Pay it Forward, Pay it Back

Pay it Forward, Pay it Back

A Guide to Giving To The University Of Texas At Arlington

By Laure Andersen

Editor’s Note: Many of us harbor altruistic intentions to support the universities with which we have been associated. Whether we favor the direct support of students, support the progressive infrastructure of the institution, or support the library, a favorite department, or a discipline by making a targeted endowment, we would like to see them maintain their high standards. The question then arises: How to go about it? For some, the opportunity exists in their lifetime to "pay it forward," to do good deeds by supporting specific plans and dreams and watch them take shape. Others are not in a position to put down the money in their lifetime, but can "pay it back" after their death.

Below are the highlights of a longer article written by Laure Andersen, of the UTA Development Office. You can find the entire text online at andersenfulltext.htm. To borrow the verbiage from our fundraising friends at the local PBS stations, some funding levels aren’t for everyone. But if you would like to explore the range of possibilities, click here to take a look at Ms. Andersen’s comprehensive article.

Philanthropy is an important part of higher education. Generosity from friends, corporations, and foundations is required to enable us to meet the many urgent needs for which state dollars are not available. The following overview of opportunities for giving is provided as a resource in planning your philanthropic program.

Planned giving is becoming an increasingly important part of the UTA comprehensive development program. These contributions allow you to make certain provisions for yourself and your family, and thereafter to provide a benefit to UTA to further our programs for teaching, research, scholarships, and public service. Planned gifts include the use of various kinds of trusts, gifts of life insurance policies, gifts of real property subject to a life estate, gifts of retirement plan benefits, and various other bequests both during one’s lifetime and after one’s death. Charitable giving is closely regulated by the law and requires specialized arrangements to achieve the goals desired. However, there is no federal statute limiting the percentage of an estate which may be bequeathed to a charitable organization. The advantages or benefits from each strategy mentioned here will vary according to the circumstances of each situation, and the University and the donor’s attorney or tax consultant should be consulted before a bequest, trust, or transfer of policies or real property is made. The following briefly describes certain key features of these basic types of gifts:

Charitable Lead Trusts: A donor may create a trust which will pay the income earned to the University for a fixed period of time not to exceed 21 years. The assets or principal in the trust are then returned to the donor, or he or she may designate that such assets go to others. This technique is ideal for individuals in high tax brackets who expect to remain in a high income position for the life of the trust.

Charitable Remainder Trusts: There are three types of trusts that a donor can establish, retain an income interest in the property transferred to the University, and still realize federal income tax benefits. In these three gift situations, the donor irrevocably transfers cash or other property to UTA under an agreement specifying that the University will distribute a certain amount of the annual income from the property for up to 21 years. Donors may name themselves or others as beneficiaries so long as all are living at the time the property is transferred into the fund.

Charitable Remainder Annuity Trusts: This trust agreement provides that a specified dollar amount (at least 5% of the fair market value of the assets placed in the trust) be paid to the beneficiary at stated periods, not less often than annually.

Charitable Remainder Unitrusts: This agreement provides that a fixed percentage (not less than 5%) of the fair market value of the assets in trust, computed annually, be paid to the beneficiary at stated periods, not less often than annually. Under a unitrust, the amount paid to the beneficiary each year will vary, while the amount paid under the annuity will remain constant. Like the annuity trust, the donor or others may be named as beneficiaries, with the remainder passing to the University.

Pooled Income Fund: This fund is a trust into which two or more donors irrevocably transfer property, contributing the remaining interest in the property to the University. The property conveyed must be comingled with other properties transferred into the fund, and each donor retains an annual income interest based upon the proportionate share of assets which the donor contributed to the total fund.

"Contributing to the UTA Libraries is a form of continuance and presence in something I strongly believe in, but am not physically present to do so. It is a feeling that my involvement and efforts are working on a different level of support and that's a nice feeling."

.................Bob Gamble

Life Insurance: Gifts of life insurance provide a means of making a sizeable contribution at a relatively low cost. Certain gifts, such as a gift of a paid-up policy, may qualify as a current gift rather than a deferred gift. Contribution of a life insurance policy is accomplished either by delivering and assigning ownership of the policy to the University or by naming UTA as the sole, irrevocable beneficiary of the policy. The owner who makes the gift of an existing life insurance policy is entitled to a federal income tax deduction for the value of the policy at the time of the gift. The amount of tax deductions vary according to many factors.

Real Property Subject to Life Estate: A donor may transfer a personal residence or a ranch to the University while retaining the right for the donor and his or her spouse to live there for life. The donor will be entitled to a federal income tax deduction for the fair market value of the property at the time it is transferred less the value of the retained life estate. In addition, the donor escapes the capital gains tax on the appreciation.

Gift of Retirement Plan Benefits: Many individuals have a substantial portion of their wealth invested in qualified retirement plans, including corporate retirement plans, Keogh Plans, IRAs, and Section 401K plans. Though beneficial during one’s lifetime, when such plans are taxed upon death they can drastically reduce the amount of property passing to family members. Designation of a charitable organization, such as UTA, as the beneficiary of such assets upon the death of the individual (or the individuals’s spouse) can eliminate all but the 15% excise tax problem.

Estate Planning: This is the process of working with your attorney, accountant, trust officer, life insurance agent, or other advisor to establish an orderly and desirable arrangement for the disposition of your estate. In most estate plans, the disposition of property after death is the key consideration. Lifetime dispositions of property, however, are also an extremely important part of estate planning.

The primary objective in any plan should be the fulfillment of the wishes of an individual with regard to the happiness and security of the individual’s family and others (sometimes including charitable organizations) that he or she wishes to benefit. Taxes, although secondary, are an important part of estate planning and are often directly related to the accomplishments of the individual’s primary goals.

A well-drafted estate plan, utilizing to the best advantage the marital deduction, a combination of trusts and life-income arrangements and other plans can result in major tax savings. An individual thereby benefits his or her family and makes it possible for a substantial bequest to be made to an educational organization such as UTA at a small cost to his or her estate. Through bequests it is possible to give cash, securities, life insurance proceeds, real property, and personal property. Any of the trusts previously discussed may be established through a bequest. Bequests may be unrestricted or restricted gifts. They may, and often do, establish lasting memorials in honor of the donor and members of the donor’s family.

The Office of Development at The University of Texas at Arlington will be happy to work with you in establishing the best program to meet your wishes. It is our policy to recommend to each individual the use of his or her own counsel for legal and tax advisory services.

Additional information about any of the opportunities for giving is available by contacting Selma Permenter, Development Office, The University of Texas at Arlington, P.O. Box 19198, Arlington Texas 76019, (817)272-2584, or at asebedo@uta.edu .