Ways to Make a Gift

• Gifts of Cash
• Donor Benefits of Cash Gifts
• Gifts of Securities (Stocks, Bonds, and Mutual Funds)
• Gifts of Real Estate
• Gifts of Personal Property
• Gifts that Produce Life Income
• Charitable Gift Annuity
• Donor Benefits of a Charitable Gift Annuity
• Deferred Payment Gift Annuit
• Donor Benefits of a Deferred Payment Gift Annuity
• Pooled Income Fund
• Donor Benefits of a Pooled Income Fund Gift
• Charitable Remainder Unitrust - Income to donor, then to Rhode Island College
• Charitable Remainder Annuity Trust
• Charitable Lead Trust - Income to Rhode Island College, then principal to family

Gifts of Cash

The simplest way to give a gift to the College is to write a check payable to the Rhode Island College Foundation. The purpose or fund for which the gift is intended should be designated on the check or in an accompanying letter.

Cash gifts are considered to be transferred on the date that they are delivered or mailed. A year-end gift may not be received until January, but it is still deductible for the previous year if postmarked in December.

If you itemize your deductions, you may deduct gifts of cash up to 50% of your adjusted gross income in a given year. If your gift exceeds this amount, you may carry forward the excess deduction on your income tax return for up to five additional years.

Donor Benefits of Cash Gifts

• Personal satisfaction of making a gift
• Income tax benefit
  • For example: A donor in the 31% tax bracket gives a gift to the College of $5,000. The donor is entitled to a charitable income tax deduction of $1,550 ($5,000 x 31%).Therefore, out-of-pocket cost is $3,450 ($5,000 - $1,550) to make this $5,000 gift.
• Potential reduction of probate
• Potential reduction of estate tax

Gifts of Securities (Stocks, Bonds, and Mutual Funds)

Giving stocks and bonds that have increased in value (and which you have owned for more than a year) provide greater tax benefits than cash gifts and the benefits are two-fold. Your charitable deduction, though limited to 30% of your adjusted gross income with a five year carryover, is based on the securities full fair market value on the day the gift is made, not your original cost. In addition, you completely avoid all capital gains tax on the appreciation.

For Example: A donor owns 100 shares of ABC Company, which were purchased at $50 per share. The current market value is $100 each. The donor decides to now dispose of this stock and give the proceeds to the College. He/she has two options in doing so:

The donor can sell the stock directly and pay capital gains tax on the difference between the price and the current market value:

• Original purchase price: $5,000
• Current market value: $10,000
• Gain on sale: $5,000
• Capital gains tax (20%): $1,000
• Net proceeds from the sale: $9,000
• Tax deductible gift: $9,000

Or, the donor can transfer the stock directly to the Rhode Island College Foundation and avoid paying capital gains tax. Plus, he/she would receive a charitable income tax deduction equal to the full fair market value of the stock.

• Original purchase price: $5,000
• Current market value: $10,000
• Gain on transfer -------
• Capital gains tax (20%): -------
• Net proceeds from the sale $10,000
• Tax deductible gift: $10,000

Gifts of Real Estate

Real estate can be used to make a meaningful gift to the College and still provide lifetime benefits to the donor. Many people own real estate that has increased in value several times over the original purchase price. This gain, when realized in a sale, is currently taxed at a rate of 20% by the federal government, plus additional taxes in some states. If the real estate is not used as a primary residence, it does not qualify for the one-time exemption from capital gains tax for owners over the age of 55.

• Outright Gifts
  Real estate that has increased in value can provide a double tax benefit as an outright gift. First, the donor receives a charitable income tax deduction for the full fair market value of the property, not just the purchase price. Secondly, because the property is donated and not sold, all capital gains tax is avoided. The donor also avoids future property taxes and annual maintenance expenses.
• Depreciated Real Estate
  If the current value of the real estate is less than the original cost to the donor, it can still be used as a gift. In this case, the donor should sell the property and realize the loss on the sale. The loss may be used to offset the future gain and reduce taxes. The cash proceeds from the sale can be given to the College, allowing the donor to receive a charitable tax deduction equal to the gift value.
• Funding a life income agreement
  Some donors want to make a gift, but need income from the real estate. This is possible by using the real estate to fund a charitable remainder trust. The trust receives the property title, sells the property paying no capital gains tax, and reinvests the proceeds. The income produced is paid to the donor and/or another beneficiary. Capital gain tax is avoided and the donor receives a charitable tax deduction for the remainder of the gift value as determined by life expectancy and government tables. Probate costs and estate taxes can also be reduced with this method of giving.
• Gift of Residence While Retaining the Right to Occupy
  Some donors choose to donate their principal residence, but retain the right to continue living there. If property is a primary residence, vacation home, or farm, it can be given to the College in an irrevocable life estate agreement. The donor receives a tax deduction for the remainder value of the gift at the time of the gift. The donor retains the rights and responsibilities of the property owner throughout his/her lifetime. This type of gift often appeals to donors over the age of 65.

The Rhode Island College Development Office can provide a detailed analysis for any of these real estate gift options.

Gifts of Personal Property

Personal property is a welcome gift to the College when appropriate to the institution's educational mission. Art, rare books, antiques, and equipment are just a few examples. Gifts of tangible personal property, which must be held by the donor for at least one year, entitle the donor to a charitable tax deduction of the property's full fair market value up to 30% of the donor's adjusted gross income. It is required that the donor obtain a written gift appraisal from an independent "certified" appraiser to determine an item's fair market value for items valued at $5,000 or more.

Gifts that Produce Life Income

(Percentages quoted change frequently. Individual and current proposals can be prepared on request)

A life income gift allows a donor to receive income while making a significant gift to the College. Benefits of this kind of planned gift include:

• Option for income payment for your life and the life of your spouse (or any other individual)
• Potential increase in income
• Income tax deduction
• Potential investment diversification
• Probable elimination of capital gains tax on appreciated property
• Reduced estate taxes and probate costs
• Satisfaction in supporting the College during your lifetime
• Knowledge of how your gift will be used

Charitable Gift Annuity

The gift annuity, the simplest life income plan, is a contract between the donor and the College. A gift annuity offers a fixed dollar payment for life. A portion of this payment is tax-free, some is ordinary income. If the annuity is funded with appreciated securities, part of these payments is treated as capital gain income. The donor receives and immediate income tax deduction based on the amount of the gift, the number of income beneficiaries, and the rate of income received. Regardless of economic condition, the stated payment rate is guaranteed. Following the donor's lifetime, the money remaining in the contract goes toward a predetermined purpose.

For example: A donor, age 65, donates $10,000 in cash to fund a charitable gift annuity. In exchange for this gift, the Rhode Island College Foundation agrees to pay the donor a guaranteed 7% return, or $700 per year for life. In addition, the donor will enjoy a $3,632 income tax charitable deduction. This deduction can be used up to 50% of the donor's adjusted gross income that year. Any carryover can be written off over the next additional five years. Furthermore, $319 of the annual $700 received will be tax-free for the next 19.9 years. The gift may also reduce probate and estate taxes.

Annuities can be funded with cash, securities, and certificates of deposit proceeds. Rates run from 5.5% to 12%. Two life rates are available upon request from the Development Office.

Donor Benefits of a Charitable Gift Annuity

• Fixed annual income, partially tax-free
• Reduced capital gains tax
• Immediate charitable income tax deduction

Deferred Payment Gift Annuit

Like the charitable gift annuity, the deferred payment plan also offers a contractual guarantee of life income. In this case, the donor doesn't start receiving income until a predetermined time in the future, often on, or shortly after, retirement at age 65.

For example: Let's assume the donor, a hard-working professional, is at the point of exceeding his Qualified Retirement Plan and exhausted his 403B Plan and is looking for a better way to insure his retirement security. The donor wishes to retire at age 65 - in 25 years. By gifting $25,000 now into a deferred payment gift annuity, the donor would receive the following benefits.

• 26.8% cash flow, or $6,700 per year for life, starting at age 65
• $482.40 of each yearly payment would be tax-free for the first 19.9 years
• $15,441 charitable income tax deduction, usable up to 50% of donor adjusted gross income
• the remainder after the donor's lifetime will go to the donor's predetermined purpose at the College.

Current rates and detailed calculations are available upon request.

Donor Benefits of a Deferred Payment Gift Annuity

• Fixed annual income, partially tax-free
• Reduced capital gains tax
• Immediate charitable income tax deduction

Pooled Income Fund

Participating in our pooled income fund is easy and requires a smaller investment than some other life income gift plans. The primary investment goal is to produce a relatively high return for the donor. Payments to the donor are taxed as ordinary income.

Gifts to the pool may be in the form of cash, securities (especially if appreciated), and CD proceeds. Gifts to the fund are invested and co-mingled with gifts of other investors. Donors receive a proportionate share of the fund's net income each year. The income is based on the fair market value of the gift to the fund. The income tax charitable deduction is based on the gift value, the ages of the beneficiaries, and the highest annual rate of return of the fund during the previous three years.

Donor Benefits of a Pooled Income Fund Gift

• Income earned on stock and other assets
• No capital gains tax
• Charitable Remainder Trusts

It is a misconception that trusts are only for the very wealthy or those with very complex estates. Many individuals with modest estates have found trusts advantageous. Charitable remainder trusts are an ideal way to cash in appreciated assets (securities, real estate) and get a lifetime income plus other gift, income, and estate tax benefits. There are different types of charitable trusts to consider: charitable remainder unitrusts, charitable remainder annuity trusts, and charitable lead trusts. The general benefits of Charitable Remainder Trusts include:

• Reduced taxes - gift, income, and estate
• No capital gains tax
• Rate of return can be increased as one gets older providing more income
• Security and protection
• Privacy (no probate or delay)
• Flexibility
• Hedge against inflation
• Professional management

Charitable Remainder Unitrust - Income to donor, then to Rhode Island College

This is an individual trust paying a donor and/or a secondary beneficiary a fixed percentage of the annual value of the gift principal. A unitrust may run for the lives of the beneficiaries or for a shorter number of years, at the donor's choosing. It is paid out quarterly, semi-annually, or annually, again, a donor preference. The rate of return is negotiated figure predetermined between the College and the donor. The lower the payment, the higher the charitable deduction. By law, the rate must be at least 5%.

Unitrust income is taxed to the donor based upon the trust's investments. Unlike the pooled fund, a unitrust may be created with or invested in tax-exempt securities that will, in turn, provide tax-free income to the donor.

To create and fund a unitrust requires a minimum gift of $100,000 in cash, securities, and/or real estate. When appreciated stock is used, capital gains tax is completely avoided.It is an excellent hedge against inflation.

Charitable Remainder Annuity Trust

Income to donor, then to Rhode Island CollegeThis is the same type of gift vehicle as the unitrust, with the exception that the income payment is a fixed dollar amount every year as stated in the agreement when the gift is established.

Because the income will not vary, the annuity trust is attractive to donors seeking secure and stable income. Because of the fixed income feature, an annuity trust will generate a larger charitable income tax deduction than a unitrust in the same amount (see example below). Like a unitrust, the minimum contribution to establish and fund an annuity trust is $100,000. Also, similar to a unitrust, an annuity trusts payout runs for the lives of the beneficiaries or for a shorter number of years as determined by the donor.

Charitable Lead Trust - Income to Rhode Island College, then principal to family

Creating a charitable lead trust allows you to pass assets to your children or grandchildren without incurring large gift and estate taxes. The trust is created for a designated period of time during which payments are provided to the College. At the end of that trust period, the principal is redistributed to the beneficiary.

The income received by the College generates a sizable charitable deduction from gift and estate taxes. You designate the size of the trust, its duration, and the amount that the College will receive. If the trust assets increase in value during the terms of the trust, the appreciation is passed along to the beneficiary without owing taxes.

A charitable lead trust is the most effective option for individuals in the highest income, gift, and estate tax bracket. Owners of stock in closely-held companies may find this arrangement particularly effective in redistributing stock ownership.