Getting Started: Gifts of Cash

If you itemize deductions on your tax returns, the first tangible benefit of making a gift of cash to Saint Mary's University today is an income tax charitable deduction for the full value of the gift in most cases. The resulting reduction in income taxes payable lowers the net cost of the gift. If you are subject to state and/or local income taxes as well as federal, the combined marginal rate (after the federal deduction for those income taxes paid) should be taken into consideration in determining the gift's net cost.

If you don't usually itemize deductions, you may want to consider it for any tax year in which you make a sizable charitable donation. One technique used by people who have few itemized deductions is to alternate between years in which they take the standard deduction and make few charitable gifts, and the years in which they give double their usual annual philanthropic support and shift to itemizing.

Beware of the annual limitation on the use of charitable deductions claimed for gifts to public charitable organizations, which for any specific year is 50 percent of your adjusted gross income (AGI) for cash gifts. Any unused deductible amounts can be carried over and used for up to five additional years, if necessary.

If you predict that your estate will be subject to estate tax at your death, keep in mind that you receive a federal gift tax charitable deduction for the value of gifts of cash made during your lifetime. Since the value also is removed from your future estate, it completely eliminates the federal estate tax. This savings reduces the net cost of your charitable gifts.

Outright Gifts and Their Results

Getting Started: Gifts of Securities

A stock portfolio is often among the most valuable assets you own, and one that carries substantial capital gain—appreciation in value. The downside to assets that have increased in value over the years is that the federal government is prepared to levy taxes of up to 15 percent on your capital gain from securities. With careful planning, you can reduce or even avoid federal capital gains tax. We can show you how charitable giving may be one of your best defenses against capital gains taxes.

As stock prices increase, so do the taxes you owe on the capital gain, which are generally charged at a rate of 15 percent (5 percent if you are in the 10 percent tax bracket). But when you donate publicly traded stocks held long term (owned for more than one year) to a qualified charitable organization such as Saint Mary's University, you avoid all capital gains taxes. Plus, you may take the full fair market value of the stock gift as a charitable deduction on your income taxes. The maximum deduction you may take within a given tax year is 30 percent of your adjusted gross income. If you are unable to take the entire deduction in one year, you may carry the excess deduction forward for five additional years.

Even if you own stock you wish to keep in your portfolio, giving us the stock and using cash to buy the same stock through your broker provides the same income tax deduction with a new, higher basis in the newly acquired stock.

If you have stock losses, sell the stock yourself to realize the loss and take the allowable deduction for tax purposes. Then generate a charitable deduction by donating the cash proceeds of the sale to Saint Mary's University.

• The spread between the top federal tax rate applied to long-term gain and the highest tax rates applied to ordinary income is significant. The long-term capital gains tax rate is 15 percent for most assets (28 percent for some). Current tax rates for ordinary income exceeding specified amounts in each tax bracket are 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent. For taxpayers who fall within the higher tax brackets, long-term capital gains tax is more attractive than ordinary income tax.
• Estate and gift taxes are computed using the unified rate schedule, where the rate of tax is 45 percent.
• The tax on generation-skipping transfers of assets is a flat 45 percent, too. Should you pay capital gains tax now, instead of a higher gift or estate tax later?

• Tax deferral. There is no taxable gain on appreciation until an asset is sold or exchanged.
• Capital losses. Capital losses incurred can offset other taxable income.
• Excludable lifetime gifts to others. Gifts to heirs during your lifetime qualify for the gift tax exclusion of $12,000 per recipient per year (indexed for inflation) or $24,000 if your spouse joins in the gifts. The recipients, however, inherit the cost basis of the original owners.
• Stepped-up basis for heirs. Most appreciating assets held for distribution to heirs in the estate settlement process completely avoid the capital gains tax. If they are part of a taxable estate, however, the unified estate and gift tax will be on the higher appreciated fair market value. In larger estates, this future transfer tax may exceed a current capital gains tax and requires careful analysis.

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A Sure Way to Avoid Capital Gains Tax

If you sell appreciated assets you have held for more than one year, your gains are subject to a long-term capital gains tax—unless you donate them to a tax-exempt organization like Saint Mary's University.

Consider a foolproof strategy that offers not only immediate capital gains tax relief, but also a valuable, tax-saving deduction—and possibly even increased income. A gift to Saint Mary's University of securities or real estate you have held long term (more than one year) is deductible at full present fair market value with no tax on the appreciation, allowing you to make a significant gift now, while you are living and able to witness the difference your donation makes.

If you are unable to make a sizable outright donation now, however, one of our deferred giving plans may be the answer.

Trusts Ensure Life Income
You can use cash, securities or other property to fund a plan that gives you an income for life. Highly appreciated assets that generate low current income are ideal for this purpose.

One such plan is a charitable remainder trust. You avoid any up-front tax on the long-term capital gains your property has experienced, and you receive a substantial income tax charitable deduction equal to the present value of the remainder interest. The trustee can sell the assets without incurring any tax and then reinvest the proceeds to secure a higher return. This may allow you to receive a higher income than those assets earned before. After your lifetime, the remainder goes to Saint Mary's University for our use.

Please call The Office of Gift Planning at 507-457-6647, or e-mail us at giving@smumn.edu, for more information.

When to Donate Items That You Value Most

When deciding what charitable gift to make, consider the type of property you own. While your home may be the biggest investment, many people also own other types of assets: publicly traded stocks and bonds, commercial business holdings, undeveloped property, farmland, vacation homes and tangible personal property (such as artwork, jewelry or antique furniture). Did you know that all of these assets are regularly used to fund gifts?

Many of these assets have grown in value over the years. For example, a stock may be worth many times its cost basis. If a stock was worth $10 at the beginning of 1981 and has increased an average of 10 percent per year (growth plus reinvested after-tax dividends), it is worth $144 at the end of 2008. This means that an initial investment of $100,000, given the same growth assumptions, is worth more than $1.4 million.

Many closely held businesses have grown in value even more. Usually, the business owner has a zero cost basis in the stock, often has received no or few dividends and today owns an asset of almost unbelievable worth.

Turn It Into a Cost-Effective Gift
By the time people are ready to reinvest their appreciated stock, or retire and either sell their business or pass it on to their children, they find themselves in a bind. They cannot sell or transfer ownership without facing a tax on the appreciation—a capital gains tax.

Fortunately, it's also around this time of life that people are prepared to support their favorite charitable organizations, like Saint Mary's University. And it just so happens that most gifts of appreciated assets to Saint Mary's University or other charitable organizations are not subject to federal capital gains tax.

If you, too, are in this situation, make the gift of the asset itself, and not the after-tax proceeds. Many charitable organizations, including Saint Mary's University, accept many types of assets, and all of them accept liquid assets, such as publicly traded stocks and bonds.

Click the icon to request your FREE guide to gifts of appreciated property.

Tax Benefits of Giving Appreciated Property

No matter how tax legislation affects capital gains tax, it continues to be a factor in financial planning. For those with charitable interests, making gifts with long-term appreciated property instead of cash should always be considered.

Even if cash is readily available for a desired contribution, ownership of marketable property, either securities or real estate, should first be reviewed. If an asset (1) has been held for more than one year, (2) is appreciated in value and (3) otherwise will be sold, a gift of the property itself is likely to be more advantageous than writing a check.

Examples of Efficient Giving
Long-term capital gain property is an asset owned for more than one year, with appreciation in value that is subject to the federal capital gains tax when sold. If, instead, it is given to a qualified charitable organization like Saint Mary's University, it is deductible for its full fair market value, and there is no capital gains tax to pay.

If the asset otherwise is to be sold, now or in the foreseeable future, the federal capital gains tax avoidance is a tax savings to you. When added to the tax savings from the use of a charitable income tax deduction, the dual tax benefit reduces the net cost of your gift.

To illustrate, assume Lucy wants to make a gift of $10,000. Lucy has a marginal federal income tax rate of 28 percent and is not subject to state or local income taxes. The stock’s value is $10,000, with a cost basis of $4,000.

Cash vs. Stock Gifts
Value of desired gift	$10,000	$10,000
Marginal income tax rate	x .28
Tax savings from deduction	$2,800	(2,800)
Net cost of cash gift		$7,200
Capital gain if sold	$6,000
Capital gains tax rate	x .15
Capital gains tax avoided	$900	(900)
Net cost of stock gift		$6,300

In this example, using the stock instead of writing a check saves an added $900. A higher federal bracket, and any state or local income taxes, would further improve results.

Income-Producing Gifts Based on Appreciated Property
When charitable gifts are made through the use of charitable remainder trusts, funding the trust with long-term capital gain property also results in two tax savings—from a partial charitable income tax deduction and from avoidance of the up-front capital gains tax.

To illustrate, Jane, aged 75, is in the 35 percent federal income tax bracket. She made an investment many years ago in stock now worth $300,000, with a cost of $90,000. The stock dividends are only 3 percent, and she wishes to reduce her market risk.

Selling the stock would result in a 15 percent capital gains tax on $210,000 of long-term capital gain or $31,500. She uses the stock, instead, to fund a 6 percent charitable remainder annuity trust (CRAT), paying the $18,000 annuity in semiannual installments (doubling the amount of her dividends). Following are the results:

Funding a CRAT
Fair market value of funding asset		$300,000
Charitable deduction*	$145,242
Marginal federal tax rate	x .35
Ordinary income tax saved	$50,835	(50,835)
Capital gains tax avoided		(31,500)
Net cost of funding CRAT		$217,665

*Based on a 3.4 percent charitable midterm federal rate

Calculate how a charitable remainder annuity trust can benefit you.

Calculate how a charitable remainder unitrust can benefit you.

Click the icon to request your FREE guide to making gifts of appreciated property.

The Rewards of Making Charitable Gifts

Many people are surprised to learn that the gifts they make to charitable organizations, such as Saint Mary's University, can also bring personal financial benefits. To encourage philanthropy, federal law provides you a number of tax breaks for charitable gifts, depending on the type of asset you donate and the giving method you choose:

• Income tax deduction. If you regularly itemize deductions on your federal income tax return, the first tangible benefit from an outright charitable gift is an income tax charitable deduction. The deduction is limited for gifts of cash to an overall maximum of 50 percent of your adjusted gross income in any year; you may, however, carry the excess deduction forward for five years. There is a special 30 percent limitation on certain capital gain property.
• Capital gains tax avoidance. If you sell an asset that you have owned more than a year, you pay up to a 15 percent capital gains tax (28 percent for "collectibles") on any appreciation (plus any applicable state tax). By donating the asset instead, you eliminate the tax on any capital gain.
• Federal estate tax reduction. Any gift you make today reduces the value of your estate at your death. The result is a reduction in the federal estate tax, which might otherwise be due when your beneficiaries inherit your estate.

Case Study: One Gift, Many Benefits
Donor Profile: Terri owned $10,000 worth of stock in a manufacturing company that she wished to give to a charitable organization.

Gift Vehicle Used: Outright gift of stock.

Benefit to Charitable Organization: Used the proceeds from the sale of the stock to establish a fund in Terri’s name.

Benefit to Donor: Terri’s greatest reward is knowing that she has made a lasting difference in the lives of others.

Getting Started: Gift Strategy Using Closely Held Stock

At first, the idea of donating some of your closely held stock may sound a bit strange. After all, how could we, or any other charitable organization, benefit from such a gift?

Let's assume you're unable to make a substantial cash contribution out of your own pocket, but there is cash in the corporation from retained earnings. These have been taxed on the corporate level and, if distributed as dividends, would be taxed again on the individual level.

You cannot or will not sell the closely held stock to the public, but you decide to give some shares to Saint Mary's University. We may then present the stock to your corporation for redemption. This redemption can be accomplished by using retained earnings for the purchase, letting us receive much-needed funds.

Are there any problems with this plan? The Internal Revenue Service has ruled that you cannot legally bind a charitable organization to go through with the redemption at the time it receives the shares. There can be no prearranged contract or agreement for the corporation to buy the stock. But the IRS accepts a tax court holding that a charitable organization may independently offer the donated stock for redemption.

A Typical Example
Phil owns virtually all of the stock in a company he founded. Its current valuation is $2 million. Phil's cost basis is zero because his original investment has long since been written off for tax purposes.

The corporation has $200,000 in retained earnings, and Phil is concerned that the IRS may question the retention of this amount and decide to impose a second tax on it. Moreover, he has wanted to make a major contribution to us. So, Phil gives us $200,000 worth of his stock, and both he and Saint Mary's University accomplish their goals.

• He receives an income tax deduction of $200,000. (Note: When you claim a charitable contribution deduction for a donation of closely held stock valued at more than $10,000, its deductibility depends upon you obtaining and attaching to your tax return a qualified appraisal of the stock.)
• He avoids federal taxes on capital gains plus the additional state taxes.
• His corporation solves its potential accumulated earnings problem, including a potential federal penalty tax.
• He retains full control of his company.
• The charitable organization receives $200,000.

Gifts of Securities: Closely Held Stock

A gift of closely held stock usually represents a minority block of the total outstanding shares. After obtaining a qualified appraisal of the shares (required if the gift's value is above $10,000) that takes into account a discount for the minority interest, the desired gift is made. It is deductible at the appraised value and produces income tax savings at a marginal rate of, say, 35 percent. For a gift valued at $50,000, the maximum income tax savings is $17,500.

As a charitable organization, Saint Mary's University normally does not invest in closely held corporations; we may accept the gift as long as there are no preconditions on what we will or will not do with the stock. The corporation normally does not welcome outside stockholders and is likely to offer to redeem the stock at its appraised per share valuation, and preferring to have cash to invest, we likely would sell.

Has the gift cost the sole stockholder $32,500 ($50,000 worth of stock minus $17,500 in tax savings)? Not if the corporation redeems the stock and retains it as treasury stock. The donor is still the sole stockholder. With the reduction in the number of shares outstanding, all held shares went up in value to maintain the same total ownership of equity in the firm.

The only cost to the donor is the after-tax income realized had the cash come from the company as dividends or salary, minus the tax savings from the deduction. This can net out at about one-fourth of the value of the gift to us.

A caution: There can be no prearranged contract or agreement for Saint Mary's University to sell the stock or for the corporation to buy it if the donor wishes to avoid being taxed on the gain.

A variation of the plan is for the stock to be repurchased from Saint Mary's University by employees or younger family members.

Please contact The Office of Gift Planning at 507-457-6647, or via e-mail at giving@smumn.edu, for more information.

Getting Started: Gifts of Retirement Plan Assets

Like many Americans, you are probably aware that the accumulation of assets in your retirement plan is the basis for a financially secure future. To preserve your retirement assets after your lifetime, consider the benefits of using them in a totally different way.

Retirement accounts are often exposed to income taxes and estate taxes, at a combined marginal rate that could rise to 65 percent or even higher on large, taxable estates. Yet many of these taxes can be avoided or reduced through a carefully planned charitable gift.

Other considerations come into play when deciding to use retirement plan assets for charitable giving. Your account can pass directly to a charitable organization as your primary beneficiary, or it can be transferred to a deferred giving arrangement that will pay an income for life to a family member, after which the remaining assets pass to the organization. You might even consider a deferred gift that is designed to pay a life income to you.

How Retirement Accounts Are Taxed
Qualified retirement plans are those that receive favorable income tax treatment during an employee's lifetime. No income tax is due on the funds as contributed, and no income tax is due on the earnings and appreciation while in the plan. You pay taxes on the funds only when you receive them. Such plans come in many forms: a defined benefit or contribution pension plan, money purchase pension, profit-sharing plan, annuity plan, 401(k) or 403(b) plan, stock bonus plan, Employee Stock Ownership Plan (ESOP) or simplified employee pension (usually a SEP-IRA) from your workplace, and Keogh accounts and Individual Retirement Accounts (IRAs) you set up for yourself.

Generally, the undistributed balance of qualified retirement plans is fully includable in your gross estate for estate tax purposes. Since the funds in retirement accounts usually represent deferred compensation that has not been subject to income tax, giving the accounts to individual heirs exposes the funds to income taxes. Your retirement dollars can be seriously depleted by this double taxation.

If an IRA owner dies before reaching the required beginning date (i.e., the date a person must begin receiving distributions from his or her retirement plan), the plan benefits may be distributed over the life expectancy of a "designated beneficiary." The designated beneficiary refers to a person, not the owner's estate or certain trusts.

If the IRA does not have a designated beneficiary, then the IRA must be distributed within five years. If the owner dies after the required beginning date, then the entire balance can be distributed over what would have been the owner's remaining life expectancy or over the designated beneficiary's remaining life expectancy.

Beneficiaries who are not designated beneficiaries should have their share distributed to them by Sept. 30 of the year following the year of death. This allows the designated beneficiaries to stretch out the receipt of distributions from the plan over their lifetimes and, hence, defer the income taxes, too. Of course, the beneficiary always has the option to speed up his or her distributions or to take the balance in a lump sum at any time.

Only a surviving spouse can roll over an inherited distribution to his or her own IRA, called a Spousal Rollover IRA, and further delay receiving distributions until his or her own required beginning date; all other beneficiaries must take distributions and are taxed according to the above rules.

A qualified retirement plan that is not an IRA may make a lump sum benefit payable to the beneficiary. If the plan allows, however, effective Jan. 1, 2007, a beneficiary who is not the spouse of the deceased account owner can move his or her inherited funds into an "inherited IRA account" and take distributions according to the above rules for nonspouse designated beneficiaries.

Income in Respect of a Decedent
The IRC labels estate assets that were not previously included in a decedent's taxable income as items that generate "income in respect of a decedent (IRD)." In plain language, these are assets that would have been taxed as income had the recipient lived long enough to receive them. In addition to qualified retirement plans, IRD items include accrued interest on certificates of deposit and savings bonds, unused vacation pay, non-qualified stock options, deferred payments of capital gains and other undistributed but earned income. Among all your assets, the largest IRD source will probably be your retirement accounts.

By donating retirement assets, those funds avoid both estate and IRD taxes, and you can be certain that 100 percent of the balance of your retirement funds will support your philanthropic objectives. Generally, the cost to individual heirs will be modest.

Example: Bill is considering adding a charitable bequest to his will, with the residue of his estate passing to his children. Instead, he should name Saint Mary's University as beneficiary of his profit-sharing account. The death benefit passing to the organization will not only qualify for the estate tax charitable deduction but will also pass free of any income tax obligation. His children will benefit from this change because, rather than getting the profit-sharing account proceeds that are subject to income tax, they will receive other assets of his estate that are free of income taxes.

For example, Bill owns stocks that have a low cost basis. He can secure a further tax advantage by leaving these to his children. They will receive a step-up in the income tax basis to the date-of-death value of the stocks. Since the basis is the amount from which any gain or loss will be figured when the new owner ultimately sells the property, this means there will never be a tax on the appreciation that occurred during his lifetime. The person who inherits the property will owe tax only on appreciation after the time of Bill's death.

How to Donate Your Retirement Account
The simplest way to leave the balance of a retirement account to us after your lifetime is to list us as the beneficiary on the beneficiary form provided by your plan administrator. Never make a beneficiary change, however, before discussing your desires with your professional advisor. For an IRA or Keogh plan you administer personally, notify the custodian in writing and keep a copy with your valuable papers.

If you are married, your surviving spouse is entitled by law to receive the entire amount in these qualified plans: money purchase pension, profit-sharing plan, 401(k) plan, stock bonus plan, ESOP or any defined benefit or annuity plan (though not an IRA). In order for the assets to be transferable to Saint Mary's University, your spouse must execute a written waiver (even though you may designate a charitable organization as beneficiary on your employer's forms). Your spouse can execute one after your death, if necessary. In that case, the document must also include a qualified disclaimer.

If you prefer to make your spouse the primary beneficiary of the retirement account, you can name Saint Mary's University as the secondary beneficiary.

Perhaps you want your children to benefit from your retirement account, too. In that case, you might designate a specific amount to be paid to us, before the division of the rest among your children.

Tax Precautions and Options for Charitable Transfers
Being cautious in the way you designate your charitable bequest will ensure that you are not setting your estate up for some disadvantageous tax consequences.

Calculate how a charitable remainder annuity trust can benefit you.

Calculate how a charitable remainder unitrust can benefit you.

Click on the icon to request your FREE guide to gifts of retirement plan assets.

Retirement Benefits: Who Gets the Rest?

You benefit from your retirement plans as long as you live. After that, who gets the remainder?

Of course, annuity payments generally last only during your lifetime (and possibly your spouse's, if you're married). But the assets of other plans, such as an IRA, Keogh, or 401(k) account, may not be fully distributed. The remainder could be substantial.

The choice of an ultimate beneficiary is yours. Naturally, your decision will depend on your family circumstances. If you're married, you probably want your spouse to benefit. After that, you may want to help your children.

A Charitable Gift Option
Once you've provided for your family, you have another option: a gift to Saint Mary's University. There's no better testimonial to your heartfelt concern for our ongoing efforts to serve others. To make sure you don't shortchange your family, consider these possible gift options:

• Designate a specific amount to be paid to us, before the division of the remainder among family beneficiaries.
• Make us the beneficiary of part or all of the balance remaining after your spouse's lifetime.
• If you have no relatives you want to benefit, name Saint Mary's University as your primary beneficiary.

Click the icon to request more information about retirement plan assets.

Know Your Retirement Plan Taxation

Retirement plan assets are favored in our tax code. These plans include pension plans, profit-sharing plans, stock bonus plans, 401(k) plans, 403(b) plans and IRAs. Their earnings grow tax deferred, and often the contributions are made with pretax dollars. The tax favored status of these plans can enhance the size of your retirement fund substantially over time.

Let's do a quick comparison to illustrate. Judy plans to save $5,000 each year for 30 years for her retirement. She can participate in a qualified retirement plan, or she can choose taxable accounts such as an ordinary savings account or a mutual fund. Either way, we'll assume that the money is invested in assets that earn a total return of 7.5 percent per year.

If Judy puts the money in a retirement plan, so that she is not taxed on the $5,000 contributions and taxes aren't imposed on the growth, she will accumulate more than $550,000.

Instead, if Judy's investments are in a taxable account and not in the retirement plan, and her contributions and earnings are taxed each year at her 28 percent federal tax bracket, her 30-year total will be only about $270,000. This is much less than tax-free growth, and it illustrates the effect of taxes.

The flip side is that the $270,000 account can be accessed at any time without any tax consequences. On the other hand, the $550,000 account is taxable to Judy as she receives distributions from the account. Plus, IRA penalties apply if she makes a withdrawal before age 59 1/2 with limited exceptions.

When the Taxes Do Kick In
Qualified retirement plan distributions are taxed to you (normally at your ordinary income tax rate) as they are removed from the plan.

The exception to this is the Roth IRA. The Roth IRA is almost the reverse of the standard IRA. Taxpayers and their spouses are able to make nondeductible contributions of up to $5,000 in 2008, yet the distributions are typically not taxed. Catch-up contributions up to an additional $1,000 are allowed for individuals who have attained age 50.

Regardless of the type of plan, however, retirement plan assets are subject to taxation in a person's estate at death. They potentially face an estate tax and (with the exception of the Roth IRA) an income tax. This means that special planning is in order if you wish to pass the remainder of your retirement plan to heirs.

The most popular option is to name a charity as beneficiary of all or a portion of your retirement account. Whatever amount is left to charity will avoid income and estate taxes.

Another tax-smart option for some people is to arrange for a testamentary charitable remainder trust to be established upon your death using the assets in a retirement plan. The trust could pay an income stream to selected beneficiaries and after their lifetime, it pays the remaining balance to Saint Mary's University.

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Preserve Your Retirement Plan Assets

And Shield Your Heirs From Undue Taxes
Do you have a significant amount of money in an employee benefit plan, an IRA or a tax-sheltered annuity? Are you hoping to pass those assets to your loved ones through your estate? While the huge growth in retirement assets during the last decade may have made you wealthier than you had originally planned, this growth also makes your estate more vulnerable to taxation.

A qualified retirement plan usually comprises deferred funds that have yet to be included in taxable income. Because those assets have not been taxed as income previously, passing them to individual heirs at your death will then subject them to both income and estate taxes, depending on the size of your estate. In some cases, taxes can take up to 65 percent.

Yet there is no need to have taxes eat up money to which you and your heirs were entitled.

Charitable Remainder Trust
One way to avoid the double taxation is to leave a retirement asset to a charitable remainder trust at your death. The trust will provide income to one or more beneficiaries for their lifetimes or a term up to 20 years. At the end of the trust term, the remainder goes to a charitable organization, like Saint Mary's University. The retirement account is included in your estate, but the estate will receive an estate tax charitable deduction for the remainder value of the trust. If the sole income beneficiary is a spouse, generally the entire retirement plan will escape estate taxes.

Calculate how a charitable remainder annuity trust can benefit you.

Calculate how a charitable remainder unitrust can benefit you.

• Because most retirement plans are funded with pretax income, distributions made during life, even to charitable organizations, are taxed at ordinary income rates to the donor.
• Federal law requires that your spouse consent to the transfer of your retirement plan (although it doesn't apply to IRAs) upon your death to benefit a charitable organization like Saint Mary's University.

Click the icon to request your FREE guide to gifts of retirement plan assets.

Estate Planning With Bequests

You have several smart choices to direct the maximum inheritance to loved ones after you are gone. But if your estate is sizable, minimizing the federal estate tax stands head and shoulders above all others.

Consider a Charitable Bequest
By making bequests of particular assets to Saint Mary's University, which is exempt from federal estate taxes, you can actually preserve more of your estate for the benefit of loved ones. For example, IRAs and other retirement plan assets are taxed twice at death, first as part of your taxable estate and second as income to the beneficiary. Rather than leaving IRA or retirement plan assets to family members, consider the following alternative.

Example: Betty plans to leave $250,000 to her niece, Karen, and $250,000 to Saint Mary's University. Among her assets, Betty owns a $250,000 IRA. If she leaves the IRA to Karen, it will be subject to estate taxes (up to a maximum rate of 45 percent in 2008) and income taxes at Karen’s marginal rate (25 percent). Instead, Betty plans to leave the IRA to us and less tax-burdened assets to Karen. Thanks to the unlimited estate tax charitable deduction, no estate tax will be levied on the IRA. And because our organization is tax-exempt, we won’t owe income tax either.

Please contact The Office of Gift Planning at 507-457-6647, or via e-mail at giving@smumn.edu, for more information.