An endowed fund can be established with a minimum gift of $10,000.
The John Bapst endowment, carefully managed by a committee of the Board, has assets of over $800,000. A maximum of 5% of a portion of that corpus is used annually for scholarship purposes, helping students both to afford a John Bapst education and to pursue their educations in college. Unrestricted gifts to the endowment account for nearly half of the total amount. A 4% payout on that portion of the endowment supports annual operating expenses at the school each year.
The term “planned gift” means a gift deferred until some time in the future. The John Bapst endowment has grown over the years most often thanks to planned gifts. The following are examples of the most common planned gift vehicles.
The most common endowment gifts received at John Bapst are bequests. A bequest is a provision in your will or living trust that leaves some portion of estate assets to John Bapst. Bequests to charitable organizations, such as John Bapst, are 100% tax-deductible. As with current gifts, bequests may be designated either as unrestricted – giving the school the most flexibility – or restricted; that is, designated for a specific purpose. The following are sample provisions for including John Bapst in your will:
- “I give and devise the sum of $_______ (or ______percent of my net probate estate) to John Bapst Memorial High School of Bangor, Maine, for its general purposes. ” or
- “I give and devise the sum of $_______ (or ______percent of my net probate estate) to John Bapst Memorial High School of Bangor, Maine, with the income only of such bequest to be used on an annual basis to provide scholarships to graduates of the school who are enrolled on a full-time basis in a 4-year, undergraduate program for the study of English Literature, to be awarded at the discretion of the Head of School based on demonstrated academic excellence.”
Charitable Remainder Trusts
A charitable remainder trust is an irrevocable trust arrangement in which a donor transfers assets (typically cash or securities) to a trustee who invests the assets and makes annual payments to one or more beneficiaries, frequently the donor and his or her spouse. The trust usually terminates upon the death of the last surviving income beneficiary but can also terminate after a period of years identified in the trust document. When a donor creates a charitable remainder trust, he or she receives an income tax deduction equal to a portion of the value of the trust assets. When the trust terminates, the remaining assets are distributed to John Bapst.
There are two different kinds of charitable remainder trusts: charitable remainder annuity trusts and charitable remainder unitrusts. Under a charitable remainder annuity trust, the annual payments to the income beneficiaries are a specific dollar amount that does not change from year to year. In contrast, payments from a charitable remainder unitrust are determined based on a stated percentage of the value of the trust assets valued on an annual basis. Therefore, unlike an annuity trust, payments from a unitrust will fluctuate from year to year depending on the value of the trust assets.
Charitable Lead Trusts
A charitable lead trust is another irrevocable trust arrangement similar to a charitable remainder trust. The difference is that the annual payments during the term of the trust are made to John Bapst rather than an individual. When the trust terminates, the remaining trust assets are distributed back to the donor or, more commonly, the donor’s children or other members of his or her family.
Gifts of Appreciated Securities
A gift of appreciated securities generally qualifies the donor for an income tax charitable deduction equal to the value of the gifted securities. It may also avoid the long-term capital gain tax on the donor’s unrealized gain. Usually a sale of appreciated securities results in a tax on your gain. However, if you give those same appreciated securities to John Bapst, there is no tax on your gain, even though your “profit” is counted as part of your charitable deduction.
Ownership of individual life insurance policies, either new or no longer needed, may be transferred to John Bapst, with the school named as a beneficiary. As the donor of the policy, you remain the insured and regardless of whether the policy is fully paid up, you may claim an income tax deduction for the cash value of the policy and any subsequent contributions toward premium payments. In addition to outright gifts of life insurance, you can also retain ownership of a life insurance policy and name John Bapst as the beneficiary. Upon your death, John Bapst will receive full policy benefits, which will be used for the purposes you direct.
Retirement Plan Assets
Another increasingly popular way to give is by designating John Bapst as the beneficiary of a qualified retirement plan (e.g., an IRA or 401(k) plan). Because these assets are subject to both income and estate taxes upon the owner’s death, a significant portion of the assets held in a qualified retirement plan could end up being paid in taxes rather than to the owner’s designated beneficiaries. Using these assets to fund a gift to John Bapst will generate an estate tax charitable deduction and John Bapst will not have to pay income tax on the assets when they are received.
Remainder Interests in Residence
If you are considering a gift of your personal residence but wish to live there during your lifetime, a gift of the property with a retained life interest is one solution. Transferring the property to John Bapst, while reserving a life estate for you and/or another person, provides you with a current federal income tax charitable deduction. This arrangement also results in the avoidance of any capital gains tax on the appreciation of the property.
Works of art, rare books, antiques, intellectual property, and other tangible and intangible gifts offer important tax advantages. The allowable deduction for this type of gift depends upon its related use and appraised value.