Bequests & Lifetime Gifts

The most common form of giving to the foundation is the simple bequest written into a will. The savings in state and federal death taxes resulting from a gift to the foundation can be dramatic, and your charitable bequest can benefit your family’s inheritance.

Bequests can take a variety of forms. You can leave the foundation a stated sum of money, or you can make the foundation a contingent beneficiary in the event other beneficiaries die before you. You can provide a name by which the gift should be known (or indicate that it is an addition to an existing fund). You also can leave the gift unrestricted or specify a charitable purpose. We’ve provided some suggested language for making a bequest.

Disclaimers in Favor of Charity

A special type of contingent bequest is the disclaimer in favor of charity, a useful device that can be incorporated into your will with a little forethought and advance planning. You may have valuable items such as paintings, jewelry, silver or collectibles. In some cases, the recipients may not want these items or may not be able to use them conveniently. In addition, their presence in your estate can significantly increase federal and state inheritance taxes.

Your beneficiary could accept the bequest after paying these taxes and then donate the item to a charity, taking a deduction at the maximum current income tax rate. But advance planning could result in a much more favorable tax treatment.

For example, your will could bequeath your collection of antique cars or art to your son, but provide that if he disclaimed the bequest, it should go to Chillicothe-Ross Community Foundation. Your heir would then have an option. At any time within nine months after your death, he could disclaim the bequest, and it would pass to the foundation, which would sell the collection and add the proceeds to its charitable endowment in your name.

With such a disclaimer, the value of the bequest would not be included in federal and state inheritance taxes since the collection would pass directly to charity. It, therefore, qualifies for the charitable deduction.

To take advantage of the disclaimer option, the will must name the charity, in this case, Chillicothe-Ross Community Foundation, to receive the bequest in the event of disclaimer. In the absence of a specific provision mentioning a charity, your heir would not be able to disclaim the bequest and put its value to charitable use.

Lifetime Gifts

Most lifetime gifts are made with cash or marketable securities. Cash gifts are simplest and may be fully deducted for federal income tax purposes up to 50 percent of your adjusted gross income. Contributions above that limit may be deducted for up to five successive tax years.

Gifts of appreciated securities save income tax and avoid the capital gains tax that would be imposed if you sold the securities yourself. For most donors, the full fair market value of publicly traded stocks and bonds may be deducted for income tax purposes up to 30 percent of adjusted gross income with a five-year carryover. The actual impact of such a gift on your personal taxes should be reviewed with your tax adviser.

In many situations, the foundation will accept gifts of stock in a small business, such as a family firm. Such gifts may be particularly advantageous if you plan to sell your business in the near future or as part of your estate plan. In some cases, your closely held corporation may be willing to buy back stock donated to the foundation by family members. Under IRS rules, however, such repurchases may not be prearranged.

The foundation can accept a gift of real estate that is readily marketable and free of environmental or other problems.