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Bequests
Bequests provide support for the college beyond the donor's lifetime. Bequests can provide support for
general use or a specific purpose, such as creating a named endowment fund. The best way to make a
charitable bequest in your will depends on a number of factors, including your assets and family
considerations. The college can be named as a beneficiary in your will in several ways: (1) a
specific amount provides a dollar amount, (2) specific property, (3) a percentage of your estate,
(4) a residual bequest (allowing you to provide for a gift to the college from what's left of your
estate after providing for loved ones), (5) or a life income bequest which is a testamentary trust
or annuity paying income to one or more of your surviving heirs for life. Life income bequests
provide that the fund principle becomes a gift to the college. The donor benefits by having no federal
or state taxes while providing an income to a family member.
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Qualified Retirement Plans
Qualified retirement plans are another resource for charitable gifts. You may want to look closely
at your estate, and if it has grown to an extent that it will provide adequate retirement income
through other investments, your retirement funds may become a tax liability whether you use them
yourself or leave them to your heirs. Federal and (if applicable) state income taxes and estate taxes
will be applied to these funds if left to your heirs. This tax amount can be as high as 60-70 percent.
One way to reduce or avoid these taxes is to use these funds for a charitable gift. The most
advantageous way to convert your retirement asset into a charitable gift is to make the college a
co-beneficiary or the sole beneficiary of the balance of your retirement account at your death. In
community property states, spousal consent is required. No income, estate or capital gain taxes are
applied to retirement funds that are given to the college at your death.
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Life Insurance
Life insurance is primarily intended to secure inheritance for your heirs during the building of
your personal estate. If your estate grows to a size where you no longer need this additional
security, your life insurance policies can be an outstanding charitable gift resource. You can
name the college as beneficiary and/or owner of the policy. The later option is irrevocable and
offers certain tax advantages. This is a most advantageous way for those with limited resources to
make a large gift with minimal cost. When gifting life insurance, the benefits include the cash
surrender value and ongoing premium payments that are tax deductible. In addition life
insurance gifts are not subject to estate taxes.
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Life Estate Gifts of Remainder Interest
Under this type of arrangement, you donate a primary or vacation home, condominium, or farm or
ranch to the college and reserve the right to continue to use the property during your lifetime.
Since you have reserved the right to use it, you remain responsible for maintaining the property.
At your death, the remaining interest in the property benefits the college. Your income tax
deduction is based on the value of the remainder interest being donated. Since the college owns
the remaining interest, the property is essentially removed from your estate, assuring a reduction
of estate taxes. Income produced from the property, such as rent on a house, is kept by the donor.
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Charitable Gift Annuities
Charitable gift annuities are contractual arrangements in which Texas Tech Foundation, Inc. agrees
to pay you, or someone else you designate, a lifetime income. The income amount is determined by
using a fixed percentage of the original gift value, the number of annuitants, and their ages. Gift
annuities can be funded with cash, appreciated stock or bonds. Once established, the annuity contract
cannot be enlarged with additional funding. However, additional annuities can easily be created.
Another attractive feature of the gift annuity is that the income stream can be deferred to a future
date when income is most needed, such as during retirement years. Benefits include establishing the
gift with a one-page contract. The income to a named beneficiary is guaranteed by Texas
Tech Foundation, Inc. regardless of the investment climate. The income is partially tax-exempt
and a tax deduction can be claimed the year you establish the gift annuity. Only a portion of
capital gains tax is recognized if the annuity is funded with appreciated assets and removing
assets from your estate to fund a gift annuity can reduce your estate tax liability.
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Charitable Remainder Trusts
This trust arrangement can be a very effective method of making a gift during your lifetime while
receiving income for yourself or any other beneficiary, or for a specified term of 20 years or
less. At the termination of the trust, any remaining assets benefit the college. With the
charitable remainder trust, you can choose to establish one of two trust types; the Charitable
Remainder Annuity Trust (CRAT) or the Charitable Remainder Unitrust (CRUT). This trust method
can be used to benefit your income needs or the needs of someone you care for. Benefits to the
donor include an income tax deduction based on the estimated value of the remainder of the
trust assets being given and unrecognized captial gains on appreciated assets used to fund the
trust. Also, establishment of a charitable remainder trust reduces
estate taxes.
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Charitable Lead Trusts
Charitable Lead Trusts are unique trust arrangements in which income from the trust flows first to
college over a defined term of years or a life expectancy, with the remainder of the trust passing
to other beneficiaries. The term "lead" applies to this trust because the funding interests of the
charity are given the lead, or priority, over the interests of other beneficiaries. A charitable lead
trust can be funded with cash, appreciated stock, corporate bonds, tax-exempt bonds, zero coupon
bonds, marketable real estate, or income-producing real estate. The payout can be in the form of
annuity or variable income. There is not usually an income tax deduction for assets placed in a
charitable lead trust, but income and estate taxes can be reduced. This trust can be established
during your lifetime or through your will and works well for philanthropic-minded people who have
many accumulated assets that could pose large estate-tax liabilities.
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