About Planned Gifts
Planned gifts include gifts through your will, charitable gift annuities, gifts of life insurance, pooled income funds, and charitable trusts.
Bequest: Many of our supporters make charitable gifts by naming the Red Cross as a beneficiary in their wills.
Life Income Gift: You irrevocably transfer some assets to the Red Cross now, and in return, you (and a survivor, if you wish) receive income for life.
Gift of Life Insurance: Some of our supporters no longer need their life insurance, that was purchased years ago to provide for children or other family members, and donate the policy to the American Red Cross.
Pooled Income Fund: Your gift of money, marketable securities, or both is invested together with similar gifts from other supporters.
Charitable Lead Trust: Individuals with very large estates can use a charitable lead trust to benefit the American Red Cross and pass principal to family members with little or no tax penalty.
Gifts of Retirement Plans: Your IRA assets will be transferred to a charitable remainder trust, the trust will provide life income to the beneficiary, and then an eventual gift to the Red Cross.
How to Include the American Red Cross in My Will…
Many of our supporters make charitable gifts by naming the Red Cross as a beneficiary in their wills. The federal government encourages these gifts or bequests, by allowing an unlimited estate tax charitable deduction.
To make a bequest to the Red
Cross, the following language will be helpful to your
lawyer:
Local Chapter Gift
I give, devise, and bequeath to the American Red Cross
for the benefit of the Knoxville Area Chapter the sum
of _______ (or otherwise describe the gift or specify
a percentage of the estate).
There are three ways you can make a bequest:
Specific Bequest
You designate a specific dollar amount, specific percentage, or specific property to the American Red Cross.
Residual Bequest
Your estate will pay all debts, taxes, expenses, and specific bequests. The remaining amount—the residue—will be transferred to the American Red Cross.
Contingent Bequest
You can ask that the American Red Cross receive all or a portion of your estate only under certain circumstances. For example, you can name the Red Cross as a beneficiary of your estate only if there are no surviving close family members. Childless couples sometimes provide for the entire estate to go to the surviving spouse, or if the spouse does not survive, to the Red Cross.
When you are a planned gift donor, the Red Cross will honor you with membership in the Legacy Society. If you have already made a plan to give to the Red Cross in your will or estate plan, please feel free to contact us. We realize that with your special gift, you consider us to be part of your family, and we want to do our best to keep you informed as to how your gift will be used and to give you the opportunity to tell us of your wishes.
How do I establish a life income gift?
Family obligations and the need to provide for retirement, coupled with the high cost of living, make it difficult for many people to consider substantial charitable gifts now. But there is a way to have the satisfaction of making a meaningful lifetime gift without sacrifice. In fact, you can get current income tax and financial benefits. It is called a life income gift. You irrevocably transfer some assets to the Red Cross now, and in return, you (and a survivor, if you wish) receive income for life. As a result, the assets are used to carry out our mission.
By making a life income gift to the Red Cross, you will receive the following benefits, in addition to the pleasure of knowing the good work your gift will do. The benefits include:
- A charitable deduction in the year you make the gift for the present value of our right to eventually receive the assets.
- Your effective yield is increased by substantial income tax savings.
- Income can be taxed more favorably in some plans.
- Your probate and estate administration costs may be reduced.
Example Life Income Plans
Charitable Gift Annuity
In exchange for your gift of cash or marketable securities to the American Red Cross, we agree to pay you (and a survivor or other beneficiary) a fixed amount annually for your lifetime. The transfer is part gift and part purchase of an annuity. The rate of return is attractive and the payments are guaranteed for life.
The Red Cross uses the charitable gift annuity rates recommended by the American Council on Gift Annuities.
> American Council on Gift Annuities (Single Life)
> American Council on Gift Annuities (Two Life)
For example, Miss Anderson, age 75, transfers $10,000 to the Red Cross for a gift annuity. She will receive a guaranteed annual income of $730 ($10,000 x 7.3%—the annuity rate for her age).
The rates are different for an annuity for two lives. The rates for two lives are less than rates for one life because the period of payment may be longer. For example, Mr. Edwards is 75 and his wife is 70. They transfer $20,000 to the American Red Cross for a gift annuity and receive $1,260 annually for life ($20,000 x 6.3%—the annuity rate for their combined ages). The full guaranteed payments continue for the survivor's life.
If you wish, you may defer charitable gift annuity. You can make the gift now, and the Red Cross will pay you (and another beneficiary, if you wish) life income starting at any date you specify. This is a great option if you are concerned about retirement income. Also, you receive the income tax deduction in the year you make the gift. The amount you receive each year depends on the amount transferred, your age now, and your age when the payments are to start.
For example, Miss Baker, age 50, transfers $10,000 to the Red Cross for a deferred gift annuity with payments to start at age 70. Her rate of return will be 13.4 percent, and she will receive $1,340 per year for life ($10,000 x 21.4%).
Charitable Remainder Trust
This life income plan is created by transferring assets to a trust that pays you (and another beneficiary, if you wish) income for life. At the end of the trust, the remaining trust assets are transferred to the Red Cross. A bank or trusted advisor can serve as trustee.
The type of charitable remainder trust you choose determines your annual payments:
Charitable Remainder Annuity Trust
The charitable remainder annuity trust pays you a fixed dollar amount annually for life. The fixed payments are determined by the payout percentage selected at the beginning of the trust. You can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
For example: Mrs. Edwards irrevocably transfers $100,000 to create a charitable remainder annuity trust that will provide her with life income payments. Included in the trust agreement is the stated payout percentage of 7. She will receive $7,000 annually for her life ($100,000 x 7%). If income earned by the trust exceeds the fixed payment of $7,000, the excess is reinvested.
Charitable Remainder Unitrust
The charitable remainder unitrust pays you a fixed percentage of the fair market value of the trust assets, as revalued each year. Like the annuity trust, you can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
For example, Mr. Edwards irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.
Gift of Life Insurance
Some of our supporters no longer need their life insurance that was purchased years ago to provide for children or other family members. If that is your situation, please consider donating the policy to the American Red Cross. You may claim a charitable deduction for approximately the policy's cash surrender value, and the proceeds are completely removed from your estate.
Pooled Income Fund
Your gift of money, marketable securities, or both to the American Red Cross's pooled income fund is invested together with similar gifts from other supporters. Each year, you receive your share, which is taxable as ordinary income, of the fund's earning.
For example, Mr. Simon's $10,000 life income gift is invested in our pooled income fund. The fund's net income is 6 percent this year, so he receives $600—his share of the annual earnings. Each year, Mr. Simon's payment will reflect any increase or decrease in the fund's net income.
Charitable Lead Trust
Individuals with very large estates can use a charitable lead trust to benefit the American Red Cross and pass principal to family members with little or no tax penalty. It works like this: You transfer assets to a trust that provides payments to the Red Cross for a term of years. Then the trust principal goes to your children, grandchildren, or others free of, or at greatly reduced, federal gift and estate tax. (Please note that a generation skipping tax [GST] is imposed on large transfers to grandchildren and others who are more than one generation younger than you.)
Gifts of Retirement Plans
Many individuals today have large qualified retirement plans such as an IRA, 401(k), or Keogh plan. These assets have been growing tax-free for years. Once the owner begins to receive payments from the qualified plans, the distributions are taxed. The plans are also included in the owner's taxable estate. A retirement plan may be an excellent source of funds for making a gift to the American Red Cross.
One way to make a gift of your retirement plan is to create a charitable remainder trust through your will. It works like this: Your IRA assets will be transferred to a charitable remainder trust. There is no tax due because the charitable remainder trust is a tax-exempt entity. The trust will provide life income to the beneficiary (for example, your child) with an eventual gift to the Red Cross. The beneficiary will pay income tax on the distributions from the trust. Your estate will receive an estate tax charitable deduction for the value of the Red Cross's right to eventually receive the trust assets.
