MMSC Foundation: Ways to Give

The Pension Protection Act of 2006
~A New Tax Incentive~

The Pension Protection Act of 2006 is a new law that will provide donors with tax incentives for charitable rollovers if they are 70-1/2 or older. Under the proposed law, donors will be able to make lifetime gifts using funds from their IRAs without any undesirable tax effects. Now donors can make these IRA gifts without claiming the distribution as taxable income. Donors won’t deduct the distribution as an itemized deduction, either.

Charitable Rollover Requirements:
• Donors must be 70-1/2 or older on the date the gift is made.
• Gifts of up to $100,000 can be made in calendar year 2006 and again in 2007.
• Donors must transfer the funds directly to a public charity and never take receipt of the funds (i.e. never receive an IRA distribution check from the IRA custodian).
• The funds must come from an IRA or Rollover IRA. Other types of retirement accounts including SEPs, SIMPLEs, TSAs of 403(b)s, 401(k)s, and pension or profit-sharing accounts are not eligible. If a donor who is age 70-1/2 or older has funds in these other types of retirement accounts, they may wish to move part of that money directly into a Rollover IRA; then a charitable rollover could be made from the Rollover IRA.
• Donors must make the gifts to public charities. Gifts to charitable trusts, donor advised funds and supporting organizations are NOT eligible.
• Donors cannot receive a benefit from the gift or else the entire gift becomes an ineligible charitable rollover.
• Gifts must be completed by December 31, 2007, when the provision expires.
 
How Donors Can Make Gifts
Donors must contact their IRA custodian for the forms necessary to transfer gifts directly to public charities. It is very important that the funds are transferred electronically and directly from the IRA to the charity. The donor cannot receive the funds first and then make a gift using the proceeds from the distribution.

Annual Gift
• A majority of the Foundation’s donors make their gifts through the MMSC Foundation’s annual giving program. Gifts by currency or personal check immediately benefit the Foundation and are the easiest and most direct way to give.

Pledges
• A promise to give to the MMSC Foundation over one or more years, up to a maximum of five years. Examples of this include cash, securities, real estate, gifts-in-kind, life insurance and planned gifts.

Non-Cash Gift
•These may be securities, personal property real estate or gifts-in-kind.

Gifts of Life Insurance
• Name the MMSC Foundation as the owner and beneficiary of a new or existing life insurance policy, while at the same time providing an annual tax deduction for the premiums you pay.

Charitable Bequests
• A revocable gift intended to serve a religious, educational, political or general social purpose to benefit mankind, aimed at the community or a particular segment of it. Charitable bequests also reduce the estate taxes that might be owed on the estate left by a decedent.

Charitable Gift Annuity
• An irrevocable transaction in which an individual transfers cash or property to the MMSC Foundation in exchange for the Foundation’s promise to make fixed annuity payments for no more than 20 years.

Charitable Remainder Annuity Trust (CRAT)
• A trust that pays the donor’s beneficiary an agreed-upon annual income of at least 5% of the initial gift for the life of the donor or for a specific term to be paid once a year for no more than 20 years.

Charitable Remainder Unitrust (CRUT)
• Similar to a CRAT, this type of trust provides a fixed percentage (at least 5% of the fair market value of the assets in trust, computed each year) to be paid to the beneficiaries at least once a year. The amount to be paid to the beneficiaries will vary on a yearly basis according to the annual reevaluation of the trust principle. The remainder is paid to the MMSC Foundation at the end of the term.

Charitable Lead Trust
• The opposite of a charitable remainder trust, a charitable lead trust is an arrangement whereby the MMSC Foundation receives an annual percentage or a fixed amount from a trust for a term of years or for a period measured by the lives of one or more individuals.

Retained Life Estate
• An irrevocable transfer of a personal residence or farm by a person or persons to the MMSC Foundation whereby the donor retains the beneficial use of the property for his or her lifetime or for a term specified in the instrument of transfer.

Wealth Replacement Trust
• This trust is designed so that upon the death of the second spouse, the death benefit of the life insurance policy goes to the heirs. These funds replace the property that passes to the MMSC Foundation from the charitable remainder trust. You can buy enough insurance to replace only a portion of the property that will eventually pass to the Foundation, or you may prefer to replace all of the property within the charitable remainder trust.

Real Estate Gifts
• Gifts of approved personal, commercial, residential and recreational property, which may be an outright gift or used to fund a lifetime income arrangement such as a charitable gift annuity between the donor and the MMSC Foundation.

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