Planned Giving

What charitable planning methods are best?

A good advisor can walk clients through the pros and cons of each type of charitable giving plan and give advice about which assets to use for philanthropy. East Tennessee Foundation receives gifts from:

Bequest by Will

Not only does a gift to charity remove the asset from the donor's taxable estate, but it is also the ultimate statement of values. It reminds loved ones, heirs, and the community of where the donor found passion and merit. Charitable bequests add meaning to our lives both now and forever. Bequests to East Tennessee Foundation can add to an existing fund or establish a new fund. The fund can be anonymous or named. It can make grants in a wide area of need that interests the donor, or it can benefit designated charities and churches, which will receive a grant each year in perpetuity. Wills can also provide the scholarship funds.

Charitable Remainder Trusts

A charitable remainder trust is a gift plan defined by federal tax law that allows a donor to provide income to himself or herself and/or others while making a generous gift to charity. The income may continue for the lifetimes of the beneficiaries, a fixed term of not more than 20 years, or a combination of the two.

How it works: The donor irrevocably transfers assets, usually cash, securities, or real estate, to a trustee of choice, such as a bank trust department or East Tennessee Foundation. The donor receives an income tax deduction equal to the trust's remainder value to the Foundation, subject to IRS 30%/50% limitations. During the trust's term, the trustee invests the trust's assets. Each year the trustee pays either a fixed percentage of the trust's current value, revalued annually (remainder unitrust), or a fixed dollar amount (remainder annuity trust) to income beneficiaries. Payments may be made annually, semiannually, or quarterly. When the trust term ends, the trust's principal passes to East Tennessee Foundation, to be used for the purpose the donor designates. The charitable remainder trust is a powerful tool for those who desire the security of a lifetime income and who want to make a significant future charitable gift.

Charitable Lead Trust

A non-grantor charitable lead trust is a gift plan defined by federal tax law that allows an individual to transfer assets to family members at reduced tax cost while making a generous gift to East Tennessee Foundation.

How it works: The donor transfers assets, usually cash or securities, to a trustee of his or her choice, such as a bank trust department or East Tennessee Foundation. During the lead trust's term, the trustee invests the trust's assets. Each year the trustee pays either a fixed percentage of the trust's current value, revalued annually (lead unitrust), or a fixed dollar amount (lead annuity trust) to East Tennessee Foundation. These payments are used for the charitable purpose the donor designates and until the trust term ends. The lead trust's term may be for a specific number of years (10 to 20 years is common), one or more lifetimes, or a combination of the two. When the trust's term ends, its charitable payments cease and the trust's principal is distributed to all of the beneficiaries named by the donor.

Life Insurance

Life insurance may be given to the Foundation and the cash value deducted from income tax. However, the Foundation can also be named as a beneficiary on life insurance policies. Donors may wish to establish a fund at the Foundation by naming ETF as a sole beneficiary, a contingent beneficiary, or a beneficiary of a fixed percentage of the policy.

Remainder Interest in a Home or Farm

This gift can be ideal for a donor whose home represents a major portion of his or her net worth. A life estate contract can allow a donor to remain at home and also provide a substantial gift to charitable causes. The donor gifts the home to the Foundation but retains the right to live there for life. This gift creates an up-front charitable deduction for the remainder value of the property, removes the property from the donor's taxable estate, and relieves heirs of the burden of selling the property. As with the charitable remainder trust, donors can use a portion of tax savings to purchase life insurance to replace the value of the home or farm for the heirs.

IRA's, Other Retirement Plans, and Savings Bonds

Lifetime gifts of these types of assets are encumbered with IRD - income in respect of a decedent. This simply means that the donor did not pay income tax on the growth of the asset during life, and upon death the taxes must be paid. These assets are poor bequests to children, because the heirs (except spouses) are taxed heavily on them. However, they are a great tool for charitable bequests.

East Tennessee Foundation does not pay income tax; a gift of tax deferred retirement assets on bonds come to the Foundation tax-free.

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