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Gifts & Estates at Cincinnati Museum Center

This section describes some of the tax-efficient ways to make gifts to Cincinnati Museum Center. No matter how your gift is structured, you can direct your contribution to the program of your choice at Museum Center.

Outright Gifts

Giving Cash

Gifts of cash or by check have outstanding, immediate impact on Cincinnati Museum Center. They also provide direct income tax benefits for you in the form of a charitable deduction equal to the value of the gift. The deduction can offset up to 50% of your adjusted gross income, and unused portions of the deduction may be carried forward for an additional five years.

Giving Property

You may deduct gifts of property owned longer than 12 months at their full, fair-market value. The deduction may offset as much as 30% of your adjusted gross income, and any unused portions of the deduction may be carried forward for five additional years.

Stock

Using stock or mutual funds that have appreciated significantly in value since you purchased them can be an especially tax-efficient way to make gifts. In addition to the charitable deduction, you may also avoid the capital gains tax on the growth in value.

Suppose a donor in the 35% tax bracket gives stock valued at $10,000 which was purchased years ago for $3,000. The charitable deduction for the gift saves $3,500 in income tax and the gift avoids $1,050 in capital gains tax: a total tax savings of $4,550 on a $10,000 gift.

Real estate

Real estate is an often overlooked asset that can be ideal for charitable giving. You may realize three immediate tax-savings benefits:

• Claim the full, fair-market value of the real estate as an income tax deduction

• Avoid capital gains tax

• Reduce estate taxes (the property and any subsequent appreciation are removed from your estate)

Real estate can also be used to fund some life-income plans (see below).

Retained life estate

You can make a gift of your home, vacation home, or farm to Museum Center and continue to live there for the rest of your life, with no interruption of your lifestyle. You can claim an immediate, substantial income tax deduction for a portion of the value of your home.

Suppose a couple, ages 78 and 80, gives their vacation home to Museum Center and retains the right to use it for the rest of their lives. If they paid $35,000 for the home (now worth $100,000) several years ago, they would be entitled to a charitable income tax deduction of $42,970—almost half the value of the home.

Life insurance

A gift of life insurance—either an existing policy you no longer need or a new policy—could enable you to make an ultimate gift that is significantly larger than your out-of-pocket cost. You can claim a tax deduction based on the policy’s present value or net cost, whichever is less. And it may also be possible to claim deductions for ongoing premium payments.

Gifts that provide income

Gifts that provide income for you or others for life or over a period of years can reduce or eliminate capital gains tax and are particularly suited for gifts of appreciated assets that you have owned for over a year. You can also claim a charitable deduction for a portion of your gift, and the asset used to fund the gift is removed from your estate for estate tax purposes.

Charitable Trusts

Charitable trusts are particularly flexible. You can set up trusts to provide income for any number of beneficiaries, in numerous configurations, over a period of years or lifetimes or some combination of both. The charitable deduction allowed for your gift depends upon the amount of the gift, the expected duration of the trust, and the payout rate selected (must be at least 5%). The usual minimum to fund a charitable trust is $100,000, and you may select either fixed income (called a “charitable remainder annuity trust”) or variable income that is based upon the fluctuating value of the assets in the trust (called a “charitable remainder unitrust”).

Suppose a couple, both age 65, donate stock now worth $100,000 that they purchased years ago for $60,000 to a charitable unitrust with a 5% payout. In the first year of the trust, they will receive $5,000 in income and would be entitled to take a charitable deduction of over $35,000.

Gift Annuities

You can set up gift annuities to provide income for one or two people (of your choosing, including yourself) for life. This fixed-income plan provides lifetime income, some of which may be taxed at the lower capital gains tax rate and some of which may be tax-free. Your charitable deduction depends upon the amount of the gift, the income beneficiaries’ projected life expectancies, and the income payment rate (generally, the older the income beneficiaries at the time of the initial gift, the higher the fixed income rate). The minimum to fund a charitable gift annuity is $10,000.

Suppose that same couple gives the same stock to Museum Center to fund a charitable gift annuity instead. Each year for the rest of their lives (and then the survivor for the rest of his/her life), they will receive $5,600 in payments, some of which will be taxed at their lower capital gains tax rate and some will be treated as tax-free income. Their charitable deduction will be over $30,000.

Pooled Income Funds

Cincinnati Museum Center’s pooled income funds combine your contribution with other similar gifts. In return, this variable-income plan provides you or your designated beneficiaries with lifetime income, based on the actual earnings of the fund. The minimum to join one of Cincinnati Museum Center’s pooled income funds is $10,000, and you may select either the “growth” fund or the “income” fund.

Suppose a donor aged 68 donates $10,000 to Museum Center’s “income-targeted” pooled income fund. The income (s)he receives each year will vary, depending on the actual earnings of the fund (currently around 3.47%, or $347). The charitable deduction associated with this gift would be $6,182.

Gifts that Pass assets to heirs

If you wish to make annual gifts to Cincinnati Museum Center for a period of years and maximize the value of assets bequeathed to your heirs, then a charitable lead trust might be right for you. The value of the assets in the trust is essentially “frozen” at the time the trust is established, which can significantly reduce taxes on the eventual transfer of those assets. The minimum for charitable lead trusts will vary, but is usually in the $500,000 to $1,000,000 range.