What is a Legacy Gift?

Give Through a Fund at ACT

What is it? Donor advised funds (DAFs) at ACT are an easy and effective way to invest in the causes you care most about. Your contributions into the fund are immediately tax-deductible, and you’re able to recommend grants to any registered charitable organization or institution in Alexandria and beyond. You can involve the next generation of your family in your legacy of giving by naming Successor Advisors, people who take over the responsibility of making grants from the fund after your lifetime.

Future funds at ACT are a streamlined tool for your legacy giving. Part of the setup process includes outlining specific instructions that detail the organization(s) you want to support, how much they should receive, and for how long the funding should last (anywhere from a one-time payment to perpetuity through an endowed future fund). Once your estate is realized and the fund is financed, we will carry out your charitable vision.

Click here for more details on Donor Advised Funds at ACTClick here for more details on Future Funds at ACT

If I want to make this type of legacy gift, what should I do?
Contact our team at development@actforalexandria.org.

Example: Curtis and Tamira want their children to engage in charitable and philanthropic efforts, so they work to set an example early on. As a two-income family, they are fortunate enough to devote a portion of their income each year to a donor advised fund. During their lifetime, they engage their children in choosing charities to receive a share of the income earned by the assets in the DAF. After their passing, their children will all become Successor Advisors and can continue supporting the causes they care about as family.

Cynthia has many nonprofits that she supports year after year. She wants to continue to provide for those nonprofits after her lifetime. Cynthia establishes a Future Fund at ACT, understanding that when her estate is realized, assets she designated for charitable support will be directed to the fund. She works with ACT to identify which nonprofits to support, how much the donations will be, and a timeframe for the disbursements. Cynthia can change these directives at any time with ACT’s staff.

Give Through a Charitable Trust

What is it? A charitable trust is a type of financial account that invests your money long-term, paying out the interest to a charitable organization with funding and either you or your inheritors with an income. Different types of trusts determine the order in which the different recipients receive funding.

• Charitable lead trusts give annual payments to the nonprofit(s) of your choice first, either for a specific period of time or until your passing. Once that specific period ends, the remaining interest is paid to the individual(s) or charitable organization(s) of your choice. (Charity first, heirs second)
• Charitable remainder trusts are the opposite: you draw an annual income from the trust’s interest, and after your lifetime, the remainder is donated to charity. (You and/or other beneficiaries first, charity second)

Please note this description is not all encompassing, please contact your financial or wealth advisor for more detailed information.

If I want to make this type of legacy gift, what should I do? Setting up a charitable trust requires financial advisory support and legal counsel. For suggestions of local firms and practitioners, please contact our team at development@actforalexandria.org.

Example: Alicia has been a successful entrepreneur and feels that she has adequate wealth to give away, but she wants to ensure that she and her husband have a regular income stream for as long as they live. After that, she is happy to leave the remainder of her estate to her favorite charity. She also would like to get the benefit of a charitable deduction now. She sets up a charitable remainder trust that allows her to do both.

Give From Your Retirement Plan

How does it work? Nonprofit organizations can be named as beneficiaries of a retirement account, same as a loved one.

Additionally, Individual Retirement Account (IRA) holders who are 70.5 years of age and older can make Qualified Charitable Distributions (QCDs) from their IRA to nonprofits, up to $100,000, which counts toward the Required Minimum Distribution (RMD) they have to make each year. Note: QCDs cannot yet be made into a donor advised fund; they are only permitted to go directly to a nonprofit.

If I want to make this type of legacy gift, what should I do?  Review the beneficiaries listed on your retirement accounts and amend them to include a nonprofit of your choice.

Examples: Carlos is single and has accumulated $400,000 in his 401(k) account. So far, he has been able to live off some other pension and Social Security income. He plans to designate whatever is left in his 401(k) plan to several charities. Carlos’ children and other heirs also benefit from his decision, as they would otherwise have to pay tax on required withdrawals from those plans.

Monica, who is now in her early 70s, must take the RMD from her IRA. She doesn’t need the money, so she donates this money through a QCD each year to charity. As a bonus, the income donated through the QCD is not included in her taxable income. (Which is even more advantageous than a regular charitable deduction since she can still take a standard deduction on her taxes.)

Give From Your Life Insurance

How does it work? Permanent life insurance policies—both whole life and universal life—have a cash value that can be donated (transferred) to a nonprofit organization during your lifetime, whether paid-up or not. Once transferred, the receiving nonprofit can cash-in (surrender) the policy, tax-free.

Policy holders of any type of life insurance policy—permanent or term, whole or universal—can designate a nonprofit(s) as a full or partial beneficiary of their plan.

If I want to make this type of legacy gift, what should I do?
Review the details and fine print of your life insurance plan to understand your options, then reach out to the nonprofit of your choice and verify what types of gifts they can accept.

ACT recommends consulting a financial advisor, accountant, or tax attorney before donating an insurance policy to charity, either a transfer or beneficiary designation.

Example: David put money into an insurance plan when he was younger. His children are grown, he and his wife are older, and they are fortunate to have enough retirement assets that they won’t have to rely on the funds from that life insurance plan for income. David works with his local community foundation to transfer the plan to them, so they can surrender the policy and deposit the cash into a field of interest fund that supports local charities for low-income children.

Give Your Complex Assets

How does it work? The revenue from the sale of property can be directed straight to the nonprofit(s) of your choice. Some organizations, including community foundations, can accept donations of assets like shares of small business, real estate, or art before they’re sold (known as a complex gift).

If I want to make this type of legacy gift, what should I do? While tax-efficient at times, donating complex gifts is a detailed process. ACT advises that you consult your estate planning attorney, and the nonprofit(s) you wish to support with such a gift before making arrangements.

Example: Mary and John want to deed their residence, or a portion of their residence, to charity now, but they also want to retain the right in the deed to reside there for the rest of their lives. Instead of simply making that gift in their will, they consult with their lawyer and the nonprofit they wish to support, who assists them in making the commitment now, generating a current tax charitable deduction while still providing them with use of their home for the rest of their lives.

Tom has always been philanthropic but also smart about tax deductions. So, when he decided to retire and sell his small business, he contributed a share of his business to a donor advised fund (DAF) at the community foundation, allowing him to avoid a capital gains tax on a portion of the sale. Over time, he is able to recommend grants to various charities that he would like to support.

Give Your Work

How does it work? Staying on at a job for an extra period of time and/or income from a side hustle can provide a nonprofit organization with crucial funding.

If I want to make this type of legacy gift, what should I do? Donate your income to the nonprofit of your choice after receiving paychecks. (Recurring gifts are incredibly helpful for nonprofits, as they can plan against the expected funding.)

Example: Erica believes that life has been good to her and that she has adequate income and wealth on which to retire but feels that her children will need whatever small wealth she might have left in her estate. However, she decides that is not ready to retire as she likes her job, so she stays on at work for an additional year and devotes the income return to a charity that supports families facing hardships.