Careful financial estate planning can be beneficial to you and your family and can allow you to leave an enduring legacy that will support the future of the museum. We do recommend that you seek the advice of a tax consultant or financial advisor when considering these, or any other, planned giving options.
The 1902 Legacy Society
The North Carolina Museum of History honors friends and supporters who do include planned gifts to the museum in their estate plans by including them in the 1902 Legacy Society. The year 1902 is special to the museum because it was the year that the private collection of Colonel Frederick Augustus Olds was merged into the State Museum and opened as the Hall of History.
Bequests are donations made through a will or trust that are distributed by your estate after your death. Charitable gifts made by bequests outnumber all other methods of planned giving. A charitable bequest can be made as a specified asset, as a specific amount of money, or as a percentage of your estate or trust assets.
The advantages of bequests:
- Bequests can be revoked during your lifetime.
- Bequests are relatively inexpensive to establish.
- Bequests allow continued use of an asset during the donor’s lifetime.
- Bequests allow your heirs to take a maximum charitable deduction, in regards to the asset, for your estate.
Life Insurance Gifts
Life insurance policies will let you make a substantial donation to charity in the future by making a series of smaller donations now. The most common way to give using life insurance is to purchase a new life insurance policy and name a charity such as the North Carolina Museum of History as the irrevocable owner and beneficiary. You, the donor, would then make annual contributions to the museum in the amount of the insurance premium payments; you would also receive an annual income tax deduction in that amount. Upon your death, the museum would receive payment of the life insurance death benefit.
The advantages of a life insurance–based gift:
- A gift of life insurance does not take estate assets from other heirs.
- The life insurance value will not be included in the donor’s taxable estate.
Individual Retirement Accounts (IRAs)
Name the North Carolina Museum of History as a beneficiary, in toto or in part, of your IRA. At your death, the IRA balance that is directed to the museum is income tax free, since we are a 501(c)(3) tax-exempt organization.
The advantages of making an estate gift through your IRA:
- You can change IRA beneficiaries at any time, so the gift is revocable during your lifetime.
- The final distribution from the IRA is not reported to your estate or your heirs as taxable income, eliminating any income tax on the distributed income.
- The full value of the IRA can be used by the museum (because of its tax-exempt status).
- The IRA still provides income to you during your lifetime.
Charitable Remainder Trusts (CRTs)
Using a charitable remainder trust (CRT), you can receive a current charitable income tax deduction, while continuing to receive income from the asset, during your lifetime; the asset could then transfer to a charity, such as the North Carolina Museum of History, upon your death.
Charitable remainder trusts work well for donors who want or need income from their assets during their lifetime but do not want or need to pass the assets on to heirs.
The advantages of making an estate gift through a CRT:
- You can receive an income tax deduction for whatever portion of the assets you transfer to the trust.
- You continue to receive income from the trust (along with any advantageous tax treatment) during your lifetime.
- You maintain some control of the asset during your lifetime, subject to the terms of the trust agreement.
- Assets in the trust are removed from your taxable estate.
- Details of the CRT are determined by you, the donor, since it is the donor who establishes the trust.
Charitable Lead Trusts (CLTs)
Charitable lead trusts (CLT) are most appealing to donors who wish to pass assets to their heirs but do not need income from the assets themselves. This is accomplished by allowing a charity, such as the North Carolina Museum of History, to receive income from the donor’s assets for a specified time, often the remainder of the donor’s life, after which the asset is transferred back to the donor or the donor’s heirs.
The advantages of making an estate gift through a CLT:
- You may receive an income tax deduction for the transfer of assets into a CLT.
- You may not be taxed on the income earned and distributed to charity by the trust.
- You or your heirs can receive the assets back at the end of the trust period.
- A transfer of assets to a trust may create a discounted gift value, ultimately reducing the donor’s taxable estate value.
- Details of the CLT are determined by you, the donor, since it is the donor who establishes the trust.
Charitable Gift Annuities
A charitable gift annuity is a contract between a donor and a charitable institution, such as the North Carolina Museum of History.
The contract is initiated when you, the donor, make a gift to the charity; in return, you receive annual, quarterly, or monthly payments for life. The size of the payments depends on the donor’s age and the interest rates in force at the creation of the annuity. Each payment received is made up of a taxable portion of interest and a tax-tree return of principal.
The advantages of making an estate gift through a charitable gift annuity:
- Inexpensive for you, the donor, since the annuity is established by the charity.
- The charity receives a current gift; you receive a stable income for life, which will include a deductible, tax-exempt portion.
- If the annuity is funded with appreciated assets, the embedded capital gain will be distributed and taxable over the life of the annuity.
A donor-advised fund is a charitable-giving vehicle housed in a public charity and administered by a third party (such as a Community Fund or a Mutual Fund company) for the purpose of managing charitable donations on behalf of an organization, family, or individual. Donor-advised funds are the fastest growing charitable-giving vehicle in the U.S.
To initiate this vehicle, you will contribute an asset to a donor-advised fund in exchange for a current income tax deduction. You will then play an advisory role over the distribution of contributed assets; however, the third party administers the fund and has final authority over distributions.
The advantages of making an estate gift through donor-advised funds:
- A donor-advised fund is a relatively inexpensive way for a donor to create an ongoing charitable giving program.
- Donor typically receives an immediate income tax charitable deduction for the full amount of the contribution.
- Donor-advised fund offers professional management of assets.
- You retain an advisory role in naming which charities the funds should be distributed to.
The information above has been compiled from sources believed to be reliable at the time of this writing; however, no information is guaranteed to be accurate or complete. Any opinions expressed here are statements of judgment on this date and are subject to future change without notice. No one should act upon any tax information without professional advice from their own tax advisor.