Music from Angel Fire has established the Legacy Society to recognize the generosity of individuals who make provisions in their wills or estate planning to benefit the Festival. While it will always be necessary to make annual appeals, the growth of an endowment is an essential element in sustaining and enhancing the quality of the music experience in the future.
Planned Giving provides you with the means to achieve financial goals, such as additional income, tax-free income, income to a family member or friend, or tax savings.
A planned gift can help you achieve the following objectives
- Bypass capital gains
- Increase current income
- Reduce current income taxes
- Reduce federal estate taxes
- Conserve future assets for your heirs
Planned Giving can take many forms
- Trusts through estate planning (Charitable Remainder Trust; Charitable Lead Trust)
- Charitable gift annuity (deferred gift)
- Gifts of life insurance
- Gifts of personal residence or other real estate
CHARITABLE GIFT ANNUITY
A charitable gift annuity is part gift and part annuity. It is a fixed income plan, which is essentially a contract between a patron and the Festival. It enables patrons to make a generous gift to the Festival, while providing them with a high, fixed, guaranteed income for life. Charitable gift annuities may be established to provide either immediate payments or deferred payments to the donor themselves or to another beneficiary named by the donor. Patrons will also be entitled to a charitable income tax deduction based upon the age of the beneficiary and established annuity rates. In addition to the fulfillment of charitable objectives and tax benefits, gift annuities offer freedom from investment worries and management fees.
CHARITABLE REMAINDER TRUSTS
Charitable Remainder Trusts also enables a patron to contribute to the future of The Festival, retain lifetime annual payments and generate significant tax benefits. However, these agreements are drafted to meet the personal financial requirements of the patron. Charitable Remainder Trusts are especially attractive to patrons who hold highly appreciated and/or low-yield investments, as they permit conversion of those investments into higher-yield assets without incurring tax on the appreciation.
To establish a Charitable Remainder Trust, the donor makes an irrevocable contribution of cash, securities or other property to the trust. Since these are tailored to the individual and their assets, flexibility exists in the type of property that can be donated. A trustee is selected to invest and manage the Charitable Remainder Trust as a separate account. You, and/or a second beneficiary, receive payments for life, or for a specified amount of time. At the end of this time, the trust’s remaining assets pass to the Festival for its general purposes or for the use you specified when establishing the trust. An immediate income tax charitable deduction is available for an amount equal to the present value of what the Festival will receive when the trust terminates.
There are two types of Charitable Remainder Trusts, the major difference between them being the manner in which the income payments are determined. The first type, a Charitable Remainder Unitrust, specifies the amount to be paid to the beneficiary as a fixed percentage of the fair market value of the trust assets annually, producing a variable dollar amount. The second type, a Charitable Remainder Annuity Trust, specifies the annual amount paid to a beneficiary as a fixed dollar amount that remains constant over the term of the trust.
CHARITABLE LEAD TRUSTS
Charitable Lead Trusts are designed to provide income to the Festival for a period of years, after which the trust assets revert to either the patron making the donation or to a designated beneficiary, usually children or grandchildren. A Charitable Lead Trust is essentially the reverse of the operation of a Charitable Remainder Trust. The income provided to The Festival may be a fixed dollar amount or a fixed percentage of the trust principal each year.
A current income tax charitable deduction is available only if the principal reverts back to the donor at the end of the trust period. However, there may be major tax benefits derived from a Charitable Lead Trust that is distributed to other family members when the trust term ends. First, the tax payable on the gift of the remainder interest to heirs will be reduced, and possibly eliminated, by the charitable deduction resulting from the contribution of income interest to the Festival Second, the trust property is removed from your estate, thus is not taxable in your estate. Third, all future appreciation of the trust property will automatically be transferred to the beneficiaries without incurring additional tax.
GIFTS OF LIFE INSURANCE
Life insurance offers an easy method of making a substantial gift to Music from Angel Fire. There are several ways to use life insurance for charitable purposes.
- A patron may liquidate a policy no longer needed for family protection and give the proceeds to the Festival, which will entitle them to an income tax charitable deduction equal to the cash value.
- A patron may transfer a paid-up policy, naming the Festival as the owner and beneficiary. An income tax charitable deduction equal to the replacement cost of the policy will be received.
- A patron may give a policy that is not fully paid-up, name the Festival as the owner and beneficiary and take a deduction for the present value of the policy. If the patron continues to pay the premiums to maintain the policy, they may also deduct the premium payments as charitable contributions.
- Life insurance may also be used as a “replacement asset.” Appreciated property is given to the Festival either outright or to fund a life income arrangement. The dollar value of the property may then be replaced with life insurance for your family. The tax savings from the gift is sufficient to cover the cost of replacement insurance, and the insurance proceeds can be paid outside of an estate.
GIFT OF PERSONAL RESIDENCE OR OTHER REAL ESTATE
Giving real estate is often an intelligent alternative to selling property. A patron can enjoy the satisfaction of making a substantial gift to the Festival while also avoiding capital gains tax on appreciated property, and an income tax charitable deduction can be claimed for the gift. A personal residence may also be donated for significant tax advantages without affecting the current lifestyle of the donor.
Real Estate may be contributed in several ways
- Outright Gift: This is the most popular way to convey real estate to the Festival. A properly executed deed to the property is delivered to the Festival, and the donor will qualify for an income tax deduction equal to the property’s full fair market value.
- Retained Life Estate: This is a gift of a personal residence whereby a patron transfers ownership of their residence to the Festival, but continues to use it for the rest of their lives. At the time of death, the residence passes to the Festival, outside of an estate, therefore reducing probate and estate tax costs. An income tax charitable deduction is also allowed, based upon the donors age and the fair market value of the property, for the value of the future interest that is conveyed to the Festival.
- An Undivided Interest: An “undivided interest” in real estate owned by a patron is given to the Festival. The Festival would receive the exclusive right to use, lease or receive income from the property, proportional to its undivided interest in the property. The donor would retain rights proportional to their share. An income tax charitable deduction based on the value of the undivided interest is allowed. This method of giving real estate is very popular for vacation homes and commercial real estate.