GIFTS OF LIFE INSURANCE

LIFE INSURANCE POLICY

Sometimes people find themselves with life insurance policies they no longer need after the death of a spouse or after children are grown. By contributing such a policy to Antioch College, you can make a wonderful gift and reduce taxes that may otherwise be due upon your death.

You can also receive a charitable income-tax deduction for the cash surrender value of the policy when you irrevocably assign the policy to Antioch College. Be sure to use our legal name and address as follows:

Antioch College
One Morgan Place
Yellow Springs, OH 45387

Gifts of Percentage Interest in a Policy
You might choose to designate Antioch College to receive only a partial interest (e.g., a percentage) of a life insurance policy.

Gifts of New or Partial-Paid Policies
You may also assign a partially paid policy to Antioch College and keep the policy active by sending premium payments to Antioch College. Or you may purchase a new policy and name Antioch College as owner and irrevocable beneficiary. All of your payments would be tax deductible if you itemize.

Gifts That Save Capital Gain
Gifts of securities can be used to cover the payments on a new or partially paid life insurance policy, with Antioch College named as a beneficiary. By donating securities, capital-gain tax can be eliminated entirely.

Insurance Dividends
The dividends of a whole life insurance policy may be designated to Antioch College without reducing the death value of the policy for your beneficiaries. The donor, who remains the owner of the policy, retains the right to borrow against the policy.

Naming Antioch College as Beneficiary
Another option is to name Antioch College as the primary beneficiary or co-beneficiary of a life insurance policy. You would retain ownership of the policy and have access to the policy’s cash value. Because you retain ownership, no charitable income-tax deduction is allowed at the time of the gift. Although the face value of the policy will be included in your gross estate at your death, your estate will be entitled to an offsetting charitable estate-tax deduction.

How It Works

  1. You assign all the rights in your insurance policy to Antioch College, designate us as irrevocable beneficiary, and then receive an income-tax deduction
  2. Antioch College may surrender the policy for its cash value or hold it and receive the proceeds at your death

Benefits

  • You receive a federal income-tax deduction
  • If premiums remain to be paid, you can receive income-tax deductions for contributions to Antioch College to pay these premiums
  • You can make a substantial gift on the installment plan
  • Antioch College receives a gift they can use now or hold for the future

LIFE INSURANCE TO REPLACE GIFT

An important but frequently overlooked role of life insurance is the one it can play in charitable gift planning. Life insurance itself can be the direct funding medium for a gift, permitting the donor to make a substantial gift (face value of policy) for a relatively modest annual outlay (i.e., the premium payment). Life insurance can also be used to replace an asset that has been given to Antioch College.

How It Works
After a donor makes a gift to Antioch College, the tax savings produced by the charitable deduction are used by his or her children or an irrevocable trust to purchase and pay the premiums on an insurance policy on the donor's life. Such an arrangement can ensure that the interests of family beneficiaries will not be adversely affected.

  1. You make a gift to Antioch College
  2. You give the tax savings from the charitable deduction to your children
  3. Your children purchase an insurance policy on your life with the tax savings
  4. Your children will receive the proceeds upon your death

Benefits

  • You can make a significant gift to Antioch College without diminishing the amount your family will receive
  • Your tax savings finance this life insurance policy


GIFTS FROM RETIREMENT PLANS

Your retirement-plan benefits are very likely a significant portion of your net worth. And because of special tax considerations, they could make an excellent choice for funding a charitable gift.

Retirement-plan benefits include assets held in individual retirement accounts (IRAs), 401(k) plans, profit-sharing plans, Keogh plans, and 403(b) plans.

GIFTS FROM RETIREMENT PLANS DURING LIFE

Likely your IRA, 401(k), or other retirement fund is one of your largest assets. If the fund is larger than you and your family will probably need for retirement security, you may have considered using some portion of it for a charitable gift. From a tax standpoint that could be a wise move. The way to structure your gift depends on your age and the type of plan you have.

If you are between 59½ and 70½

You can withdraw money from your retirement fund, whether that is an IRA, 401(k), 403(b), or other comparable plan, and then contribute it to a charity. The money you withdraw will be added to your taxable income, but you will receive a charitable deduction for the same amount. If the amount you are able to deduct on your federal and state tax returns equals the withdrawal, you will make the gift at little or no tax cost. Don’t do this if you are under 59½ because the amount withdrawn would be subject to a 10% penalty tax as well as being added to your taxable income.

If you are over 70½ and have an IRA

You may authorize the administrator of your IRA to transfer funds (roll funds over) directly to one or more charities. The amount you transfer will count towards your mandatory distribution and will not be added to your taxable income.

The total amount of the transfers in any one year cannot exceed $100,000. Also, a transfer cannot be for a donor advised fund, supporting organization, or a private foundation. It can be for any designated purpose at our organization; it can be for an endowment, and it can be used to fulfill any outstanding pledge.

The Protecting Americans from Tax Hikes (PATH) Act that was passed by Congress and signed into law by the president in 2015 made this special “rollover” provision permanent.

If you are over the age of 70½ and have a retirement fund other than an IRA

The direct transfer (“rollover” provision) described above can be done only with an IRA. However, if you have another plan, such as a 401(k) or 403(b), you could transfer money from that plan to an IRA and then do a direct transfer to charity from your IRA. Some people, upon retirement, convert their employer retirement plan to a self-directed IRA anyhow.

So long as your money remains in a plan other than an IRA, you can follow the procedure described above for those younger than 70½: withdraw funds from the plan and then contribute them to the charity, in which case the deduction usually offsets all or most of the tax on the distribution.

If you own some appreciated stock, you might contribute that stock to charity and then withdraw from your retirement plan cash equal in value to the stock. Suppose, for instance, that you contribute stock worth $50,000 with a cost basis of $20,000. Then you withdraw $50,000 from your retirement plan and use that $50,000 to repurchase the stock, stepping up the basis to $50,000 and reducing the taxable gain if you sell the stock in the future. Assuming you are able to use the deduction, it would totally or substantially offset the tax on the amount withdrawn, and the withdrawn amount would count towards your mandatory distribution requirement.

Tips on how your beneficiaries can avoid income tax!

When individuals are named as beneficiaries of retirement funds (other than from a Roth IRA), the distributions are taxed as ordinary income. On the other hand, when those beneficiaries receive bequests of appreciated property—such as securities and real estate—they are not taxed on the gain that accrued before your death. Thus, when a person wants to make end-of-life gifts to both loved ones and a charity, it is more tax-efficient to name the charity as a beneficiary of all or a portion of remaining funds in the retirement account. The charity, being tax-exempt, will pay no income tax on any of the distributions, and your loved one will pay no income tax on the appreciated securities or real estate.

Here is a comparison of the potential tax savings for loved ones in the 33% income-tax bracket, receiving appreciated securities versus retirement-plan assets. In this example the appreciated assets are sold within a year after death (experiencing modest appreciation of about 4%):

Retirement Plan vs. Appreciated Securities:
Which to Loved Ones and Which to Charity?

 

SCENARIO 1:

SCENARIO 2:

Your assets

• 

$500,000
appreciated securities

• 

$500,000
retirement plan

If you give

• 

appreciated securities to loved ones

• 

retirement plan to
charity

If you give

• 

appreciated securities to
charity

• 

retirement plan to
love  ones

Taxes paid by charity

Net to charity

$0.00

$500,000

$0.00

$500,000

Taxes paid by
loved ones*

Net to gift loved ones

$3,000
(capital-gain tax)

$497,000

$165,000
(federal income tax)

$335,000

*33% income-tax bracket, 15% capital gain

In this example your loved ones get almost 50% more when you give retirement funds to charity. That’s a clear advantage with inheritance.

How do I change my beneficiary designation?

The procedure is very simple. It is unnecessary to amend your will or living trust agreement. Just request a change-of-beneficiary form from your plan administrator and indicate the percentages for family members and charity.

You can make a gift by beneficiary designation from an IRA, 401(k), 403(b), or any other comparable plan.

How It Works

  1. You take a distribution from your qualified retirement plan or IRA that is includable in your gross income
  2. You make a gift of the distribution or of other assets equal in value to the distribution
  3. You receive an offsetting charitable deduction
  4. If you are 70½ or older, read ahead about the IRA rollover opportunity available to you

Benefits

  • You may draw on perhaps your largest source of assets, with no adverse tax consequences, to support the programs that are important to you at Antioch College
  • The distribution offsets your minimum required distribution

If you use appreciated securities instead of cash from your distribution to make your gift, you'll avoid the capital-gain tax on the appreciation.

GIFTS FROM RETIREMENT PLANS AT DEATH

Retirement-plan benefits often make an excellent choice for funding a testamentary charitable gift to Antioch College. Not only will such a gift escape federal income tax, but it will also avoid any potential federal estate tax. This combination of income taxes and estate taxes could result in a tax hit of more than 63% of the retirement-plan benefits.

If, for example, you have designated your children to be the beneficiaries of $100,000 of your retirement-plan benefits, and your estate is subject to federal estate taxes, your children could lose $40,000 to federal estate taxes and as much as an additional $23,760 to federal income taxes for a total reduction in benefits of $63,760. If, however, you designate Antioch College as the beneficiary of that $100,000, the full amount will pass to us with no reduction in benefits.

How It Works

  1. You name Antioch College as beneficiary for part or all of your retirement-plan benefits
  2. Funds are transferred by plan administrator at your death

Benefits

  • No federal income tax is due on the funds that pass to Antioch College
  • No federal estate tax on the funds
  • You make a significant gift for the programs you support at Antioch College

Special note: Call or e-mail us to tell us of your intent, and we will assist you with the details of the transfer.

Next Steps

  1. Contact Susanne Hashim, VP of Advancement, at (937) 319-0163 or shashim@antiochcollege.edu, for additional information on including Antioch in your retirement plan.
  2. Seek the advice of your financial or legal advisor.
  3. If you include Antioch College in your plans, please use our legal name and federal tax ID.
    Legal Name: Antioch College Corporation
    Address: 1 Morgan Place, Yellow Springs, OH 45387
    Federal Tax ID Number: 26-1672457 
  4. Complete and send us the Declaration of Intent Form

 

“IRA ROLLOVER” GIFTS FOR DONORS AGED 70½ OR OLDER

The Protecting Americans from Tax Hikes (PATH) Act of 2015, which was passed by Congress and signed into law by the president on December 18, 2015, made permanent what is popularly known as the IRA charitable rollover.

Here are the requirements and restrictions for making an IRA charitable rollover gift:

  • The donor must be 70½ or older.
  • The gift must be made directly from the IRA to an eligible charitable organization.
  • Gifts to all charities combined cannot exceed a total of $100,000 per taxpayer for the year.
  • The gifts must be outright, and no material benefits can be received in return for the gifts. Thus a transfer for a gift annuity, charitable remainder trust, or pooled income fund is not permitted.
  • Gifts cannot be made to a donor advised fund, supporting organization, or private foundation.
  • The gift is not included in taxable income, and no charitable deduction is allowed.
  • The gift can be made only from an IRA. Gifts from 401(k), 403(b), and 457 plans are not permitted.

An IRA rollover may be the right gift for you to make if:

  • You want to make a charitable gift and your IRA constitutes the largest share of your available assets.
  • You are required to take a minimum distribution from your IRA, but you do not need additional income.
  • You do not itemize your deductions. In that case a personal IRA distribution increases your taxable income without the benefit of an offsetting deduction. An IRA charitable rollover will not be included in your taxable income even if you do not itemize other deductions.
  • You live in a state where retirement plan distributions are taxable on your state income-tax return, but your state does not allow itemized charitable deductions.
  • You would like to make an additional charitable gift, but it would not be deductible because of the annual limitation of 50 percent of adjusted gross income for charitable contributions. The IRA charitable rollover is equivalent to a deduction because it is not included in taxable income.
  • You have an outstanding pledge to a charity. The IRA charitable rollover can satisfy a pledge without violating rules against self-dealing.

Here are the steps to take to make a gift:

  • If you want to make a qualifying transfer, contact your IRA administrator and instruct that person to transfer funds to the charity(ies) you designate.
  • Contact our office. We will answer your questions and provide instructions for completing your gift.

How It Works

  1. You are 70½ or older and instruct your plan administrator to make a direct transfer of up to $100,000 to Antioch College
  2. Plan administrator makes transfer as directed to Antioch College

Benefits

  • Your gift is transferred directly to Antioch College; since you do not receive the funds, they are not included in your gross income*
  • Your gift will count towards your minimum distribution requirement
  • You support the programs that are important to you at Antioch College

*No income-tax deduction is allowed for the transfer.

Next Steps

  1. Contact Susanne Hashim, VP of Advancement, at (937) 319-0163 or shashim@antiochcollege.edu, for additional information on including Antioch as a beneficiary.
  2. Seek the advice of your financial or legal advisor.
  3. If you include Antioch College in your plans, please use our legal name and federal tax ID.
    Legal Name: Antioch College Corporation
    Address: 1 Morgan Place, Yellow Springs, OH 45387
    Federal Tax ID Number: 26-1672457 
  4. Complete and send us the Declaration of Intent Form