National Park ServiceU.S. Department of the Interior
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Planned Giving Options

There are a number of tax-advantaged ways in which people can provide needed support for their park or friends group while enriching their lives through philanthropic activity. There are three types of planned gifts. The first are current outright gifts, the second are revocable deferred benefits and the third are irrevocable deferred benefits.

Current Outright Gifts

Stock, real estate, and tangible personal property, given for the current use and enjoyment of a nonprofit organization, are considered planned gifts. These gifts require significant contemplation and planning, unlike annual fund gifts, which are often made spontaneously in response to a mail appeal and satisfied by writing a check from income.

Stock

Appreciated stock is the most common type of noncash gift and is a tax-wise way to make a planned gift to a park. Nonprofit organizations prefer gifts of publicly-traded stock rather than closely-held stock because it can be sold quickly and have a readily ascertainable fair market value. Closely held stock is corporate stock that is held by small number of shareholders and are generally not traded to the public. It may be difficult to value and subject to restrictions or it may not be salable if a buyer cannot be found.

An appeal for the donor is that gifts of appreciated securities held longer than one year are exempt from capital gains taxes and for outright gifts entitle the donor to a tax deduction equal to the fair market value of the securities at the time the stock is transferred. If the donor chose instead to donate the proceeds from the sale of the stock, they would be required to pay capital gains tax. By donating stock instead of proceeds from the sale of the stock, the donor is reaping two tax benefits: a charitable deduction, and avoiding capital gain taxes.

Real Estate

A landowner may wish to donate a home or a portion of his/her property to a park or the friends group which serves the park. In some cases the donor may wish to retain use of the property for a term that is specified in the gift agreement, (e.g. a term of up to 25 years or for the rest of their life). At the conclusion of the term, all rights in the property are transferred to the friends group or park, whichever is specified in the agreement. A gift of this kind may result in both an immediate and a long term tax benefit for the donor, and also ensures the property will serve a public use for future generations.

Retention of a term of occupancy will reduce the amount of the deduction the donor can claim based on the length condition and term of the continued occupancy. If the property is located outside the park and donated to a friends group, it may be sold or exchanged for property within the park boundary. The donor may receive a charitable tax deduction for the present value of the remainder interest given to a qualified nonprofit organization.

However, prior to accepting the gift, there are a number of issues that should be addressed. The following is a list of questions the park or friends group should ask when considering a gift of real estate:

  • Are there liens or encumbrances on the real estate?
  • Is the donor the sole owner, or is the property jointly owned with others?
  • Will the park or friends group be able to sell the property within a reasonable period of time, and if not, does it have funds available to pay for annual the insurance, taxes, and maintenance during the interim?
  • Will the park or friends group retain the property and use it for its exempt purpose?
  • Will environmental remediation be needed, and if so, who will cover the cost or be responsible?
  • Will the donation maintain the integrity of NPS programs and operations?

Before accepting any gift of real property for ultimate conveyance to the United States for the benefit of the National Park Service, the friends group should consult with the NPS Regional Land Resources office to review the proposed acquisition for any legal, title, environmental or ethical issues that could potentially bar acceptance of the gift by the United States.

Parks and many friends groups require board approval before accepting gifts of real estate. Most organizations have limited interest in entering into the real estate management business so acceptance of a gift of real estate is often predicated on the ability to readily sell or exchange the property, if located outside the park boundary, within a reasonable period of time.

Donors often choose to give their most highly appreciated property, thereby entitling the donor to a charitable income tax deduction equal to the current fair market value of the property. Furthermore, if the donor gives appreciated assets to the park or friends group and the organization sells those assets, capital gains tax may be avoided due to the park or organization's tax-exempt status.

Parks and friends groups may give general but not specific advice to donors on the potential tax benefits of a charitable donation of real property to the United States or other qualified recipient. Potential donors should consult independently with a qualified tax consultant or the Internal Revenue Service on the valuation and tax advantages before making a final decision to donate.

Charitable Lead Trust

A charitable lead trust is a trust arrangement that pays current annual income to a park or friends group for a specified period of years, with the trust principal reverting to the donor or the donor's family when the trust expires. The donor's estate taxes are reduced and the property is not taxed to their family. The annual income payment by the trust is similar to an outright gift of cash, for the park or friends group is free to use the cash as soon as it is received, subject to any restrictions placed on the gift by the donor. Because a charitable lead trust is one of the most sophisticated planned giving tools, it is wise to consult an experienced charitable estate planner prior to entering into this type of agreement.

Endowments

Endowment funds generate interest income for immediate use, while the principle remains intact and is not invaded or diminished. The primary function of the endowment is to build a pool of assets that will benefit the park. Endowment gifts may be made outright, through testamentary instruments, or through deferred gifts that are established now, but benefit a friends group and ultimately the park at a later date. Endowment funds can be used to establish or expand park programs. Often an endowment is created by an initial gift and others contribute subsequent gifts to build the corpus of the fund from which interest is generated.

The NPS and its partner should agree in advance on how the funds will be used and ensure that NPS has sufficient discretion for the use of the funds to meet its day to day needs, consistent with the purposes for which the endowment was created.

Factors that should be considered in authorizing the creation of an endowment are:

  1. How and by whom the endowment will be administered;
  2. How endowment funds are to be used;
  3. Process of authorizing expenditures;
  4. Investment policy for the endowment funds;
  5. Funds accountability;
  6. Circumstances, if any, under which the corpus may be used; and
  7. Contingencies for the disposition of the endowment in the event of the dissolution of the partner or the endowment.

Memorial Gifts

The memory of an individual or group is honored through the donation of resources or the establishment of a fund that reflects the gifts, values concerns of the individual or group. Memorial gifts allows donors to pay tribute to a loved one or honor a milestone while helping further efforts to enhance conservation, stewardship, and education programs within a park. By supporting a memorial giving program, donors give a priceless gift to a loved one as well as to current and future generations. Memorial gifts to the parks can be made through a number of programs, including tree planting, commemorative benches, and bike rack dedication programs.

Revocable Deferred Benefits

Revocable deferred benefits are another giving method that involve a promise by a donor to make a gift in the future to an organization and may be revoked at any time prior to the donor's death. The donor does not enjoy the benefit of a charitable income tax deduction when the expectancy provision is created because there is no transfer of value during the donor's life. The advantages are a substantial commitment when the donor no longer needs the gift, a tax avoidance to the heirs of the estate and peace of mind. The most common types of expectancies are bequests, retirement plans and IRA designations, and life insurance designations.

Bequests

A bequest is a provision in a will directing that specific assets, or a percentage of the estate, be transferred to a designated tax exempt cause or charity at the donor's death. Bequests appeal to donors because they are easy to understand, the assets remain with the donor throughout their life and the value is conveyed when the donor no longer needs it. Nonprofit organizations like bequests because they are easy to explain, require very little cost to promote, and once in place are rarely revoked.

Bequests should be suggested to an organization's entire constituency since they can be gifted by anyone for any amount. Ensure that the concept of planned giving and sample will language are regularly included in your organization's communications with your constituency. Standard language for some typical bequests to National Park Service areas is provided below:

If a donor wishes to make an unrestricted bequest to a National Park Service area, the language in the will could be:

"Upon my death, my [Executor(s)/Trustee(s)] shall distribute [$ amount, specific items, assets or residue of the estate] to the National Park Service, a tax-exempt United States agency for the support of programs and projects in _______________ National Park (Monument/Battlefield/etc.)."

For a restricted bequest, the wording could be:

"Upon my death, my [Executor(s)/Trustee(s)] shall distribute [$ amount, or specific items, assets, or residue of the estate] to the National Park Service, a tax-exempt United States agency for the _____[name a park project(s) or program(s) ]________ in _____________ National Park (Monument/Battlefield/etc.)."

A third option would be for the donor to make the gift to the primary park non-profit tax exempt organization (e.g. Friends of Great Smoky National Park, Blue Ridge Parkway Foundation, or National Park Foundation/National Park Trust who can also manage restricted accounts for parks) for a specific park or park program with the following language:

"Upon my death my [Executor(s), Trustee(s)] shall distribute [$ amount, specific items, assets, or residue of estate] to the ______________[Primary Park NonProfit Tax Exempt Organization, National Park Foundation or National Park Trust], a charitable and nonprofit corporation, or its successor, to establish a restricted fund for the support of ____[general operations, or specific project/facility/program] in _______________ National Park (Monument/Battlefield/Parkway/National Seashore, etc.)."

An existing will can be amended with the below suggested language as a codicil or addition. Depending upon the state in which the donor resides, a codicil may need to be executed just like the will. Check with local financial advisors, or the state Bar Association for the applicable procedures.

Codicil:

"I hereby notify, confirm and approve my last will and testament of ____ 19 ____ with the following modification:

My [Executor(s),/Trustee(s)] shall distribute ___[$ amount, specific items, assets, or residue of estate]__ to the National Park Service, a tax-exempt United States agency, for the __[general operations, or specific project/facility/program]___ in ____________ National Park (Monument/Battlefield/Parkway/National Seashore, etc.)."

While there are a number of do-it-yourself guidebooks on preparing wills, it is preferable to have a will properly drawn up by a lawyer. This is especially true where substantial assets are involved, or where there is a possibility the will could be challenged in court.

Gifts of will can also be earmarked as a percentage of a total estate, where gifts adjusts with changes in the size of your estate. Gifts can also be made as a residue or specific percentage of the residue of your estate - after specific gifts to loved ones have been made, a donor can designate that the entire residue or percentage of the remainder shall go to one or more charitable organizations.

Borrowing a lesson from hospitals and universities, some park and recreation agencies have used wills clinics to encourage planned gifts. Click here for more information on the types of wills clinics and lessons learned.

Planned gifts can also be encouraged through money management firms that offer wealth management and estate planning seminars. Financial advisors can use park examples in their seminars to market the concept of bequests to national parks and target professionals.

Retirement Plans and IRAs

For many individuals, retirement plan assets represent the single largest asset in their portfolios. Like a bequest, it is easy to understand and implement. This gifting opportunity is simple and involves obtaining a beneficiary designation form from the retirement plan administrator and naming a park or its friends group as the entire, or partial, beneficiary of the retirement plan assets upon the owner's death. A donor may achieve significant income and estate tax savings by naming a friends group or other non15 profit organization as the beneficiary of the retirement plan assets, with a tax savings as much as 75 cents on the dollar.

Life Insurance

Life insurance policies are a common way to provide for the security of an individual's family. But if that security is already adequately provided, or is no longer needed for any other reason, the policy may be easily changed to a designated park or park partner as the beneficiary on a beneficiary designation form. If the annual premiums continue to be paid by the donor, they are tax deductible as a charitable contribution. The proceeds, when realized on the death of the donor, are removed as a taxable item from the estate.

Pooled Income Fund

Pooled income funds allow a donor to transfer assets (usually appreciated securities) to an organization which "pools" and invests these assets with other gifts. The donor receives income from the investment in proportion to their contribution. On the death of the donor, their share of the fund passes to the organization. The management of pooled income funds should be left to experienced money managers. As with trusts, the National Park Service should only be involved with pooled income funds as the ultimate beneficiary.

Irrevocable Deferred Gifts

Irrevocable deferred gifts are transfers of cash or property not available for the organization's use until a later date. Although the gift is complete, thereby entitling the donor to a current charitable income tax deduction, the funds will not be available to the park or friends group until the donor's death or the expiration of a specific term of year. The most prevalent types of deferred gift arrangements are charitable gift annuities and charitable remainder trusts.

Charitable Gift Annuity

A charitable gift annuity is a contract between the donor and a nonprofit organization whereby the donor makes an irrevocable transfer of cash or property to the nonprofit organization, which in return agrees to pay a fixed amount of money each year for the lifetime of one or two individuals. The payout rate will depend on the number of annuitants and their ages. The annuitants have the option to defer receiving their annuity payments until some future date. A park partner can be named as a recipient of a charitable gift annuity. The park cannot be named as a recipient because once the cash or property is deposited into a federal account, the NPS does not have a mechanism to pay out annuity installments to the donor.

Charitable gift annuities are popular among nonprofit organizations because they are easy to explain to donors and require minimal administrative time and expense to implement. Charitable gift annuities are attractive to donors who are interested in making a gift to charity but are unable to make a current outright gift-they require an additional stream of income for their lifetime in return for their gift.

Since most states regulate charitable gift annuities, it is important to become familiar with state restrictions, regulations, and reporting requirements as they pertain to charitable gift annuities before starting a program. The organization should review not only state requirements where they are located but also requirements in the state where the donor resides.

Charitable Remainder Trust

Through a charitable remainder trust, a donor gives assets (cash, appreciated securities and or property) to a trustee who manages the assets in the trust. The donor and/or anyone they name as a beneficiary receives an annual income from the trust, based either on a percentage of the value of the trust (unitrust), or on a fixed dollar amount (annuity trust), for a term not to exceed 20 years. On the death of the donor and/or other beneficiaries, or at the end of the term, the assets remaining in the trust go to the designated organization. Charitable remainder trusts offer income tax as well as estate tax benefits to the donor, the value depending on the conditions placed on the trust and the age of the donor and beneficiaries.

The IRS states that at a very minimum, the trust must distribute at least 5% of the net fair market value of its assets. If the donor or beneficiaries don't need the income one year, they may elect to defer income through a "makeup provision". However, the trust's net distributions must eventually equal 5% to be considered valid by the IRS. Most charitable remainder trusts have payout percentages ranging from 5% to 10%, depending on the number of income beneficiaries and their ages. Keep in mind that the higher the payout percentage, the lower a donor's income tax deduction. Organizations that serve as trustees can determine the payout percentage offered for each particular trust.

Park units should not become involved with charitable remainder trusts except as the designated charitable beneficiary. The negotiation and management of a trust involves special financial management skills and resources. Most cities and some countries have Community Foundations that are willing to serve as the trust manager for parks or their partner organization. Local banks and other financial institutions have trust departments that can work with the donor in establishing a charitable trust to benefit a park. The National Parks Foundation and the National Park Trust (part of the National Parks and Conservation Association) can also serve as a negotiator and money manager on behalf of your park.

For more information on how wills and other instruments are used and established, consult:

  • Community Foundation which is usually city, county or regionally based
  • Local attorneys, bank trust officers, accountants, and other financial advisors
  • The National Park Foundation, 1202 Eye St., NW, Suite 550 B. Washington, DC, phone: 202-354-6460
  • The National Park Trust, 51 Monroe St., Ste. 110, Rockville, MD, phone: 301-279-7275

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