Planned Gifts for Scouting

In addition to gifts made during the donor's lifetime, the BSA Foundation can accept a wide range of planned gifts.

Bequests

Bequests are the simplest way of making future gifts – and revocable gifts – to the Foundation. The key to making effective bequests is precise language that accurately identifies the charitable recipient and the donor’s intent. Donors may choose to make gifts in the form of: a) an exact dollar amount, b) a percentage amount, or c) as a portion of the residue estate or trust. They may also name the Foundation contingent beneficiary of an estate.

Either the Foundation staff or National Major Gift Counsel can also provide sample bequest provisions to your professional advisors in drafting suitable bequest language on a confidential basis, without requiring the advisor to identify the donor.

Life estate

Almost half of all personal wealth in the U.S. comes from real estate. This is particularly true for older donors whose homes have greatly appreciated in value over the years. In these situations, a life estate may enable a donor to give generously to Scouting and also achieve significant income and estate tax benefits.

A life estate is basically a deed restriction. It gives the donor the right to use a personal residence (or farm) for life, or a specified term, with the remainder interest passing to the BSA Foundation. The most common property used for life estates is the donor’s primary residence, though second homes may also be used.

Creating a life estate gift generates an immediate income tax charitable deduction for the net present value of the remainder interest in the property. This type of gift also removes the real estate from the donor’s estate, potentially reducing estate taxes. Some donors will even use their income tax savings to purchase life insurance, thereby replacing the value of the donated property for their heirs.

Though a life estate irrevocably conveys the remainder interest in the property to the Foundation (to be used as the donor requests), these arrangements do offer some flexibility. For example, the donor might decide to enter a retirement community. The donor could then rent the property and receive the income. Or the donor and the Foundation might agree to sell the property and divide the proceeds during the donor’s lifetime, according to their respective interests.

Retirement plan beneficiary designations

Retirement plans, including IRAs, 401(k) plans, 403(b) plans, Keoghs, and SEP plans, can be effective assets to use for testamentary charitable gifts.

Many people choose to name their heirs as beneficiaries on retirement plan documents. However, for donors with charitable intentions, this may not be the wisest course of action from a tax planning perspective. Assets in retirement plans can be hit with both income and estate taxes if left to anyone other than the surviving spouse. These funds are considered “income in respect of a decedent,” or IRD, so any individual beneficiary (again, except for a surviving spouse) is required to pay income tax on the distributions.

Donors can avoid this “double taxation” by designating the Foundation as the beneficiary of all or part of the plan's assets. As a qualified public charity, the Foundation does not pay any tax on the distribution. The donor may then leave other assets that are taxed more favorably to family and non-charitable beneficiaries.

A sample IRA beneficiary designation and letter to an IRA plan administrator is available from the Foundation.

Charitable Remainder Trusts

A charitable remainder trust (CRT) enables the donor to irrevocably give cash or property to the trust while retaining an income stream, either for life or for specified time period. The donor may also select someone else, such as a spouse, parent, or child to receive the payments.

The CRT terminates either on the death of the named beneficiary or at the end of the specified term. The appreciated principal then passes to the Foundation to grow in a fund established by the donor. Some of the benefits of a remainder trust:

· Allows donor to convert non-productive assets into an income stream

· Generates immediate tax deduction for contribution to the trust, and avoids capital gains tax on the sale of appreciated property by the trust

· Pays annual distribution to the donor or other beneficiaries selected by donor

· Very flexible in structuring the amount and timing of income payments to the income beneficiaries (either for life or a term of years)

· Donor can designate future use of gift proceeds through the Foundation to the local council or Scouting program of his or her choice.

There are two basic types of charitable remainder trusts: annuity trusts (CRATs) and unitrusts (CRUTs). The primary differences between these two types are the method used to determine the payments, and the annual valuation requirement.

In an annuity trust, a specific, fixed annual income is paid to the donor or other beneficiaries. The income beneficiaries receive a constant annual payment, regardless of value fluctuations of the trust assets or the actual return on the trust assets. In contrast, the unitrust pays a specified percentage of the net fair market value of the assets. The trust is revalued annually for income purposes, so the annual income will typically fluctuate based on fund performance.

There are many variations on these trusts. You may want to discuss these with one of the National Major Gift Counsel or the BSA Foundation staff.

Charitable lead trust

A charitable lead trust (CLT) is the “mirror image” of a charitable remainder trust. It is a trust that generates income for Scouting first, and then transfers trust assets either to the original donor or to the donor’s family members.

The donor transfers cash or property irrevocably to a trust, creating an income stream to the BSA Foundation for a certain number of years. At the end of that period, the principal either reverts back to the donor or passes to non-charitable beneficiaries, such as the donor’s children, grandchildren, or great-grandchildren.

If persons other than the donor receive the remainder of the lead trust:

· Donor receives a federal gift or estate tax deduction for the present value of the payments given to the BSA Foundation.

· Taxable income and capital gains realized annually by the trust are taxed to the trust.

· The principal ultimately passes to non-charitable beneficiaries either outright or in a continuing trust.

· The present value of the assets passing to non-charitable beneficiaries is a gift for gift tax purposes or is included in the estate for estate tax purposes.

If the donor receives the remainder of the lead trust:

· Donor obtains a current income tax deduction equal to the present value of the total payments to the Foundation.

· Taxable income and capital gains realized annually by the trust are taxed to the donor

Lead trusts are ideal vehicles for making significant charitable gifts and transferring assets with high growth potential to the next generation. It may also be appropriate to fund a lead trust with income-producing real estate interests, oil and gas interests, or closely held stock and ultimately transferring these assets to future generations.


BSA GIFT ANNUITY PROGRAM AND POOLED INCOME FUNDS

Some donors want to make a major gift to Scouting, but don’t want the ongoing responsibility of an advised fund, or can’t afford the minimums required for charitable trusts. The simplicity of a charitable gift annuity or a pooled income fund gift may be just what they need to meet their objectives.

The BSA Gift Annuity Program allows donors to make a gift to Scouting and, in return, receive lifetime income – part of which is tax free – and a current charitable income tax deduction. The annuity rate is guaranteed by the general assets of the Boy Scouts of America, established at the time the gift annuity is created, and will not change for the duration of the gift annuity. Some donors choose to create a gift annuity (and a stream of income) for a spouse or other family member. When the gift annuity ends, after the lifetime of the annuity recipients, the remainder goes to the local council(s) chosen by the donor. Larger gift annuity remainders could also be designated to the BSA Foundation to create a named fund in perpetuity.

The minimum gift to establish a gift annuity is only $2,500. The donor may use cash, stocks, bonds, or mutual shares to make the gift. Annuity beneficiaries must be at least 50 years of age at the time the gift annuity is established, and most donors want their annuity payments to begin immediately. Many donors also choose a deferred gift annuity – they get a tax deduction now, but delay the annuity payments until a later date when the income is most needed (e.g., at retirement).

The BSA Pooled Income Fund Program is similar to the gift annuity program, but is more like a “charitable mutual fund.” Donors contribute to the pooled fund and receive “investment shares” in the larger pool. They receive lifetime income and an income tax deduction in return for their gift. At the end of the lifetime of the beneficiary (or beneficiaries), the “shares” are cashed in with the proceeds going to the local council or councils of the donor’s choice (or, again, to establish a new fund at the Foundation).

The minimum gift to participate in the pooled income fund is $5,000. Donors may add to their gift in $1,000 increments at any time – each addition increases their annual income from the fund and generates another tax deduction. Donors may use cash, stocks, bonds, or mutual shares to make the gift. Pooled fund beneficiaries only need to be 40 years of age at the time of the initial gift.

There are two differences between the income stream from the pooled fund and the income from a gift annuity. First, unlike the gift annuity, pooled fund income will not be partially tax-free. Second, the income stream from the pooled fund will vary from quarter to quarter, based on the actual investment performance of the fund.

COMPARISON OF DONOR GOALS WITH

PLANNED GIVING VEHICLES

Giving vehicle

Typical donor goals

Income to donor or others

Income tax deduction

Capital gains and estate taxes

Attractive funding assets

Bequest

Estate tax reduction

Provide for favorite Scout councils or programs

No

No

(But will reduce estate tax for large estates that owe it).

Avoided

IRD assets

Life estate

Reduce income taxes

Provide for Scouting

No

Yes

Avoided

Residential real estate

Retirement plan beneficiary designation

Provide for charity while treating heirs equitably

No

No (unless pursuant to Pension Protection Act of 2006, and may avoid income tax compared to other gifts)

Avoided

IRAs, other qualified plan assets

Charitable remainder trust (Unitrust or Annuity Trust)

Create income for self or others

Establish permanent charitable legacy

Yes,

Variable (CRUT) or Fixed

(CRAT)

Yes, based on value of assets contributed, minus present value of income payments

Avoided

Appreciated low-basis stock or real property

Appreciated real property (if CRUT is selected)

Charitable lead trust

(CLT)

Transferring assets to another generation (non-grantor trust)

Income tax deduction (grantor trust)

Yes, income to charity or fund in BSAF

No (non-grantor trust)

Yes (grantor trust, but donor taxed on income stream)

Estate taxes are avoided, but gift tax may be due

Income-producing assets that are likely to greatly appreciate in value, or will be passed to children (e.g. shares in closely-held business)

Gift annuities and pooled income fund gifts

Potentially increasing current income from existing assets

Simple, affordable way to provide an endowment gift to a local council

Yes, either predictable and part tax free (gift annuity) or a variable income stream (pooled fund)

Yes, for both.

Avoided

Appreciated stocks with low dividends, or cash that could be invested for higher returns.


GIFT TRANSFER INSTRUCTIONS

For the Boy Scouts of America National Foundation

Electronic Transfers of Stock (Broker-to-Broker)

Step 1: Please have the broker transfer stock to:

National Financial Services Corporation

Boy Scouts of America -- Account #W18-123692 DTC Clearing #226

Step 2: Prior to the transfer, the donor, broker, agent, or trustee should fax or email a description of the stock, any specific use or purpose for the funds, and the anticipated transfer date. Fax: BSA Cashier Services, 972. 580. 2108, or email tpierce@netbsa.org.

Mailing of Stock Certificates, Checks, Money Orders, & Cash Equivalents

Step 1: If actual stock certificates are being given, the stock certificate and a properly signed stock power should be mailed – in separate envelopes – to:

Tim Pierce, Cashier Services, S401

National Boy Scouts of America Foundation

1325 West Walnut Hill Lane

Irving, Texas 75015-2079

Step 2: Donor (or agent) will include instructions as to the use/purpose of the funds.

Electronic Transfer of Cash/Sales Proceeds from Stock

Step 1: If cash or sales proceeds from stock sold by the donor's broker are being electronically transferred, please direct them to:

Chase Bank of Texas -- Houston

Account Name: Boy Scouts of America

ABA # 113000609 -- Account Number: 07000451724

Step 2: Prior to the transfer, please fax or email a notice to BSA Cashier Services describing the stock transfer, any specific use or purpose of the funds, and the anticipated date of the transfer. Fax: 972. 580. 2108, or email tpierce@netbsa.org.

Donor should discuss with his or her advisor the tax implications of selling stock and contributing the proceeds, rather than contributing the stock directly to the BSA or other charity. Questions? Please call the BSA at 972. 580. 2230.