If you read last month’s article, “Why the REF” (p. 13), written by Leslie J. Crofford, MD, president of ACR Research and Education Foundation (REF), announcing the REF’s new planned giving program, you may have asked yourself, “How can I benefit from this program?” The answer: The REF’s planned-giving program is designed to help you plan your legacy while supporting the mission of the REF—to improve patients’ lives through support of research and training that advances the prevention, treatment, and cure of rheumatic diseases. Put simply, you benefit monetarily, but—more importantly—you feel satisfaction because you helped ensure the future of rheumatology by making a charitable gift to the REF.
What’s Planned Giving and How Does It Work?
Planned giving incorporates estate planning, tax planning, and philanthropy to help individuals minimize their tax burden and achieve their charitable goals. The REF is equipped to educate you about techniques that can provide income tax and estate tax deductions, the avoidance of capital gain tax on appreciated assets, and, in some cases, income streams for yourself or your loved ones. The REF will also work with accountants and lawyers to help you implement planned giving vehicles.
A straightforward example of a planned-giving technique is a charitable remainder trust. A charitable remainder trust can transform a concentration of appreciated stock into quarterly cash payments and provide multiple tax benefits. Suppose a long-term investment has done well for you over the several years and has added to your net worth, but is otherwise not useful to you—it may produce a small dividend but the appreciation means that if you sold the stock, you would incur a large tax bill. A better option is to set up a charitable remainder trust and transfer the stock into the trust. There is no tax due since a charitable remainder trust is a tax-exempt trust, and you are able to claim an income tax deduction. Later, the stock is sold within the trust, again without incurring tax liability, and the proceeds are invested in a diversified portfolio.
Each year, the trust pays your named beneficiaries—either yourself and/or loved ones—a set percentage of the trust value, and when the trust term ends, usually upon the death of the last income beneficiary, the remainder is donated to the REF. Because you have given that asset away, it is no longer in your taxable estate so you avoid any potential estate tax liability for that asset.