Deferred Gifts

Tags Gifts

Deferred Gifts

Deferred gifts, although given today, will not realize their benefit to the University until some years into the future. Large, deferred gifts have a major impact on the University and its fundraising mission. We ask all deferred gift donors to make their gifts to UGAF. Since deferred gifts are integrally connected to the donor’s financial and/or estate plans, deferred gifts are often referred to as planned gifts.

Life income gifts and estate gifts are two general categories of deferred gifts. Life income gifts provide either an income or the use of some assets for the duration of the donor’s life. Estate gifts are normally associated with donor’s wills or final distribution of estates. All donors who have documented a deferred gift to UGAF are eligible for membership in the Heritage Society.

Gifts with Retained Life Income Overview

The donor may wish to make a substantial capital gift to the Foundation but feel that he or she cannot afford to give up the annual income produced by the property. UGAF offers the following ways to make such a gift while retaining an income for life.

The benefits vary, but all arrangements have the following attractive features:

  • Satisfaction of providing for the University's future.
  • Income for life is paid to the donor and/or another beneficiary such as a spouse or another family member.
  • An income tax charitable contribution deduction for the portion of the transfer that represents the gift to the Foundation.
  • Elimination or deferral of some or all capital gains tax if the gift is in the form of securities or real estate that has been appreciated in value.
  • Potential for increased income.
  • Assets are professionally managed for the donor.
  • Reduction or elimination of estate and inheritance taxes.

Pooled Income Funds

The UGAF Pooled Income Fund operates much like a mutual fund: individual contributions are "pooled" for investment purposes. In return, the net income of the entire fund is distributed based on the number and value of "shares" held by each donor. All gifts are irrevocable and qualify for an income tax charitable contribution deduction, the amount of which is based on the age of the beneficiary(ies) and the recent performance of the fund.

A donor must make a minimum initial contribution of $5,000 (additional contributions of $1,000 or more may be made), and a maximum of two beneficiaries may receive the life income (each beneficiary must be at least 50 years old when designated). The quarterly payments are taxed as ordinary income.

Charitable Gift Annuity

A charitable gift annuity (CGA) is a contract between a donor and the UGA Foundation. The donor transfers cash or securities to the Foundation in exchange for quarterly payments in the form of a guaranteed fixed annuity to the donor, another designated beneficiary, or both. When the annuity matures, the principal reverts to the Foundation and may be designated to benefit a specific area.

A minimum contribution of $10,000 is required to fund a CGA. Annuitants must be 60 years of age or older when payments begin. If a donor wishes to establish a CGA before the annuitant meets the minimum age requirement, annuity payments will be deferred until the age requirement is met.

To ensure that the donor fulfills his or her desire to benefit the University, the maximum rate of return on the annuities will be the annual rate according to the American Council on Gift Annuities guidelines.

The regulation of gift annuities varies from state to state. For this reason, the gift annuities described here may not be available in all states.

Charitable Remainder Trusts

The charitable remainder trust is similar to other types of trusts except that it has a charitable beneficiary. A donor transfers property irrevocably to a trust and specifies how trust income and principal are to be distributed. The trust may be created to become effective during life or at death. A minimum gift of $100,000 is required by UGAF for Charitable Trusts.

  • Charitable Remainder Unitrust ("CRUT")
    • The primary feature of the unitrust is that it provides for payment to the income beneficiary in an amount that may vary. The payment must equal a fixed percentage of the new fair market value of the trust assets valued annually. The donor determines the fixed percentage upon creation of the unitrust.
    • The unitrust payment must be made annually or at more frequent intervals to the donor and/or another beneficiary for life. Or, the unitrust may be set up for a term of years not exceeding 20.
    • The donor is allowed an income tax charitable contribution deduction equal to the present value of the Foundation's remainder interest in the unitrust that is determined by reference to Treasury Regulations. The deduction is based on the fair market value of the asset transferred, the payout rate chosen, and the age and number of beneficiaries.
    • The unitrust can be funded with cash or - ideally - with long-term, highly appreciated capital gain securities or real estate.
  • Charitable Remainder Annuity Trust ("CRAT")
    • The annuity trust shares many common features with the unitrust with the following exceptions:
      • The annuity trust provides for fixed income payments that may not be less than 5% of the initial fair market value of the gift in trust, and additional contributions are not permitted.
  • Charitable Lead Trust
    • This trust is the reverse of a Charitable Remainder Trust in that the income generated from assets placed in trust is paid to the Foundation for a period of years, after which time the property either returns to the donor or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren). By establishing such a trust the donor is, in effect, "lending" the asset to the Foundation for the term of the trust and in doing so may obtain substantial tax benefits.

Estate Gifts Overview

The largest gifts to the University have traditionally been estate gifts, which may be used for restricted or unrestricted purposes.

Gifts from the estates of deceased donors consisting of property that is not acceptable shall be rejected only by the action of the Gift Acceptance Committee. The legal counsel of UGAF shall expeditiously communicate the decision of the Gift Acceptance Committee to the legal representative of the estate. If there is any indication that the representatives of the estate or any family member of the deceased is dissatisfied with the decision of the Gift Acceptance Committee, this fact shall be communicated to the Gift Acceptance Committee or to the appropriate member of the development staff as quickly as possible.

Attempts shall be made to discover bequest expectancies whenever possible to reveal situations that might lead to unpleasant donor relations in the future. When possible, intended bequests of property other than cash or marketable securities should be brought to the attention of the Gift Acceptance Committee and every attempt be made to encourage the donor involved to conform his or her plans to UGAF policy.

Bequests

Gifts by will may be an attractive gift option to donors who are unable to make a current gift but would like to contribute to UGAF in a meaningful way. These gifts may be restricted or unrestricted for the use of funds. Specific, residual or contingent bequests will be recorded by the Office of Planned Giving. A documented (copy of Will, portion thereof, or Bequest Provision Form) specific or residual bequest will be counted for Heritage Society membership.

Types of Bequests:

  • Specific bequest - usually a dollar amount. It may also be a gift of real estate or tangible personal property (for example, artwork, antiques, jewelry, or coin/stamp collections).
  • Residuary bequest - names UGAF to receive all or a percentage of the remainder of the estate after specific bequests have been fulfilled.
  • Contingent bequest - takes effect only if all primary beneficiaries named in the will have predeceased the donor. Declaring UGAF a contingent beneficiary can prevent the property from going to the state if there are no heirs.
  • Testamentary trust - designates that part or all of the estate is to be left in some form of trust with a bank or individual trustee with income and/or principal to be paid to UGAF.
  • Pooled Income Fund - a gift may be made, by will, to the UGAF's Pooled Income Fund to pay income to a survivor or survivors, with the principal ultimately paid to UGAF.

Insurance

For insurance to qualify as a gift, whole life or certain universal life insurance policies should be purchased as follows:

  1. The Owner and Beneficiary of a gifted life policy must read "The University of Georgia Foundation." Designation of a specific school, college, department, or fund should be made in a planned gift agreement, not in the policy application. The original policy should be forwarded to the Foundation.
  2. The insured must be at least 21 years of age.
  3. It is preferred that the insured be the donor or the donor's spouse. Any exceptions should be reviewed prior to acceptance.
  4. The policy must always carry a minimum face value of $25,000. An exception to this rule will be made only for fully paid-up policies.
  5. If a donor is transferring ownership of an existing policy, they must provide the Foundation with the most recent annual summary and an in-force illustration for review before the gift is made. The policy's cash surrender value at the time of transfer is a tax-deductible charitable contribution as allowed by law.
  6. If a donor is taking out a new policy with the Foundation as owner, the policy application and illustration must be reviewed by the Foundation before the gift is made.
  7. The Foundation should receive annual statements and premium notices from the insurance company. Premiums must be made payable annually.
  8. Premiums should be paid by the donor directly to the Foundation, with the Foundation making payment to the insurance company. In this way the donor's premium payments are tax deductible charitable contributions as allowed by law.
  9. Accumulated cash values may not be utilized to pay premiums:
    1. This means for Universal (Flexible Premium or Adjustable) Life policies that cash value must not decrease from one annual statement to the next.
    2. For Whole Life policies, the premium should never be paid by loan. Annual dividends can be applied to completely pay premiums or to reduce the premium with the donor paying the remainder.
  10. If there are any questions regarding life insurance policies qualifying an individual for recognition by the Heritage Society, please direct them to the Foundation, 1 Press Place, Suite 101, Athens, Georgia 30601, telephone (706) 542-6677.

Revocable Trust

The establishment of a revocable trust requires a minimum gift to the University of Georgia Foundation of $100,000 if the University of Georgia Foundation is to be trustee. The University of Georgia Foundation will serve as trustee of a revocable or irrevocable trust only if 100% of the remainder gift is for the benefit of the University of Georgia Foundation.

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