February, 2006: "The AFCF and Planned Giving - Charitable Remainder Trust Gifts"

by Mike Bourland
American Football Coaches Foundation

Courtesy: AFCA
Release: 02/01/2006

In previous additions of the Extra Point, we discussed various methods of Planned Giving which can assist The American Football Coaches Foundation (the "Foundation") meet its financial requirements. Planned Giving is the structured and pre-planned way to donate to the Foundation. It is charitable giving through Wills, Living Trusts, life insurance and other advance planning methods. In the October 2005 issue of the Extra Point we discussed giving to the Foundation through the Planned Giving technique called Charitable Gift Annuity. In this issue, we will discuss giving to the Foundation through a Charitable Remainder Trust ("CRT"). But before we discuss the CRT Planned Giving technique, let's again review some of the previously discussed Planned Giving techniques, as well as key aspects of the Foundation, its goals and how it accomplishes its goals.

When a donor names the Foundation as a beneficiary of his Will or Living Trust, property passes to the Foundation at the donor's death. Because the Foundation is a publicly supported, tax-exempt charity, the estate of the donor receives an estate tax charitable deduction for the value of the property passing to the Foundation at the donor's death under a Will or through a Living Trust. Additionally, a donor can make a gift to the Foundation by designating the Foundation as the beneficiary of a life insurance policy on his life. At the donor's death, the Foundation receives the proceeds of the insurance policy, and the donor's estate receives an estate tax charitable deduction for the value of the proceeds passing to the Foundation. A Charitable Gift Annuity is part charitable gift and part purchase of an annuity. It is a contract between a donor and the Foundation, where the donor irrevocably transfers money or property to the Foundation in return for the Foundation's promise to pay a fixed, guaranteed payment to the donor, or another person that he designates, for life. Through a Charitable Gift Annuity, a donor can make an immediate gift to the Foundation and provide an income stream for himself or another, either starting immediately or at some point in the future.

As a contrast to the sophisticated techniques described above, a gift of cash is simple - just write a check and give it to the Foundation. You will receive an income tax charitable deduction limited by 50% of your income, thereby reducing the cost to you of the gift by the income taxes you save through the charitable deduction. Another easy way to make a contribution is by giving the Foundation property that has grown in value since you acquired it. You will normally receive an income tax charitable deduction for the full value (limited by 30% of your income), even though neither you nor the Foundation pays income tax on the property's appreciation. Therefore, the appreciation is never taxed and the cost to you of the gift is reduced by the taxes saved from the income tax charitable deduction you achieve and the capital gain you avoid.

In regard to the goals of the Foundation, we know the goals are to provide funding for the education of American football coaches to better serve the public through role modeling and character development for young men and your women and the promotion and enhancement of the coaches' technical skills and coaching capabilities. The American Football Coaches Association (AFCA) is a tax exempt trade organization. Contributions to the AFCA do not qualify for an income tax charitable deduction to the donor. As previously stated the Foundation is a publicly supported, tax-exempt charity. Contributions to the Foundation qualify for an income tax and estate tax charitable deduction to the donor. Revenue generation activities of the Foundation should be structured to maintain its advantageous publicly supported tax exempt charity status.

To meet the requirements of a publicly supported tax exempt charity, the Foundation must receive at least one-third (1/3) of its support from a broad range of donors, which includes AFCA member coaches. That is why your annual contributions and membership payment are anticipated and crucial to the success of the Foundation. For every dollar from an AFCA member coach, the Foundation can receive two additional dollars from a larger donor or donor foundation without endangering the Foundation's favorable publicly supported tax exempt status. Because you are now familiar with this rule, you can see how every AFCA member coach's personal involvement is important to the Foundation's strategic game plan to solicit and receive contributions from wealthy individuals and their family foundations. With these types of gifts, the Foundation has funds that it can put to work immediately in support of the Foundation's goals.

The Planned Giving technique to be discussed in this issue of the Extra Point is the CRT. Let's say you are concerned over your ownership of a publicly traded stock that has grown in value significantly since you purchased it, but that pays you a very small annual dividend. You want a higher annual cash flow from the stock but are unwilling to give up 15% of the stock value as a result of the capital gain tax that occurs upon change of the investment. You also want to make a contribution to the Foundation and wonder if your financial and charitable goals can be combined. The answer is - Yes, they can!

You can create and fund a CRT with the appreciated stock. A CRT is an income tax exempt trust that makes an annual payment to you or another for life and at death distributes the remaining assets of the CRT to the Foundation. Because the CRT is income tax exempt, the stock can be sold by the CRT with no capital gain tax at the time of sale and the proceeds invested in assets that provide you or another an acceptable annual payment, taxed only when received by you or another. Even though the Foundation will not receive anything until the death of the CRT beneficiary(s), you receive an income tax charitable deduction in the year the CRT is created and funded.

A gift through a CRT is an additional way that you can support the Foundation and through the Foundation support the AFCA. As has been emphasized in each of the articles in this series, your participation as a donor to the Foundation is critical to the accomplishment of the mission of the Foundation and the AFCA.

As a further reminder, there is still time to acquire a Bench, Plaque, Capstone, Tile or Brick in the Plaza of Influence. The Plaza of Influence presents a tremendous method for AFCA member coaches, as well as the general public, to prominently honor a special football coach and to make a contribution to the Foundation. The Plaza of Influence is a stone-lined plaza located at the AFCA facility. For a contribution to the Foundation ranging from $2,000, for a Bench, to $200, for a Brick, you or anyone within your sphere of influence can have an inscription for, as well as a brief salute regarding, a special football coach imprinted on that which you acquire. The inscription will honor this special football coach and will be a permanent part of the Plaza of Influence, which is a significant aspect of the AFCA facility. Payment for each item will be treated as a contribution to the Foundation and will be income tax-deductible to the donor.

Please continue to plan and conduct fundraising events in your community, such as banquets and golf tournaments. Proceeds from admissions, sales of merchandise, performance of services, or furnishing of facilities at an event are classified as "gross receipts" funds of the Foundation. Gross receipts funds should target a broad base of the community, as no single person can provide more than 1% of the Foundation's total support through gross receipts and have it count toward maintaining the Foundation's favorable tax status. Also, care should be taken so that no fundraising activity becomes an ongoing business, to avoid the Foundation having unrelated business taxable income (UBTI) from the activity, resulting in income taxation and possible loss of the Foundation's tax exempt status.

Will you consider making a gift to the Foundation through a CRT or some other Planned Giving Technique? Will you encourage others to do this? Will you continue to plan and conduct fund raising events in your community? Have you acquired (and encouraged others to acquire) a permanent salute in the Plaza of Influence for the special football coach in your (or others) life? Remember that the Foundation needs participation from every member coach in order to meet its goals.

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“Coach George Smith is not only an influence on young people, but the influence is multiplied many times in the beliefs of the young people he helped mold into amazing human beings. George is an outstanding coach, but more importantly, he is an outstanding gentleman.” —Tina Jones, Principal of St. Thomas Aquinas High School