GCF BULLETIN

GCF Initiates Program to Benefit Donors Now and GCF in the Future

At the recent SGO meeting in Orlando, the Gynecologic Cancer Foundation (GCF) received approval from the GCF Board of Directors to develop a program to make it easier for SGO members and other GCF donors to establish a Charitable Remainder Trust. This tax-advantaged form of philanthropy is becoming increasingly popular because of its benefits to donors now and throughout their lifetime and to a designated charitable organization in the future.

What is a Charitable Remainder Trust?

A Charitable Remainder Trust is an irrevocable legal contract between a donor, a fiduciary agent (trust company, bank, investment company, etc.) and a charitable organization chosen by the donor. When the trust document has been prepared by a lawyer and signed by the donor and the asset has been donated (stocks, bonds, real estate, land, objects of art, cash, etc.) it is turned into cash and invested by the fiduciary agent in a manner selected by the donor (fixed annuities, bonds or stock equities). The donor receives income derived from these investments regularly until death at which time the fiduciary agent pays to the named charitable institution the residual value of the charitable donation.

What are the benefits to the donor?

In addition to the satisfaction of supporting a cause or activity in which one believes, the primary benefit to the donor of this type of gift is that the value of the donated asset is converted to an investment which produces income which the donor receives over the rest of his/her lifetime. If the spouse is a joint recipient, the income continues as long as either is alive. This avoids the commonly expressed reason for not making philanthropic donations - "I am afraid to give anything away because I don't know how long I will live and I might need it."

Equally attractive to donors are the legal tax advantages of this form of charitable donation. In the year in which the trust is set up and the donation is made, the donor receives a one-time charitable deduction that applies to that year's Federal income tax liability. The portion of the total amount which is deductible depends on the age of the donor and is determined by a formula established by the IRS. In addition, a significant portion of the income regularly received by the donor during their lifetime is not taxable.

Of particular benefit to a donor is the use of assets which have increased in value since they were initially obtained. The value of the one-time charitable tax deduction and subsequent income is based on the current value of the asset. The donor is not taxed on the increased value of the asset which would normally be subject to capital gains taxes. Using this form of financial planning, a donor can contribute an asset whose value has increased greatly but generates no current income into a large current charitable deduction from taxes, a source of regular income which is only partially taxable until their death and never pay taxes on the assets' increase in value.

What are the benefits to the Foundation?

The obvious answer is "money." But it is not quite that simple, for the money does not come to the Foundation when it is donated but only when the donors have passed away. However, the Foundation does receive one immediate benefit. Since the trust is irrevocable, the Foundation can depend on the fact that it will eventually receive the residual value of the original donation. In this way, the Charitable Remainder Trust serves one of the functions of an endowment - it guarantees the financial future of the Foundation. By doing this, it allows the Foundation to use its current income to fund current programs and activities without diverting significant amounts to create or enlarge its endowment.

What is needed to create a Charitable Remainder Trust?

Simplistically, all that is required is:

• 1) A willing donor with disposable assets;
• 2) Legal assistance to develop the trust document
• 3) A fiduciary agent to receive the original assets, invest the proceeds from these assets in accordance with the donors wishes, and guarantee the payment of the income from these investments to the donor(s) while living and residual funds to the chosen charitable organization when the donor dies;
• 4) A legally registered charitable organization chosen by the donor to use the funds to carry out their programs in an effort to meet their stated goals.

In order to simplify this process, the GCF has asked the assistance of PaineWebber, Inc./Comerica, an investment firm chosen by the SGO and the GCF to manage their investment portfolio, to direct a program to assist our SGO/GCF members who want to know more about Charitable Remainder Trusts and give assistance to establishing one.

PaineWebber staff, working with GCF leaders and headquarters staff, are available to help you with:

• 1) Information related to Charitable Remainder Trusts and your individual situation;
• 2) Selection of a lawyer from a network of trust/estate planning specialists to help you draw up the trust documents;
• 3) Decisions concerning how you wish your funds managed by the fiduciary agent while you are alive;
• 4) Coordination of the management of your funds while they are being handled by the chosen fiduciary agent, Comerica.

Is it necessary to use this network, Paine Webber Inc. or Comerica, to establish a Charitable Remainder Trust?

NO. You can use any lawyer or fiduciary agent that you select. However, we do hope you will keep the Gynecologic Cancer Foundation as the ultimate recipient of your philanthropy.

Further written information is being prepared for SGO/GCF members and other potential donors to GCF. In the meantime, if you wish to talk to individuals with particular knowledge and interest in this program, you can contact:

Dr. Wesley C. Fowler, Jr., Chair GCF, 919/966-1196

Dr. John L. Lewis, Jr., Chair GCF Advisory Committee, 603/643-6875

Dr. Larry Copeland, 614/293-3873

Dr. Ronald Alvarez, 205/934-4986

Karen Carlson, 312/321-6810

Jim Hunt (PaineWebber), 312/984-2377

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