Pathways to Giving
The Lincoln University Foundation provides several special opportunities for donors to make contributions to the University. The Office of University Advancement will gladly assist donors and their attorneys and financial advisors in selecting a method that best meets their needs.
At LU, we believe that there are compelling reasons for every one of our alumni and friends to give when the time is right. From outright gifts, to bequests, to life-income gifts, there are many ways to tailor a gift in the best way for your circumstances. Some planned gifts can provide income for life to the beneficiary you name, and some allow you to unlock the income potential from a low-yielding asset. Most planned gifts receive favorable tax treatment, and all give you the satisfaction of investing in LU’s future.
Make a Gift! When you decide to give, you'll have choices to make:
Where should your gift go?
You can designate your gift to a specific area or you can give an unrestricted gift for the University to use for its greatest needs. Look into University priorities, the President’s Unrestricted Fund and school/unit priorities.
What type of gift should you make?
There are many ways to give, including some that provide great financial benefits to you and your family. Outright gifts and planned gifts present many options.
How will we recognize your gift?
We are proud of our supporters and have identified giving clubs and other forms of recognition to say thank you.
How can you make a gift?
You can write us, send us an email, or call the Office of University Advancement- whatever is easiest for you! In this document, we will define several of the options for giving to LU and explain some of the language that may often be confusing. We hope that you will find the information useful.
BENEFITS OF GIVING:
Giving to the University benefits its students, faculty, and staff. You benefit from making a gift in many ways, from the satisfaction of supporting a first class university to receiving an income tax charitable deduction.
There are many additional benefits of giving, depending on what you give and how you give it. We have listed some of these on the next page:
• Tax Savings: These increase when you give non-cash assets such as appreciated real estate or securities. Gifts of cash are fully deductible up to 50 percent of the donor's adjusted gross income. Any excess over the 50 percent deduction ceiling can be carried forward for up to five additional years. Gifts of appreciated assets are fully deductible up to 30 percent of the donor's adjusted gross income for that year. Any excess of the 30 percent deduction can be carried forward up to five additional years.
• Retirement income: If you need it for yourself or others, there are charitable remainder trusts and charitable gift annuities that allow you to give an asset to LU now and receive income for the rest of your life. After your death, the University uses your gift for the purpose you specified. You will find more information on these below.
• Full Control of Your Assets Now, Reduction in Estate Taxes Later: Making a bequest to LU allows you to retain ownership and control of all your assets during your lifetime when you may need them. A charitable bequest may also reduce the size of your taxable estate.
Cash Gifts: A gift of cash (most often made by check) is the most popular type of charitable gift. The gift is considered made on the date it is hand-delivered or a check is mailed (postmark on envelope). A contribution on a credit card (American Express, Diner’s Club, Discover, MasterCard, Visa) can be deducted when the charge is made, even though the bill is not paid until a later time. You can also make a gift through an automatic bank draft. Because of the availability of the income tax charitable contribution deduction, the net cost to you of a cash gift is lower than the face value of the gift. Gifts of cash are fully deductible up to 50 percent of your adjusted gross income. Any excess over the 50 percent deduction ceiling can be carried forward for up to five additional years.
Checks should be payable to: The Lincoln University Foundation, Inc. and mailed to
820 Chestnut St.
Post Office Box 29
Jefferson City, MO 65102
PLANNED GIVING
Many of us give annually and want to do more. But how do we make a large enough gift to fund a scholarship, professorship, library fund, or teaching award while keeping what we want to provide for ourselves in retirement or support a family member? It takes planning but it can be done!
Bequests: Making a bequest to LU allows you to retain ownership and control of all your assets during your lifetime when you may need them. A charitable bequest may also reduce the size of your taxable estate. Gifts to LU through a will are fully deductible for estate tax purposes, and a bequest may be included in a new will or added to an existing will through a simple codicil.
There are several types of bequests to consider:
• Specific bequest: states a specific amount or asset. It may be a gift of cash, securities, or a gift of real estate or tangible personal property (for example: artwork, antiques, and jewelry or coin/stamp collections).
• Residuary bequest: names LU to receive all or a percentage of the remainder of the estate after specific bequests has been fulfilled.
• Contingent bequest: takes effect only if all primary beneficiaries named in the will are predeceased. Declaring LU a contingent beneficiary can prevent the property from going to the state if there are no heirs.
• Testamentary trust: designates that part or all of the estate is left in a trust, with income and/or principal paid to LU.
You may choose to designate your bequest to benefit any area of the University, or the bequest may be unrestricted to be used where the need is greatest.
Examples of sample bequest language:
Unrestricted Gifts
"I give, devise and bequeath __________ percent (___%) of my residuary estate [or, the sum of __________ Dollars ($_____) to Lincoln University Foundation, Inc. (the "Foundation"), located in Jefferson City, Missouri, to be used for the unrestricted needs of Lincoln University of Missouri at Jefferson City in any manner in which the Board deems appropriate."
Named Endowment Funds
"I give, devise and bequeath __________ percent (___%) of my residuary estate [or, the sum of __________ Dollars ($_____) to Lincoln University Foundation, Inc. (the “Foundation"), located in Jefferson City, Missouri, to establish "The ___________________Fund." The Board of Directors of the Foundation shall treat this bequest as part of its endowment, and the income paid out of the Fund shall be used for the benefit of Lincoln University of Jefferson City in any manner in which the Board deems appropriate."
Named Expendable Funds
"I give, devise and bequeath __________ percent (___%) of my residuary estate [or, the sum of __________ Dollars ($_____) to Lincoln University (the "University"), located in Jefferson City, Missouri, to establish "The ____________________ Fund." The Fund shall be expended for the benefit of Lincoln University in any manner in which the Board of Directors of the University deems appropriate."
Named Scholarship Funds
"I give, devise and bequeath __________ percent (___%) of my residuary estate [or, the sum of __________ Dollars ($_____) to Lincoln University Foundation, Inc. (the "Foundation"), located in Jefferson City, Missouri, to establish "The ___________________Scholarship Fund." The income paid out of the Fund shall be used to provide scholarship awards to students enrolled at Lincoln University at Jefferson City."
Restrictions: If you wish to restrict the use of the funds, we encourage you to contact the Office of Institutional Advancement for assistance, and we request that you include the following paragraph:
"If, in the opinion of the Board of Directors of the Foundation, all or part of the gift cannot appropriately be used in the manner herein described, the Board may use the gift for other purposes as nearly aligned to the Donor's original intent as the Board deems appropriate under the circumstances."
The Charitable Remainder Trust: A charitable remainder trust is similar to other types of trusts except that it has a charitable beneficiary. A donor transfers property irrevocably to a trust and specifies how the income and principal are to be distributed. The trust can be funded with cash, real estate or ideally, with long-term, highly appreciated securities to avoid capital gains on the transfer to the trust. The trustee**, who is designated by the donor, manages and invests the assets and pays to the beneficiary an income of usually between 5 and 8 percent for life or for a term of years.
There are two types of charitable remainder trusts: a unitrust which pays a variable income based upon a percentage of the fair market value of the trust's assets, as revalued annually, and an annuity trust which pays a fixed amount each year -- at least 5 percent of the market value of the assets at the time the trust is established. Furthermore, the Internal Revenue Code provides three variations of a unitrust.
• Standard Unitrust - provides for payout to the beneficiary of the fixed percentage specified in the agreement even if it is necessary to invade principal.
• Income Only Unitrust - a variation of the standard unitrust, provides for the payout to the beneficiary of either the net income of the trust or the fixed percentage specified in the agreement, whichever is less.
• Income Only Plus Makeup - the income only unitrust may include a "makeup" provision that allows the trust in any subsequent year in which the income exceeds the stipulated percentage to distribute the excess income to makeup for any deficiencies that may have occurred in prior years. A deficiency in any year represents the difference between the stated percentage and the net income.
An annuity trust is different in that it provides for payment to the income beneficiary of an amount that is fixed and is predictable. The payment must be at least 5 percent of the market value of the assets and is valued only at the time the trust is established. As with the unitrust, a high payout rate inhibits growth of principal and reduces the charitable deduction.
**Trustee: In most situations, the individual setting up a charitable remainder trust is free to name the trustee. It can be an individual such as a friend, a family member, a legal advisor or financial advisor, an institutional trustee like a bank or trust company or the donor can even serve as trustee. In certain limited situations, Lincoln University of Missouri Foundation, Inc., may agree to serve as trustee with the investment and management handled by our investment office.
• Legal Issues: Although the Office of Institutional Advancement is happy to provide information and sample trust agreement forms, the University cannot provide legal advice. The establishment of a charitable remainder trust is a significant financial decision, and the University cannot advise you on the appropriateness of a gift for your individual circumstances. The decisions will be for you and your advisors to determine. Additionally, it will be your responsibility to have your own attorney set up the charitable remainder trust documents at your expense.
• Beneficiary: You may name yourself, your spouse, or other persons to receive the income from the trust. It is also possible to designate LU as one of the income beneficiaries as long as there is at least one non-charitable income beneficiary. This last option may be an excellent opportunity to make a current gift to LU while also planning a gift for the future.
• Remainder Minimum: In The Taxpayer Relief Act of 1997, Congress passed a law requiring a minimum 10 percent charitable remainder interest for unitrusts and annuity trusts established after July 28, 1997. The value of the remainder now must be at least 10 percent of the net fair market value of the property transferred in trust. For unitrusts, the 10 percent interest is measured on each transfer to the charitable remainder trust. A charitable remainder trust that meets the 10 percent test on the date of transfer will not subsequently fail to meet the test if interest rates have declined between the trust's
creation and the death of a measuring life.
• Remainder Designation: LU is grateful to be named as a remainder beneficiary of a charitable remainder trust, and the University adds these gifts to its list of future expectancies. In order for the fair market value of a charitable remainder trust to be recorded in our academic gift totals and added to a donor's gift record, the remainder designation must be irrevocable; this means that the donor relinquishes the right to change the remainder beneficiary.
The Charitable Lead Trust: The charitable lead trust is the reverse of a charitable remainder trust. The income generated from assets placed in trust is paid to the University for a period of years. At the end of the trust term, the principal either returns to you or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren).
By establishing such a trust, you, in effect, "lend" the asset to LU for the term of the trust, and you may claim a charitable tax deduction for making a lead trust gift.
The Charitable Gift Annuity: A charitable gift annuity is a type of life income gift that pays a fixed dollar amount for life in exchange for an irrevocable gift to LU. The minimum initial contribution is $5,000. The donor’s age (one-life annuity) or the donor’s age and the age of another beneficiary (two-life annuity) determine the amount of income. The maximum rate of return on an annuity is 9.2 percent, which represents the rate received if the income beneficiary is 80 years old or more.
A gift annuity qualifies for immediate income tax benefits. A portion of the gift is tax deductible as a charitable contribution, and a portion of the income received each year is tax-free. Furthermore, if a gift annuity is funded with long-term appreciated securities, the donor may also receive additional tax advantages. A portion of the capital gain on the appreciation is avoided. In addition, any reportable capital gain is spread over the donor's life expectancy rather than all in the same year.
Life Insurance: A gift of life insurance can be made to LU. You have several options:
• make LU the beneficiary of an existing policy and earn an estate tax charitable deduction;
• make LU the owner and beneficiary of an existing policy, thus removing it from your taxable estate and earning an immediate income tax deduction approximately equal to the cash value of the policy (future premiums are tax deductible).
• take out a new policy with LU as the owner and beneficiary (all premiums payments are tax deductible);
• use in conjunction with a life income gift to "replace" for your heirs an asset that you have given to LU.
Retirement Plan Income: Tax-deferred retirement plan assets are great sources of retirement income but not always a good choice for making gifts to children and grandchildren. Friends of LU may consider using retirement plan assets to endow a scholarship or a professorship or to make a significant and meaningful gift that will support LU into the future. And, because of the estate tax treatment of retirement plan assets, the "cost" of the gift to your estate and heirs is often relatively small.
Retirement plan assets include assets held in Individual Retirement Accounts and assets held in accounts under 401 (k) Plans, Profit Sharing Plans, Keogh Plans and 403 (b) Annuity Plans. Income taxes on retirement plan assets are deferred, but not avoided. Thus, as the account owner or the account owner’s spouse withdraws these assets during retirement, they are subject to income tax. In addition, retirement plan assets left to children, grandchildren and other beneficiaries at the death of the account owner are subject to both income tax and estate tax.
Potential Tax Hit of 75% or More
The combination of income taxes and estate taxes can result in a tax-hit equal to 75% or more of the retirement plan’s assets. If $1 million in retirement plan assets is left to children and grandchildren, the amount they receive, after taxes, could be less than $250,000. On the other hand, if $1 million in retirement plan assets is left to LU, the entire $1 million will be available to fund your favorite programs. If you prefer, LU will establish an endowment in your name, and income from the endowment will support LU in perpetuity. You can specify the purpose of your gift and the school, department or unit that will benefit from your
generosity. We will work with you and your advisors on a gift that is personally satisfying and beneficial for you and for the University.
Unrestricted Gifts: Gifts that are unrestricted in purpose provide the greatest flexibility to LU. These gifts allow the President and the Board of Directors to direct resources where the need is greatest. You may also restrict your gift to a particular area on campus, such as to the department where you received your degree, to need-based scholarships, or to one of any number of worthy funds.
OUTRIGHT GIFTS:
An outright gift is just as its name implies: a gift transferred immediately from you to LU. This category can include cash, securities, tangible personal property (gifts-in-kind) or real estate.
Matching Gifts: More than 1,000 corporations and businesses now have programs to match employee gifts of cash either in whole or in part. In some cases, gifts from spouses, directors and retired employees are matched. We urge you to explore this possibility as it can double or, in some cases, triple a gift. Ask your employer about it.
Appreciated Assets: A contribution of long-term appreciated assets to LU entitles you to an income tax charitable contribution deduction equal to the fair market value of the securities at the time of the gift. And you avoid capital gains tax on any appreciation of those securities. Gifts of appreciated assets are fully deductible up to 30 percent of your adjusted gross income for that year. Any excess of the 30 percent deduction can be carried forward up to five additional years. When making a gift of long-term appreciated assets, you save twice – on income tax and capital gains tax. You get a charitable deduction for the full fair market value of the gift. In addition, you save the capital gains tax that would otherwise be due if you sold the appreciated asset.
Valuation: Securities are considered donated to the University on the date the certificate
and stock power pass unconditionally from your control (the postmark date if mailed or the date on which we receive an overnight delivery package) or the date the securities are transferred directly to a LU account. For listed securities, the value of the gift is the market value of the stock calculated by taking the mean between the high and the low quotations on the date the gift is donated.
Closely Held Stock: If you contribute closely held stock to LU, you are allowed an income tax charitable contribution deduction for the fair market value of the stock. You also will avoid the potential capital gains tax on any appreciation in the value of the stock. At a later date, the corporation may offer to purchase the stock from LU for cash. As long as LU is not legally obligated to sell the stock to the corporation, the transaction should produce no adverse tax results.
Real Property: You can contribute real property to the University, either as a bequest or, more commonly, by a lifetime transfer, and realize significant tax benefits. The University looks at possible gifts of property on a case-by-case basis. It is a detailed process but very workable and the rewards are great. Gifts of real property can consist of almost any type of property: a personal or recreational residence, a farm or ranch, a commercial building, subdivision lots or any undeveloped parcel of land. The gift can be for all of your interest in the property or an undivided fractional interest. Individual charitable goals and financial needs determine which of the following methods of giving real property is most appropriate for your situation.
Outright Gift: You transfer the property by deed to the LU of Missouri Foundation and it is subsequently sold unless there is a special reason for holding the particular parcel of real property.
Life Income Gift: Real property is transferred to a charitable remainder trust where the trustee sells it. The income is paid to you and/or other named beneficiaries. The income paid to the beneficiaries for life depends on the net proceeds realized on the sale of the real property in combination with a previously agreed upon rate of return. At the death of the last of the life beneficiaries, the assets of the trust pass to the Lincoln University Foundation, Inc.
Life Tenancy Gift: In very limited situations, ownership of the real property may be transferred to the LU Foundation, but you retain the right to live on the property for your lifetime. You receive an income tax charitable contribution deduction for the present value of the remainder interest of the gift. Upon the death of the "life tenant," the property can be sold or used by the LU Foundation.
Personal Property: The University's Library and other facilities are greatly enriched by gifts of personal property such as rare books, manuscripts, paintings, artifacts and other art objects.
Benefits: For contributing a gift of personal property, you are entitled to an income tax charitable contribution deduction amounting to the full fair market value of the object, provided the use of the object is directly related to the University's tax-exempt purposes. If the University does not use the gift, the charitable contribution deduction for tax purposes is limited to the initial cost of the object rather than the fair market value. In either case, the deduction is limited to 30 percent of your adjusted gross income, with a five-year carryover of the excess deduction.
Endowed Funds: An endowed gift is one in which the original principal is never invaded; the gift exists in perpetuity. Endowment funds are wonderful ways to support a school, department or unit on campus. Endowments are generally funded within three years of the initial contribution, and income paid out of the fund is distributed to the benefiting area on an annual basis. There is no minimum limit for donated gifts to already existing endowments including the University's Unrestricted Endowment Fund, but the minimum amount for establishing an endowed scholarship fund within the University or the Lincoln University Foundation is $10,000. The University also has minimums for establishing other types of endowed funds such as fellowships and professorships. You may also designate your life income gift to support an endowment fund at the end of your life. Popular ways to support the University are through the establishment of a scholarship or professorship.
Investment Policy: The University’s investment management firm calculates the yearly payout rate for endowment funds in accordance with the policy set by the Board. In order to insure a stable, growing payout and to insure growth of the principal, the Endowment pays out income according to an inflation-adjusted formula. Thus, in high yield years, excess income is added to principal, and in low yield years, payment continues in spite of negative circumstances. The Board of Directors for the LU Foundation has the responsibility for setting the payout rate. Please know that the Office of Institutional Advancement is a resource for you. We are available to assist you and your advisors as you consider the many opportunities presented in this booklet so that you can accomplish your personal goals as well as making a satisfying gift to the University.
(For further information e-mail: advance@lincolnu.edu; 1-800-856-3707)
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