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Planned Giving

Carlisle_15Planned Giving is the term we apply to a variety of charitable gift arrangements that offer unique tax and income benefits to the Donor while supporting Carlisle School. These special gifts are often established as a part of an individual’s estate plan or financial plan. Among the most frequently used planned giving arrangements are charitable Bequests and Life Income Gifts.

Why is Planned Giving Important?

Planned Giving is a vital component in Carlisle School’s long term financial security. In addition, planned giving builds lasting relationships with our supporters. Significant planned giving gifts attract other major gifts to our school. Planned Giving is an opportunity for the donors to pass down their values and leave a legacy to future generations.

What are the Options?

Bequests are the simplest and most flexible of the planned gifts. The donor controls and directs assets to Carlisle School through his or her estate and the estate receives a tax deduction as a result. Among other assets, retirement plan assets make an excellent funding source for a bequest. Retirement plan assets and IRA’s which you own at your death and which pass to a beneficiary other than your spouse can be taxed at rates approaching 75%. By giving a retirement plan to Carlisle School, all of the tax can be avoided.

Life Income Gifts are structured contributions that may include cash, appreciated securities or real estate providing a current income tax deduction that can be carried over for up to five years. It can provide supplemental income for the life of the donor and/or designated beneficiaries, part of which is tax free. The gift is excluded from your estate tax. Additionally, the donor may avoid capital gains taxes while increasing their rate of return on low yielding investments. The rate of return depends on the age of the donor, the older the donor, the higher the rate.

Charitable gift annuities provide a guaranteed amount of income to the donor regardless of how the investments perform. Upon the death of the donor and/or the beneficiaries, the assets remain the property of the school and continue to benefit Carlisle for generations to come. Charitable Gift Annuities are generally cash and marketable securities donated to Carlisle School to be held and invested while paying the donor and/or other designated beneficiary a fixed rate of return. Carlisle School is responsible to the donor for distribution of annuity payments and tax reporting.

Charitable Remainder Trusts can be cash, marketable securities or real estate donated to Carlisle School to be held and invested, while paying the donor and/or other designated beneficiary a variable rate (unitrust) or fixed rate (annuity trust). Current rates average 5% to 7%. The Trustee is responsible to the donor for the trust distributions, accounting, administration and tax reporting.

Pooled Income Fund is a method where the donation is either cash or marketable securities and the donor or designated beneficiary receives income at a variable rate, currently 4% to 5%. This gift operates as a form of ‘mutual fund’ and distributes income only on the ‘shares’ held in the fund. The Trust/Trustee is responsible to fund participants for income distributions, accounting and tax reporting.

Private Scholarship

A Charitable Education Trust allows you to generate educational funds and make a significant charitable gift. Example: You donate stock with a market value of $100,000 (cost basis of $30,000) to a charitable remainder trust that will continue for a period of eight years. During each of the eight years, the child will receive annual payments of $8,000 for tuition and other expenses. Carlisle School will receive the principal at the end of the eight year term. Here are the benefits:

  • the child receives payments totaling $64,000 for education expenses
  • the amount the child receives will be taxed at a lower rate than it would have been to you
  • you receive a charitable income-tax deduction of $52,009 and avoid paying $14,000 tax on $70,000 of gain
  • Carlisle School eventually receives $100,000, assuming the trust earns a consistent 8% return on investment.

Caution: If the child-beneficiary is under 14 years old, the trust payments will be taxed at your higher tax rate. Careful funding, such as with growth stock or tax-exempt bonds, can significantly diminish or even eliminate the negative impact of this provision.

Example:
Catherine, grandparent of Catie and William, age 72 owns 2000 shares of BB&T Bank stock she purchased in 1996 at $25 per share for a total cost basis of $50,000. BB&T is currently paying a dividend of $1.60 a year or 2.5%. Looking for additional income and a sizable tax deduction, Catherine decides to form a gift annuity with Carlisle School. Catherine contributes her stock to Carlisle School in exchange for a 6.8% annuity and names her sister, 68 year old Elizabeth as the secondary beneficiary. The stock is then sold by Carlisle School with no immediate capital gains liability to Catherine. Instead of being taxed with a $76,000 gain in 2001, she receives a charitable deduction of $34,979. During Catherine’s lifetime, she receives a fixed annual distribution of $8,568 per year, compared to $3,200 she would have received as her dividend. Upon Catherine’s death, her sister Elizabeth will receive the income from the annuity. When Elizabeth dies, the balance of the annuity will be distributed to Carlisle School and used for our Endowment.

For more information on how to invest in Carlisle School please contact:

Michael Waddell – Director of Development – mwaddell@carlisleschool.org