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Endowments: Not Just for Your Parents and Grandparents!
Do you remember those advertisements from sunny Florida, where the spokesperson said, "Orange juice - it isn't just for breakfast anymore." The sponsors identified that it was a myth that a person could only drink orange juice in the morning and dispelled it with a catchy slogan.
Another such myth is that endowment giving is only for the very wealthy and the elderly. Some endowment options are specifically attractive and beneficial to younger, middle-income adults.
Through an endowment gift, which provides various types of tax advantages, the donor can specify the field of service or the Jewish Federation of Greater Philadelphia center - the Center for Social Responsibility, the Center for Jewish Life and Learning, or the Center for Israel and Overseas - that benefits from the gift, or make a gift to the Unrestricted Endowment Fund for programs and situations not otherwise funded by Federation's annual campaign.
These are some of the endowment gifts that best suit young adults:
• Life-Insurance Policy - An individual can purchase a policy irrevocably naming the Federation as the beneficiary, which makes the premiums paid by the insured 100 percent tax deductible for income tax purposes each year. Premiums are low for young adults in relation to the death benefit, providing a significant gift at a low cost.
• Philanthropic Fund - This donor-advised fund provides a way to make a gift to Federation, but also retain the right to recommend distributions of income and principal to qualified nonprofit organizations. This gift provides the benefit of an income-tax deduction for the year the gift is made, regardless of when distributions are made. This can give an individual a current charitable income-tax-deduction to offset income, before deciding on all of the charitable beneficiaries.
Establishing a Philanthropic Fund with appreciated stock is another useful strategy to consider. When shares of appreciated stock are gifted directly to the fund, neither the donor nor the fund has to pay capital-gains tax on the unrealized profit. This strategy works particularly well if maintaining cash is an important consideration for the donor, since there's no need to write a check for the value of the donation.
The Philanthropic Fund also allows the donor to consolidate charitable giving while Federation maintains the records and investments. The donor completes a simple recommendation form when making a gift to a nonprofit organization.
• Charitable Reminder Unitrust - This type of trust can be used as a retirement-savings vehicle because the donor can add to it at any time and receive an income-tax deduction for the present value of the gift. This gives a young adult the opportunity to save a significant amount for retirement while receiving a current income-tax deduction.
Upon retirement, the donor can start to receive a generous lifetime income from the trust. At the donor's death, Federation receives the amount left in the trust.
• Bequest - This form of endowment expresses an individual's commitment to the future of the community with a gift of a certain amount of money or a percentage of his or her estate. While this gift does not provide any income-tax benefits, a bequest to Federation does qualify for an estate-tax deduction, which can result in significant tax savings for families.
Bequests in a will do not detract from assets the person may need during his or her lifetime, and an individual can change his or her will at any time.
• Letter of Intent - A good way to get started with endowment giving is a Letter of Intent, a non-legally-binding commitment that states that a donor wants to provide for the future of the Jewish community through an endowment gift.
The professional staff of the Federation Endowments Corporation is available for confidential, cost-free consultation.
For more information, call Robert C. Pozen, director of endowment development, at 215-832-0519.
Clifford D. Schlesinger, Esq., is chairman of the Private Client Services Group of Wolf, Block, Schorr and Solis-Cohen LLP.