Several friends of the Yale Peabody Museum have chosen to help the Museum plan for the future by making a gift of marketable securities, making a bequest, or making another kind of planned gift to the Peabody.
Gifts other than cash or securities may include life income gifts, whereby the donor transfers an asset and retains (or provides for another person or persons) an income for life; charitable lead trusts that may permit people to save on income, gift, and estate taxes; or bequests. Even gifts of cash and marketable securities may be considered to be planned gifts.
An outright gift of appreciated marketable securities is one of the most attractive methods of realizing your charitable intentions toward the Yale Peabody Museum. Such a gift has the following benefits:
- A federal income tax deduction equal to the fair market value of the securities on the date of your gift, provided you have owned the securities for more than 1 year.
- Avoidance of capital gains tax on the transfer.
- The ability to maintain the composition of your investment portfolio by purchasing the same securities on the open market which will have a new cost basis.
Please note that, as a general rule, you should not give securities that have depreciated in value. It is more advantageous for you to sell such securities, take a loss on your income taxes, and donate the proceeds.
You may wish to make a current gift of all or a fractional interest in a personal residence, a vacation home, undeveloped land, or a commercial property. Such gifts will entitle you to a federal income tax deduction equal to the fair market value of the property on the date of your gift, provided you have owned the property for more than 1 year, and will permit you to avoid capital gains tax on the transfer.
A Remainder Interest in a Personal Residence
If you own a primary residence, a second home, or a farm and do not wish to dispose of such property in your estate, but do wish to continue to use the property, then you may give the Yale Peabody Museum a remainder interest in that property. This type of gift:
- Allows you to remain in your home for your lifetime.
- Causes the property to pass automatically at your death to the Yale Peabody Museum.
- Generates a current income tax deduction equal to the value of the Yale Peabody Museum’s remainder interest calculated by subtracting the present value of your retained life estate from the fair market value of the property.
If the Yale Peabody Museum can and is expected to use your gift of property (such as minerals or cultural materials) toward the furtherance of its educational mission, and you have owned the property for more than 1 year, you will be eligible for a fair market value income tax deduction without having to recognize the capital gain on any appreciation.
If the property is not of a type the University can use, or your intention is that the University will sell the property and use the proceeds, then your charitable contribution deduction is limited to the lesser of your cost basis or fair market value.
Closely Held Stock
A gift of closely held stock may enable you to make a more significant gift than you otherwise could, will generate an income tax deduction equal to the fair market value of the stock on the date of transfer (provided you have held the stock for more than one year), and will not be recognized as capital gain. So long as there is no binding obligation on the Yale Peabody Museum to accept any subsequent purchase offers, nor any specified price at which the University must sell, the Yale Peabody Museum may entertain offers from family members or the corporation issuing the stock to purchase the transferred shares.
Traditionally, bequests to the Yale Peabody Museum have been a primary source of endowment support. Each individual legacy contributes to the Museum’s financial stability.
Forms of Bequest
A pecuniary or specific bequest designates a specific dollar amount, a particular asset, or a fixed percentage of your estate:
“I give [dollar amount, or a specific asset] to the Yale Peabody Museum in New Haven, Connecticut.”
All or a portion of your residuary estate may be left to the Yale Peabody Museum after you have provided for all other beneficiaries by specific bequests:
“I give [percentage] of the rest, residue, and remainder of my estate to the Yale Peabody Museum in New Haven, Connecticut.”
The Museum can be a contingent beneficiary of your estate if you stipulate that the Yale Peabody Museum will receive all or a portion of your estate if your named beneficiaries do not survive you:
“In the event [named beneficiary] does not survive me, I give [dollar amount, a specific asset, or percentage of the rest, residue, and remainder of my estate] to the Yale Peabody Museum in New Haven, Connecticut.”
Retirement Plan Assets
You may wish to consider leaving tax-burdened property to the Yale Peabody Museum, such as Individual Retirement Accounts and other retirement plan death benefits. The combined effect of income and estate taxes that can result from leaving such assets to family members can exceed 75% of the asset’s value.
If you do name a family member as the beneficiary of retirement plan assets, you may wish to name the Yale Peabody Museum as the contingent or alternative beneficiary, should the family member predecease you. You can also give the family member an option to disclaim any benefits in favor of the Museum. Finally, you may wish to consider designating a charitable remainder unitrust for the benefit of a surviving family member as the beneficiary of the retirement plan assets.
Three types of life income gifts are available. Each type will generate income tax charitable contribution deductions equal to a portion of the gift and will not generate capital gain taxes at the time of transfer if funded with appreciated property.
Charitable Gift Annuities
If you are planning for retirement or currently wish to maximize spendable income, appreciate the value of deferring capital gains taxes, desire the security and predictability of a fixed income, and would like to benefit the Yale Peabody Museum, then a charitable gift annuity may be right for you.
A charitable gift annuity is an arrangement whereby you contribute cash or marketable securities in exchange for Yale University’s promise to pay you and, if you wish another annuitant, a guaranteed income for life at a rate based on the age(s) of the annuitant(s).
If you prefer to delay receiving income for some period of time, you may make a deferred payment charitable gift annuity contribution. Making a present transfer of assets while deferring the start of income payments will enable you to increase your income tax deduction or to increase the amount of the annuity payments.
The University asks that you give a minimum of $10,000 in order to establish a charitable gift annuity for the Yale Peabody Museum.
Pooled Income Funds
If you seek the protection of a diversified investment portfolio, appreciate the opportunity to select a suitable combination of investment yield and growth, and want to provide future financial stability for the Yale Peabody Museum, then you may wish to consider a pooled income fund gift. A pooled income gift is particularly appropriate if you anticipate making additional life income gifts.
A pooled income fund combines and invests your gift of cash or marketable securities (excluding tax-exempt bonds) with the gifts of others and pays your proportionate share of the fund’s yield each year to you for life, or to persons whom you designate for their lifetimes. Yale University maintains three pooled income funds: a growth fund, a balanced fund, and a stable fund.
The University asks that you make a minimum initial contribution of $10,000 to a pooled income fund. Subsequent contributions may be as low as $1,000.
Charitable Remainder Trusts
A charitable remainder trust would allow you to retain income or to provide an income for someone else, provide individualized management of your gift, and may increase your capacity to make a gift to the Yale Peabody Museum.
A charitable remainder trust is a separately invested irrevocable trust you create by designating a person or persons to receive income payments of at least 5% annually and transferring cash, marketable securities, closely held stock or real property to a trustee you select. At the conclusion of the income payments, the trustee pays the trust principal to the Yale Peabody Museum.
A charitable remainder trust involves administrative and some start-up costs. Therefore, you probably should not consider such a gift arrangement for amounts less than $100,000.
If you would like the capital value of marketable or income-producing assets to remain in your family, but can afford to give the assets’ income stream to the Yale Peabody Museum for some time, then a charitable lead trust may be right for you.
A charitable lead trust may be particularly attractive if you wish to leverage the use of your unified transfer tax credit for making gifts to your children, or if the value of your charitable gifts already exceeds the allowable deduction limits for income tax purposes.
Because a charitable lead trust involves administration costs and some start-up costs in the form of legal or financial advice, you probably should not consider such a gift arrangement for amounts less than $500,000.