned about inflation eroding the value of a fixed income, then a unitrust may be for you. You also have greater flexibility with a unitrust, as you are allowed to add to the principle of a unitrust.

Suppose you would like to give us an income from certain assets for a term of years, but ultimately want those assets to pass to your family. This can be done with a charitable lead trust. If your estate is sizable, this plan is especially desirable because of potential savings on gift and estate taxes that such a gift provides.

Step 3: Fit your gift to your age, tax bracket and circumstance.

It is wise to consider your stage in life, finances and tax considerations when deciding upon the type of gift to make to the Foundation. With so many planned giving vehicles available, how do you decide? The table below provides information on the most common gift options. (These are general guidelines - your personal circumstances may suggest a different approach.)

Age. Consider a gift of cash, securities, or real property to receive an charitable tax deduction. Long-term appreciated securities or real estate property can give you a double tax benefit: you can deduct the property's full present fair market value rather than its lower cost basis while avoiding tax on the capital gains.

In addition, no matter what your age, consider a bequest in your will. The assets/property will be yours as long as you live. Upon your death your estate will be entitled to an estate tax deduction.

Still Employed. If you're a high earner in your 40's and 50's and are restricted in the amounts that you can contribute to your qualified retirement plan, a special type of unitrust — Net Income Plus Make-up Unitrust — may act as a supplemental retirement plan for you. You place any amount you wish into a charitable remainder unitrust. The assets are invested mainly for growth during the years you are employed, and you receive as income only the actual yield, even if it's below the stated payout percentage. Upon retirement, the assets are reinvested mainly for income, and you receive annually the stated percentage, plus extra income to make up for the shortfall in earlier years between the stated percentage and the actual yield.

An example may illustrate this more clearly. David, age 45, decides to contribute $10,000 a year to a charitable remainder unitrust for the next 20 years, to be invested primarily for growth. At age 65 he wants an 8% payout. In the meantime, because the unitrust is tax-exempt, the trustee can invest and reinvest without concern for taxes on capital gains. At his retirement, David will receive payments each year at the rate of 8% of the trust assets, which are re-valued each year.

Retired, ages 60-75. For anyone with a healthy life expectancy, a unitrust provides over a longer term a hedge against inflation, because the payout percentage is based on the market value as re-valued annually. (Assuming the conditions of a gradually rising market that exceeds periodic slumps, as has prevailed in the last decade.) If you are more concerned about a declining market, an annuity trust is a better hedge, since you will be receiving a fixed dollar amount for life. Moreover, an annuity trust provides a higher deduction than a unitrust, based on the present value of the same contribution.

A two-life annuity trust or unitrust is the answer for a married couple who wants to assure continuation of annuity payments of the survivor.

Assuming you receive more income than you need, suppose you want to leave your large estate to your children absolutely free — or at greatly reduced — federal gift and estate taxes, and you also want to support the Foundation through trust payments for a fixed number of years. If your situation is similar to this one, you may consider a lead trust. Usually this kind of lead trust does not produce an income tax deduction, but it does create a substantial gift or estate tax deduction. (From this standpoint, a lead trust is attractive for an individual with an estate of more than $600,000 or a married couple with combined estates of more than $1,200,000.)

Did you purchase life insurance policies years ago to provide financial security for your family, but now find that their needs can be met by other resources? You can realize valuable tax savings by transferring ownership of these policies to the Gangaji Foundation, making the Foundation the beneficiary. (If premiums remain to be paid, the income tax deduction is generally slightly above the cash surrender value of the policy. If the policy is paid up, the deduction is generally its replacement cost. However, the income tax deduction can never be more than the total amount invested in the policy.)

Over age 60 and a grandparent. If you want to put your grandchild through college and at the same time support the needs of the Foundation, an education unitrust can qualify for a substantial charitable deduction by making the funds remaining (after the cost of the education has been covered) payable to the Foundation. The unitrust is established for a number of years, making payments towards your grandchild's education at regular intervals. (The income is taxable to the student, who is usually in a low tax bracket and will pay little or no tax.) This income can be used to pay tuition, books and housing costs. Gradual funding of the unitrust over the years can avoid the federal gift tax.

Step 4: Contact the Foundation

Decisions regarding the type of gift annuity or charitable trust that best fits your circumstances should be made in consultation with your accountant or financial advisor. We are also available to assist you in any way with this decision. For more information please contact Paldrom at paldrom@gangaji.org.