HEAL THE PLANET BEYOND YOUR LIFETIME

Most legacy gifts to Trees, Water & People come as a designation of a portion of one’s estate to the organization through a will or trust.

This is usually done via a simple statement, like this:

“I hereby leave [specific amount, percentage, residuary amount, or asset] to Trees, Water & People, a nonprofit corporation organized and existing under the laws of Colorado, at 633 Remington Street, Fort Collins, CO 80524 and federal tax identification number 84-1462044.”

The basic difference between a will and a trust is that a will generally has to go through probate court upon one’s passing, where agents of the courts govern the distribution of your assets. The duration, legal fees, and court fees will vary depending on the complexity of your assets and the states they are registered in, but typically take months to execute. 

For people with less complex estate planning needs, a will may be sufficient.

A revocable living trust requires a higher time and financial investment today, but results in a living entity to which you assign ownership of your assets (investments, real estate deeds, vehicle titles, bank accounts).

A trust lives in a document created between you, a trusted attorney, and your financial advisor, and is governed by the content in the document. It can become irrevocable at a time of your choosing, or upon your death, whereupon no further changes can be made.

In addition, best practice is to also create a pour-over will that catches any assets left out of the trust. A copy of a trust can be used in estate management proceedings, versus requiring the original as in the case of a will.

In either case, all gifts to 501(c)(3) nonprofit organizations are distributed tax free. Meet with your financial advisor to discuss including Trees, Water & People in your will or trust.

Donor Advised Funds, or DAFs, have become a popular tool for reducing tax exposure, and to facilitate philanthropic giving over time. You can receive an immediate tax deduction for funds you allocate to your DAF today, and then disbure them to charities at any pace you like. 

All cash, stock, bonds, mutual funds, or cryptocurrency placed in a DAF become assets of the managing entity, and are distributed to charitable causes as recommended by the creator of the fund, or by their successors. Funds in the DAF can grow over time when invested by the managing entity, but ultimately this shouldn’t overshadow the purpose of the funds, which is to drive action through charitable organizations. 

Many people use DAFs as ways to engage family in philanthropic activity, and encourage a family culture of giving. You can name successors to continue managing the DAF after your life, or you can name a charitable beneficiary that would receive the remaining balance of your DAF either as a lump sum, or over an interval of your choosing. 

Because you receive a tax benefit once you create and fund your DAF, you don’t get an additional benefit when you donate the funds to a charitable organization. Similarly, because the funds are irrevocably committed to the DAF, successors must also donate the funds to a charity. Your DAF can be housed at a local community foundation, or at over 50 other national financial institutions. 

DAFs are often forgotten by their creators, and funds can remain idle for years if not actively managed. By naming Trees, Water & People as a remainder beneficiary of your DAF, you ensure that funds will be put to work on TWP’s mission immediately upon your passing.

Naming Trees, Water & People as a charitable beneficiary to your traditional retirement accounts is a great way to create a legacy gift. 

If the named beneficiary is an individual, distributions from traditional IRAs, 401(k) and 403(b) are taxable as income.  However, when you name a 501(c)3 organization as one of your beneficiaries, these funds do not face income tax. 

When planning your estate, consider that charitable gifts made from your tax deferred retirement accounts, including Traditional IRAs, 401(k) or 403(b) accounts would be more favorable than giving cash or other assets. 

The step-up in basis that other estate assets enjoy may be more beneficial as gifts to your loved ones. 

Your retirement account administrator can add TWP as a charitable beneficiary of your account, and ensure your tax-free legacy gift upon your death.

Depending upon your goals, appreciated real estate can used to fund gifts that prioritize an immediate charitable income tax deduction, provide an income back to you, and/or establish a future legacy gift that would cost you nothing today. 

As these gifts can be complex, exploring the possibilities with your advisors and TWP can help ensure that your vision for your gift is fully realized.

Talk to your financial advisor, CPA, or estate planner if you have a property that you are interested in donating to a nonprofit organization.

Donating appreciated securities to charity may offer significant advantages over donating cash.

When you donate appreciated securities directly, you avoid the capital gains taxes (up to 20%) you would incur if you sold the assets first. As a result, the full value of the securities goes to TWP, maximizing the impact of your donation.  Additionally, you can typically claim a charitable deduction for the fair market value of the securities if you itemize deductions for tax purposes.

Positions with the highest amount of appreciation can benefit the most from this strategy.  Donating appreciated securities can represent a smart way to give, allowing you to support your favorite nonprofit organizations while also optimizing your tax benefits.

For those with appreciated assets, donating securities is a smarter way to give, allowing you to support your favorite nonprofit while also optimizing your tax situation.

For retirees, donating directly from a traditional IRA represents a tax-advantaged option for your charitable contributions. 

Beginning at age 70 1⁄2, IRA owners can make direct transfers to charity without recognizing income tax on the distribution.  Since most retirees claim the standard deduction for income tax purposes—instead of itemizing—utilizing QCDs can represent a more tax-efficient option for your donations.

A QCD can be made in any amount up to an annual limit of $105,000 in 2024 (indexed for inflation thereafter).  For those who are at least 73 years old, QCDs can also count toward your Required Minimum Distribution (RMD) for the tax year. 

For higher income retirees, lowering your AGI can help you stay in a more favorable tax bracket, preserving benefits that could otherwise be reduced or eliminated.

Using QCDs could make sense if you:

• Claim the Standard Deduction for income tax purposes   

• Don’t need your entire RMD and would like to lower your taxable income

•  Want to lower your RMD amount in future years by reducing your IRA balances today

• Want to support a 501(c)3 organization like TWP instead of a  donor-advised fund (which cannot accept QCDs)

• Want to make a larger donation than perhaps you could using available cash on hand

Once you’re 70 ½ or older, talk to your financial advisor and retirement account administrators to explore the benefits of a QCD for Trees, Water & People.  

You can also add TWP as your charitable remainder beneficiary to your IRA and other Retirement accounts to avoid having these funds taxed upon distribution.

Required Minimum Distributions (RMDs) are minimum amounts that individuals must withdraw annually from Individual Retirement Arrangement (IRA) starting the year you reach age 73.

A qualified charitable distribution from your IRA will count dollar-for-dollar toward your RMD for the tax year.

A CGA is a tool that helps balance out your income in retirement, while supporting your favorite charitable organization. It's a simple contract where you make a lump-sum gift to the nonprofit in exchange for a guaranteed fixed income for life.

The tax deduction is based on the amount of the lump-sum gift that will remain with the charity after the term of the annuity, or after your lifetime.

What's great about CGAs is that they flex to your needs - you can defer annuity payments until a date in the future, but receive a tax benefit today. You can spread the income from your annuity monthly, quarterly, semi-annually, or annually.

Key Features:

1. Contractual Agreement: It's a straightforward agreement between you and the charity.

2. Fixed Income: Annual income is determined at the time of the gift based on your age and the amount of the gift.

3. Charitable Deduction: You receive an immediate charitable income tax deduction for the estimated value of the future charitable benefit.

4. Annuity Rates: The annuity rates are often based on the guidelines provided by the American Council on Gift Annuities (ACGA).

5. Charity as Guarantor: The charity guarantees the annuity payments, which makes the charity’s financial stability important.

Reach out to TWP and your financial advisor to see if a CGA is the right tool for your financial and giving goals. It is a great for staying in as low a tax bracket as possible throughout retirement, but the annuity payments are fixed once established, so careful planning is essential.

Reach out if you'd like to explore charitable gift annuities as an option for your legacy plan!

A CRT is a trust that provides income to designated individuals for a specified period or for life, after which the remaining assets are distributed to your favorite charities.

Trusts are a separate entity, with their own tax ID, that can hold assets on your behalf for distribution during your life or after your death. The trust pays a percentage of its value, revalued annually (Charitable Remainder Unitrust or CRUT), or a fixed annuity amount (Charitable Remainder Annuity Trust or CRAT).

1. Charitable Deduction: The donor receives an immediate charitable income tax deduction for the present value of the remainder interest that will eventually go to charity.

2. Flexibility: CRTs offer flexibility in terms of the payout structure and can accommodate multiple beneficiaries.

3. Tax Advantages: CRTs can sell appreciated assets without incurring immediate capital gains tax, deferring it instead.

4. Administrative Requirements: CRTs require ongoing administration, including annual valuations (for CRUTs) and tax filings.

5. Investment Control: Depending on the trust structure, the donor may have some influence over investment decisions.

Benefits:

• Flexibility: Customizable payout options and the ability to benefit multiple beneficiaries.

• Tax Deferral: Capital gains tax can be deferred, and income can be spread over time.

• Larger Gifts: Suitable for larger donations and complex assets like real estate or closely held stock.

Limitations:

• Complexity and Cost: More complex and expensive to establish and maintain.

• Irrevocability: Once the trust is established, it generally cannot be changed or revoked.

Administrative Burden: Requires ongoing management and compliance with trust regulations.