By including a gift to Henry Street Settlement in your estate plan, you can have an ongoing impact on the future of the people who live and work on the Lower East Side and other New York communities in need. You can choose to direct your support to Henry Street Settlement as a whole, or to a specific program area, such as Youth or Senior Services. Your legacy will continue to touch the lives of everyone Henry Street helps.
It’s probably much easier to accomplish this than you may think. Here are some popular estate planning techniques:
- Bequest from a will or trust: Defer a gift until after your lifetime
- Beneficiary Designations: Simply paperwork
- Charitable Trusts: Where receiving benefits can be as good as the giving
- Life Insurance: An affordable way to make a substantial gift
- Real Estate: Three ways to give and gain
- Retirement Plan Assets: Will your IRA be taxed twice?
Bequests: Defer a gift until after your lifetime and keep control of your money until you are sure you will no longer need it
From the founding of the Henry Street Settlement until today, many friends have demonstrated their commitment through their wills and trusts. Bequests have come in all sizes but have one thing in common: each has been used to help ensure the Henry Street Settlement’s ability to continue its important work meeting the needs of future generations.
Bequests from wills or trusts, and are the most popular form of planned giving, nationwide. They are very simple to accomplish. Making this kind of gift can be done by using a simple codicil to a will or trust or by adding the gift to your current estate documents using the sample language below (with the assistance of an attorney). With a bequest, supporters can establish a charitable legacy for the future, yet keep control of assets during life.
The following language is suggested for use in making an unrestricted bequest:
SAMPLE BEQUEST LANGUAGE
(to be reviewed with your legal advisor)
I hereby give, devise, and bequeath to the Henry Street Settlement, a nonprofit corporation having its principal offices at 265 Henry Street, New York, NY 10002, the sum of $___________ to be used for its general charitable purposes.
I hereby give, devise, and bequeath to the Henry Street Settlement, a nonprofit corporation having its principal offices at 265 Henry Street, New York, NY 10002, all (or ___ %) of the rest residue or remainder of my estate, to be used for its general charitable purposes.
SPECIFIC BEQUEST OF PERSONAL OR REAL PROPERTY
I hereby give, devise, and bequeath to the Henry Street Settlement, a nonprofit corporation having its principal offices at 265 Henry Street, New York, NY 10002, (insert detailed description of property) to be used for its general charitable purposes.
Bequests to Henry Street Settlement, which is an IRS designated 501(c)(3) charitable organization, are deductable against federal estate taxes to the full extent allowed by law.
Perhaps one of the easiest ways to help secure Henry Street’s mission through your estate is by making Henry Street the beneficiary of a bank account, brokerage account, insurance policy, or retirement plan (retirement plans explained in greater detail in a separate section).
In most instances, this can be accomplished very simply by obtaining and filling out a form from the bank, brokerage firm, insurance company or retirement plan administrator. This actually removes the item from the general probate process that covers items left through a will, although it is still figured as part of your estate’s valuation. However, your estate is allowed a federal charitable deduction for these gifts to the full extent allowed by law since Henry Street is designated as a 501(c)(3) charitable organization by the IRS.
There are many different types of trusts that facilitate charitable giving and also help donors achieve person financial goals. Charitable remainder trusts can be used to pay an income to designated recipients (such as you and a spouse) for life or up to 20 years, and then pay the remaining assets to Henry Street. Charitable remainder trusts fall into two basic categories:
Charitable Remainder Annuity Trust: (CRAT)
- Fixed dollar amount payout every year (negotiable according to age and term)
Charitable Remainder Unitrust (CRUT)
- Fixed rate paid out annually based on yearly revaluation of assets (negotiable according to age and term)
- Numerous versions to fit almost every situation
- Most flexible standard of asset acceptability
Both Charitable Remainder Trusts include
- Tax advantaged payouts
- Professional asset management
- Charitable deduction
- Lower estate valuation
- Remainder value payable to Henry Street Settlement
Charitable Lead Trusts also involve charity and are particularly effective in periods of low interest rates. These trusts are exceptionally tax efficient in passing assets on to another person with little or zero gift taxes. They have become increasingly popular as interest rates have fallen however it takes skilled advisors to establish these trusts.
There are many different ways to use life insurance to support Henry Street, and even ways to possibly improve how much money your heirs keep.
- You can take out a life insurance policy, make the Henry Street the owner of the policy, and the pay the premiums when due. You can deduct these premium payments on your taxes as a charitable contribution. The younger and healthier the insured person is, the lower the premiums to be paid or the greater the benefit that is ultimately paid to Henry Street. This can be a great way for younger donors to make a significant gift.
- Take an insurance policy that you already have but that no longer serves the intended purpose, and transfer ownership to the Henry Street Settlement. For example, if you took out a life insurance policy to cover education costs for your children, and your children are now out of school, you may wish to donate it to Henry Street by transferring the policy ownership (just paperwork). You can write off all the premiums you previously paid, or a bit less than the cash value, whichever is the lesser of the two. If premiums are still due, you can continue to pay them and count them as charitable deductions.
- Name Henry Street as a full or partial beneficiary, or even contingent beneficiary, of your life insurance policy. There is no current tax benefit; however, your estate will be able to recognize the charitable gift, when the time comes.
- Use life insurance to replace value of an asset for your heirs when you donate the asset to Henry Street. For example, you donate property to Henry Street worth $200,000. You are entitled to a charitable tax-deduction when you make this gift. You may be able to use some of the tax saving to purchase $200,000 or more of life insurance to offset the reduction in the size of your estate for your heirs resulting from the donation. Since life insurance death benefits are paid out tax-free, your heirs might actually keep more of their inheritance than if they inherited the property. This is best done by purchasing the insurance in a “wealth replacement” or “insurance trust” so that it doesn’t revert back into the estate and inflate the tax liability).
Real estate is one of the most versatile charitable gifts you can make. It offers several attractive ways to support Henry Street and possibly reap benefits for your own financial planning. Here are some options for you:
An Outright Gift
By making an outright gift of real estate to Henry Street:
- You eliminate a possible capital gain tax on the appreciation of the property,
- You receive an income tax charitable deduction for the full fair market value of the property and
- You remove the property from your final estate evaluation, possibly eliminating or greatly reducing applicable estate taxation.
A Retained Life Estate
Did you know that you could gift your home to Henry Street and still continue to live in it for the rest of your life? This option allows you to donate your home to Henry Street and
- Retain the right to continue living in it, just as you always have, for the rest of your life or a set number of years
- Claim an immediate income tax charitable deduction equal to the value of the remainder interest in your home
- Avoid all capital gain tax liability on the appreciation of the property and
- Remove the property from your final estate evaluation, greatly reducing or possibly eliminating estate taxation.
A Charitable Remainder Trust
When you transfer unmortgaged real estate to a charitable remainder trust, the trustee usually sells it and invests the proceeds in securities.
- The trust pays you a tax-advantaged income for your lifetime or a set number of years
- You are entitled to a substantial income tax charitable deduction
- You avoid capital gain tax liability and
- The property is removed from your final estate evaluation, greatly reducing or possibly eliminating any applicable estate taxation.
When the income is no longer payable, the trust’s remaining assets are distributed to Henry Street
If anyone other than your spouse or a charitable organization is the beneficiary of your IRA, 401(k), 403(b), or any other qualified pension or retirement plan, it is very possible that the government will receive more than the person you’ve chosen to inherit this asset. That is because only your legal American spouse or a charity such as Henry Street can receive your retirement assets completely tax-free. Everyone else, even your children or other family members, will first be liable for any income tax due since these funds were not taxed during your lifetime (known as Income in Respect of Decedent). Additionally, any applicable federal estate tax and local state taxes may be applied. As such, your “Uncle Sam” could end up with more than 60% of something you wanted to leave to a loved one.
How Can You Resolve This Situation To Your Favor?
Consider making Henry Street a beneficiary of all or part of your retirement plan, and leave your “non-retirement” assets to friends and family. When you make Henry Street the beneficiary of your retirement plan, your estate can claim this charitable tax deduction and the asset passes to Henry Street completely tax-free because it is a tax-exempt organization.
HENRY STREET SETTLEMENT DOES NOT GIVE LEGAL OR TAX ADVICE; ALL SITUATIONS SHOULD BE DISCUSSED WITH A PERSONAL ADVISOR.