This section describes some of the types of estate gift planning available to you. We hope this will help you in thinking about your own estate planning. It is always wise when making plans for your estate to consult with a tax accountant or attorney experienced in estate planning.
For many members and friends of Ananda, the most practical and satisfying way to provide for Ananda is by including the Janaka Foundation in your will. A bequest (gift) made through a will allows you to retain full control of your assets, while providing the satisfaction of knowing that Ananda will eventually benefit from your generosity.
A gift made through your will may be a percentage of the total estate or a specific asset or amount. It may also be all or part of what is left after all specific bequests have been fulfilled. There are some limits on amounts that can be removed from your taxable estate via charitable gifts for Federal tax purposes. It is wise to seek experienced legal advice in drawing up a will and to be sure to keep it up to date. This process is an opportunity to provide a substantial gift and estate tax savings for your heirs, as well as a gift that can help shape Ananda’s future.
While bequests can be dedicated to specific areas of interest within Ananda’s work, the most effective and useful gift is one that is unrestricted as to use. Such a gift allows the Janaka Foundation Board to direct it where it is most needed at the time it is received.
For more information, please see our Will Kit.
Cash & Appreciated Asset
Charitable giving usually begins with outright gifts of cash or the transfer of an asset. If you itemize deductions on your Federal income tax return, your outright gift of cash is fully deductible. Generally, you can deduct up to 50% of your adjusted gross income. For gifts of appreciated non-cash assets you can deduct up to 30% of your adjusted gross income. If the amount of your charitable gift exceeds this limitation, you may deduct the balance of your gift over the next five years.
If you have decided to make a gift to the Janaka Foundation, it could be advantageous to donate appreciated assets (stocks, bonds, mutual funds and other properties) instead of cash. This method offers two tax advantages. First, you receive an income tax deduction for the full market value of the stock on the date of the gift. Secondly, most donors avoid liability for capital gains taxes otherwise due on the sale of the assets.
Retirement Plan Beneficiary
Individual Retirement Accounts (IRAs) and pension or profit sharing plans may be appealing sources of charitable gifts. Naming the Janaka Foundation as the beneficiary of your IRA or other retirement plan enables you to continue to use the income from the retirement account for as long as you need it, and then allows Ananda to benefit from it after you are no longer physically present.
Retirement plans in which you have accumulated assets will be subject to estate tax at your death as well as income tax when received by your heirs. These taxes in many cases can total more than 85% of the plan assets. Using these assets to fund charitable gifts can offer an outstanding benefit to a non-profit organization at a very small cost to your heirs, while eliminating significant taxes.
Life Insurance Policies
Life insurance has a variety of creative uses in charitable giving. Here are some of the ways it can be used to support Ananda’s work.
Donate a fully paid-up policy no longer needed for family protection. When you transfer ownership to the Janaka Foundation, you get a deduction for an amount roughly equivalent to the surrender value. Janaka may surrender the policy at once or hold it until maturity. The insurance policy is removed from your estate for tax purposes.
Name the Janaka Foundation as owner and beneficiary of an ongoing policy. In this case, if the Janaka Foundation is named as an irrevocable owner and beneficiary, you may deduct each future premium as a charitable gift, as well as the amount of the approximate surrender value of the policy.
Buy a policy, designating the Janaka Foundation as the owner and beneficiary. Your annual premium payments then become tax deductible (you make the payments in the form of annual gifts to Janaka). Upon your death,the Janaka Foundation receives the face value of the policy plus accumulations (if any). Or, if you wish, you may purchase a single-premium policy and deduct the full premium.
Charitable Gift Annuity
A Charitable Gift Annuity is established through a legal contract and is funded by the irrevocable transfer of cash or other assets (such as stocks, bonds, etc.) to a non-profit organization. In exchange the donor receives a fixed annual income for life. The amount of the annual income is determined by the total amount of the gift and by the age of the donor. You are also entitled to take a tax deduction on a portion of your total gift amount as well as on a portion of your annual payments.
A Charitable Gift Annuity can be established through the Janaka Foundation by residents of California who are 65 years of age and above and who donate a minimum of $10,000.
Outright gifts of real estate may provide substantial tax benefits for your estate. A residence, farm, or vacation home that you have owned for a long time may have appreciated so much in value that its sale would result in a burdensome capital gains tax. The Janaka Foundation, as a tax exempt entity, would not have to pay capital gains tax when the property is sold. Donating the property to Janaka provides an immediate income tax deduction for you, while greatly assisting Ananda’s work.
It is also possible to make provisions for a life estate agreement in which you deed a residence or farm to the Janaka Foundation, continue to use it during your lifetime, and receive a charitable tax deduction in the year the gift is arranged. You would continue to take care of the property, pay the property taxes, and even receive any income it generates. Because you have made a gift of the property by deed, it will not pass through your probate estate at death when the Janaka Foundation receives the property.
Revocable Living Trust A Revocable Living Trust offers a way for you to manage property and income during your lifetime as well as to distribute your assets after your death. This type of trust is revocable, meaning you may change or cancel it at any time. You can also arrange to have current gifts to the Janaka Foundation made through the trust.
Just as in a will, a bequest to the Janaka Foundation through your Revocable Living Trust may reduce estate taxes. In the event of your death, all proceeds of the trust will be distributed outside of your estate, avoiding lengthy and often expensive probate procedures.
Charitable Remainder Trust A Charitable Remainder Trust allows you to make a gift today and receive annual payments for a set period of years, or for the rest of your life. When the beneficiaries of the trust die, what is left in the trust (the remainder) is given to the Janaka Foundation and any other charitable organizations you have listed as beneficiaries of the trust.
Charitable Lead Trust If you are concerned about keeping your estate intact for your heirs, but do not necessarily need the income from the assets during your lifetime, you can set assets aside in a Charitable Lead Trust. This will allow the annual income to be given for charitable use for a period of years or for the lifetime of the donor. When the trust ends, the remaining principal plus any appreciation and undistributed income are distributed to the designated beneficiaries. An added advantage is that the gift to your heirs is valued at a reduced gift and estate tax cost. The discounted present value applies, no matter how much the principal appreciates during the life of the trust.
There are many forms of trusts. We suggest that you seek the advice of a competent tax advisor or a lawyer for information that is specific to your needs.