• Cash
• Stocks
• Real Estate
• Appreciated Personal Property, etc.

or

Later - through a planned gift

Types of Assets for Charitable Gifts

CASH

Cash gifts enable donors to claim a current income tax deduction of up to 50 percent of their adjusted gross income in the year the gift was given with a five-year carry-forward period.

APPRECIATED SECURITIES

Donors who contribute long term-appreciated securities to the Foundation get a double federal tax benefit.

Gifts of appreciated securities are deductible at their full market value if they're held longer than twelve (12) months and the donor pays no capital gains tax on the stock’s appreciation. The fair market value of the donated stock can be deducted up to 30 percent of the donor’s adjusted gross income, with a five-year carry-forward if required

CLOSELY HELD STOCK

Closely held stocks are shares in a privately owned business which can be contributed to the Foundation entitling the donor to a deduction for the appraised fair market value. The donor also avoids the potential capital gains tax on any increase in the value of the stock when gifting them to the Foundation to fund an endowment.

Subsequent to the gift, the Foundation may sell the stock to the corporation or to other shareholders for cash. There can be no prior agreement between the charity and a potential buyer before the gift is made.

The donor is entitled to a deduction for the full value of the stock up to 30 percent of the donor’s adjusted gross income. A “qualified appraisal” is required if the claimed value exceeds $10,000.

REAL ESTATE

A gift of real estate must be held more than one year to be deductible at fair market value and is deductible for up to 30 percent of the donor’s adjusted gross income. The deduction must be in the year of the gift with a five-year carry-forward period if required.

For real estate held less than one year, the charitable deduction is limited to the property’s cost basis.

Gifts of real estate require certain procedures, including the following:

• A site visit to the property
• An environmental assessment
• A qualified appraisal
• A copy of the latest tax assessment
• Determination as to whether the property has a mortgage

Gifts of real estate may be contributed as outright gifts, as a retained life estate, or as a contribution to a charitable remainder trust, or may be gifted to the Lubbock Area Foundation through a donor’s will.

TANGIBLE PERSONAL PROPERTY

Gifts of tangible personal property (art, antiques, collectibles, jewelry, etc.) when gifted to the Foundation, qualify for a charitable tax deduction at the donor’s cost in the property.

Life Income & Other Planned Gifts

Life income and other planned gifts create “win-win” opportunities for your clients and local charities. These may be created during your clients lifetime, or by bequest.

A general overview of life income and planned giving options follows:

Charitable Gift Annuities

The Foundation offers charitable gift annuities which make it possible for donors to support the community in the future while providing lifetime income for themselves.

A charitable gift annuity is a simple contract between the donor and the Lubbock Area Foundation. It gives donors the opportunity to make a future charitable gift while providing income during their lifetime. Under this contractual arrangement, donors transfer assets to the Foundation in exchange for a commitment by the Foundation to pay them (and a second annuitant, if the donor so chooses) a fixed and guaranteed payment for the remainder of their lifetime(s). Upon the death of the annuitant(s), the remaining principal is retained as a named endowment within the Foundation to carry out the donor’s charitable intentions.

Charitable Remainder Trust

A charitable remainder trust pays to the donor (and/or another beneficiary) either a fixed or variable income for the beneficiary’s life, or for a fixed term of years, or a combination of the two. When the trust term expires, the remainder is distributed to a charitable beneficiary. By designating a new or existing fund within the Foundation as the beneficiary, donors increase the flexibility of the charitable remainder.

A charitable remainder trust can be set up during one’s lifetime or through a will. If highly appreciated assets are contributed to the trust, the trustee may be able to sell them without paying capital gains tax. Low-yielding assets can be sold and the proceeds reinvested to produce higher income for the income beneficiary. Donors can receive a charitable income tax deduction depending on their age, length of the trust term, payout rate, frequency of payments, and applicable federal discount rate.

Charitable Lead Trust

A charitable lead trust is the reverse of a charitable remainder trust through which annual payments are made to a charitable organization or fund within the Foundation for a number of years, then the assets are returned to the donors or to another non-charitable beneficiary. This type of trust can be created by a trust agreement or a will.

A charitable lead trust created in a will can substantially reduce the estate taxes payable at the time of death because of the charitable deduction for the Foundation’s or other charitable organization’s interest in the annuity or unitrust payment. The value of the charitable interest depends on the length of the trust and the amount or percentage to be paid out each year.

Life Estates

Life estates provide a way for your client to gift a residence or farm to the Lubbock Area Foundation. Your client is entitled to a charitable income tax deduction for the present value of the remainder interest while relieved of the potential capital gains tax on the property’s appreciation. The donor deeds the property to the Lubbock Area Foundation and retains the right to live in the home or on the farm until death. When the life estate terminates, the real estate is sold and the proceeds are contributed to establish or add to an existing fund in the Foundation as directed by the donor.

Life Insurance

Donors may find that they have life insurance policies that are no longer needed. By gifting such policies to the Lubbock Area Foundation, they can establish an endowment to support the causes and charities important to them. Policies are excellent ways to make charitable gifts.

Generally, donors receive a federal income tax deduction for the amount of the cash surrender value in the year of the irrevocable transfer of the policy to the Foundation. Any type of fund may be established with an insurance policy. Life insurance enables donors to make a much larger gift than they might have thought possible, and a gift of insurance may not reduce their current income.

Mutual Funds

These funds can be an excellent asset to contribute to the Foundation. Gifts of mutual funds are deductible at their fair market value up to 30 percent of the donor’s contribution base, with a five-year carry-forward if required.

Qualified Retirement Plan Assets

Retirement plan assets can make excellent charitable gifts. Qualified retirement plans enjoy favorable tax treatment prior to retirement, but are severely taxed at the death of the plan participant. Plans may be subject to income tax and estate tax which can exceed 70 percent or more but these may be minimized or avoided if the plan participant makes a gift to charity at death by beneficiary designation. In many cases, it may be advantageous to leave other assets to heirs and to name a fund in the Foundation as the beneficiary of the retirement plan.

Forming a Supporting Organization

Gifts to a supporting organization of the Lubbock Area Foundation are fully deductible at the current fair market value, including publicly traded or closely held stock.

Supporting organization status (detailed in Internal Revenue Code Section 509(a)(3) and the related regulations) gives an organization many of the advantages of private foundation status. A supporting organization is a separate entity from The Lubbock Area Foundation, has its own board of trustees, makes its own grant decisions, and has its own Section 501(c)(3) tax-exempt status from the Internal Revenue Service.

The favorable tax status granted to supporting organizations results from the relationship between each supporting organization and the Lubbock Area Foundation, a public charity.

When Your Client is a Corporation

Corporations wanting to simplify their charitable giving may find that working through the Foundation can save them significant administrative expense and help focus their charitable giving.

By setting up a fund in the Lubbock Area Foundation, staff is freed from the administrative details of charitable giving and may choose their level of involvement in grantmaking. The Foundation staff provides familiarity with this area’s non-profit organizations, grantmaking services at a low cost and handles all administrative paperwork, check writing, and investment oversight.

Through a corporate donor advised fund a dependable stream of income to meet the company’s charitable obligations can be provided, even during years when cash flow is tight. Additions to the fund may be made at any time. A corporation can establish a fund and ask the Foundation to distribute either principal, income, or a combination of both at varied times throughout the year. The corporation may make suggestions to the Foundation concerning specific grantees; it may ask the Foundation to follow specific guidelines in making grants from its fund; or it may give the Foundation full discretion over disbursements.