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A Guide to Creative Giving
By Mike Shaw
08.01.01
The INTERNATIONAL MYELOMA FOUNDATION ("IMF") was founded in 1990 to provide aid to the research of multiple myeloma as well as public and patient information and support. That purpose continues today and it has continued only because of the financial and moral support of multiple myeloma patients, their families, and concerned corporate and individual donors.

IMF relies on private gifts to fund its activities. Such contributions provide nearly all of the operating budget. Private gifts will continue to be critical as the IMF strives to meet its purposes in the face of increasing costs.

In addition to satisfying your own philanthropic goals, your gift to the IMF can offer significant financial planning opportunities. Of the many benefits, perhaps the greatest is the income tax charitable deduction which reduces your taxable income. Another advantage is the avoidance of capital gains on the transfer of appreciated assets to the IMF. Some gift arrangements can actually increase a donor's income. Many gift techniques have estate planning benefits as well.

There are many ways to support the IMF and it is important for you to find the method(s) that meet your needs while accomplishing your wishes. We hope that this document will be helpful in your gift planning.

Gifts of cash

The simplest way to make a gift to the IMF is to write a check made payable to the "International Myeloma Foundation". A contribution may be designated for a specific program, or it may be undesignated, available for meeting the IMF's most pressing needs. Please indicate the purpose of your gift both on the check and in a cover letter.

Gifts of cash may be deducted up to 50 percent of your adjusted gross income in a given year. If gifts exceed this amount, you may carry-forward the excess deduction on your income tax returns for up to five additional years.

Cash gifts are considered transferred on the date they are hand-delivered or mailed. For example, although a year-end gift might not be received by the IMF until January, it is still deductible for the previous year if it has a December postmark.

Gifts of securities

Giving stocks and bonds that have increased in value (and that you have owned for more than one year) provides greater tax benefits than giving cash. Not only is the fair market value of the securities deductible (subject to the applicable limitations), but the donor also avoids paying capital gains tax on the appreciation.

The easiest way to transfer securities is to instruct your broker by letter. A sample letter is available from the IMF.

A gift of securities is valued by taking the average of the high and low sales prices of the stock or bond on the date of the gift. Because of this averaging, the value of your gift may differ slightly from the actual sale price when the IMF sells them. You are entitled to deduct the gift value of securities for up to 30 percent of your adjusted gross income in the gift year. Any excess can be carried over for an additional five years.

Securities that have decreased in market value can also make a beneficial gift to the IMF. First, sell the securities, then give the IMF the cash proceeds. You can then deduct your capital loss to offset capital gains plus up to $3,000 of your other income in the year your gift is made.

Gifts of real estate

A gift of real estate to the IMF provides a charitable deduction for the full fair market value of the gift--up to 30 percent of your adjusted gross income if you have held it for more than one year--with a five-year carry-forward provision for the excess. A donor generally is not liable for capital gains tax on the appreciated value of the property.

You will need to have your gift of real estate appraised by an independent appraiser to determine the value of your deduction. Most gifts of real estate are sold to provide funds for current needs. If the property is sold within two years of the date of gift, the charitable deduction is limited to the sale amount. Properties to be held by the IMF for a longer period of time would usually be accompanied by an endowed fund to provide for their maintenance.

Gifts of objects

Donation of art, books, equipment and furniture are sometimes appropriate gifts to the IMF. Before making a gift of tangible personal property, however, please consult with the IMF to confirm that your gift can be used as you wish while also meeting institutional needs.

Gifts of tangible personal property entitle you to a deduction of the property's full fair market value--up to 30 percent of your adjusted gross income--as long as the object is related to the IMF's purpose and you have held it for more than one year. If your gift is likely to be valued at more than $5,000, you must have it appraised by an independent appraiser within 60 days of the gift's transfer to the IMF to determine the value of your deduction. Be sure to use IRS Form 8283 to document your gift. But regardless of its value, the IMF is not permitted to assign a value to your gift of property.

You may also give personal property that is unrelated to the IMF's purpose. In this case, your deduction equals your cost basis in the property or its fair market value, whichever is less, up to 50 percent of your adjusted gross income with the same five-year carry-forward provisions.

If the IMF sells the object within two years of the date of gift, then the charitable deduction is limited to the sale amount.

Gifts of life insurance

Naming the IMF as owner and beneficiary of a paid-up life insurance policy entitles you to a deduction equal to your cost basis in the policy, or its replacement cost--whichever is less. Naming the IMF as owner and beneficiary of a policy that is not fully paid-up provides the donor with a tax deduction approximately equal to the policy's cash surrender value.

Current and endowed gifts

Current gifts to the IMF enable a donor to respond to areas of compelling need. Endowed gifts perpetuate a donor's support of the IMF. The gift is left intact, while income from the investment of the gift provides permanent support for an IMF program, such as a research grant. Endowed gifts can be directed either to an existing area of special need or to a fund designated by the donor for a particular use.

The IMF welcomes the opportunity to work with donors to establish specific criteria for current and endowed gifts. A program or service could be named for a generous donor, or for those they have chosen honor.

Family gift accumulation account

In a family gift accumulation account, a donor puts dollars into a restricted account each year for a set period of years. The IMF invests the money in that account.

At the end of the term of years, the donor has made a larger gift than would be otherwise possible because of the earnings on the account.

Gifts with income retained for life

Gifts that provide income to the donor are excellent vehicles for retirement planning. These gifts allow you to make a significant contribution to the IMF and receive a number of benefits:

  • Income payments for the rest of your life and the life of your spouse
  • Elimination of capital gains tax on appreciated property
  • A potential increase in income
  • An income tax deduction
  • Potential investment diversification
  • Professional management
  • Reduction of estate taxes and probate costs
  • The satisfaction of directing the purpose of your gift, and
  • The fulfillment of supporting the IMF during your lifetime

We are pleased to work with your financial, accounting and legal advisors, and to provide illustrations of income arrangements that are tailored to your individual needs.

Gift annuities

The gift annuity, which offers fixed income payments for life, is the simplest of life-income plans, and is a contract between you and the IMF. Part of each income payment is tax free, part is ordinary income, and--if the annuity is funded with appreciated securities--part is treated as capital gains income.

Your income tax deduction is based on the amount of your gift, the ages of the income beneficiaries and the income received. You may increase your after-tax income, particularly is appreciated stocks are used to fund the gift annuity. A gift annuity may be established with a minimum of $25,000. Since additions cannot be made to a gift annuity, you may establish more than one.

Pooled income fund

A pooled income fund works much like a mutual fund, and requires a smaller initial investment than other income gifts. (A gift of $10,000 is the minimum amount to participate in the pooled income fund, with additions of as little as $5,000). The primary investment objective of the fund is to balance income with growth.

Your gift to the fund is invested with money contributed by other donors, and you receive a proportionate share of the fund's net income each year. The income you receive is based on the fair market value of your gift to the fund and is taxed as ordinary income. Your income tax deduction is based on the gift amount, the ages of the beneficiaries, and the highest annual rate of return of the fund during the previous three years.

Annuity trusts

An annuity trust is separately invested and provides a fixed income. An annuity trust is valued when the trust is established, and at least five percent of this amount is distributed quarterly to you or another beneficiary. You are not able to make additional contributions to an annuity trust, but you may establish a new one.

Your income tax deduction is based on the amount of the gift, the ages of the income beneficiaries, and the percentage of trust assets received as income. Generally, the more income you receive, the lower your tax deduction.

Unitrusts

A unitrust is also separately invested and provides income that may vary from year to year. The unitrust is valued the first business day of every year, and a percentage of the trust is distributed quarterly to you or another beneficiary. Unitrusts may also be established for $100,000, and additional contributions can be made to a unitrust with a minimum of $10,000. As with annuity trusts, your income tax deduction is based on the amount of the gift, the ages of the income beneficiaries, and the percentage of the trust assets received as income.

Term-of-year trusts

A term-of-years trust is a type of unitrust or annuity trust that pays you income over a period of years, rather than over a lifetime. This kind of trust can provide either fixed or variable income. A term-of-years trust is often used while children are in college and extra income is needed. Term-of-years trusts require a minimum gift of $100,000.

Gifts that keep property in the family

With a lead trust, you make a gift of income to the IMF for a term of years. After the term is completed, the principal may be passed on to your children or to your estate.

Leads trusts can provide a means of directing assets to children and other heirs in a cost-effective way. Lead trust do have a number of income and gift tax consequences, however, which should be considered before making a gift.

Bequests

Both large and small bequests can play a major role in the IMF. A bequest to the IMF can be included in the body of your will or in an addition to it (a codicil). As with lifetime gifts, a specific purpose may be designated for the use of your bequest. Testamentary gifts to the IMF are typically deductible for estate tax purposes and may be made in several ways:

  • Residuary bequest -- You may state that all--or a portion--of your estate be given to the IMF after specific amounts are distributed to other beneficiaries.
  • Specific bequest -- You may stipulate that a certain percentage of your estate, a certain dollar amount, or particular securities or other assets be given to the IMF.
  • Testamentary charitable trust -- You may establish a unitrust or annuity trust for the benefit of specific beneficiaries through your will. The trust principal is transferred to the IMF only after the death of the last trust beneficiary.

Additional information

This document is provided for your information and contains a variety of gift-planning scenarios. These scenarios may or may not apply to your particular financial circumstances. It is not the purpose of this document to provide legal, investment or tax-planning advice. Prior to acting on these ideas, you should seek professional counsel from your lawyer, accountant or financial advisor.

Giving wisely requires adequate information. If you have any questions about ways of giving to the IMF, or would like more information about gift planning, please contact:

Heather Ortner
International Myeloma Foundation
12650 Riverside Drive, Suite 206
North Hollywood, CA 91607
Phone: (818) 487-7455
Fax: (818) 487-7454
E-Mail: TheIMF@myeloma.org


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