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Bequests | Trusts | Charitable Gift Annuities | Pooled Income Funds

Questions about Bequests

What Is A Bequest?

Bequests are the actual gift disbursals that result, upon one's passing, from a specifically worded commitment in a will or trust agreement. Bequests are unlike any other gifts we receive because they represent individuals' final statements about what is most important to them. Every bequest is a powerful expression of loyalty, good will, and faith in the future of us and our mission.

I'm Not Wealthy, Can My Bequest Still Make A Difference?

You do not have to be wealthy to create a legacy. A bequest of any size can be significant in helping to preserve our mission and our reach.

I have a will. Do I need anything else?

In addition to a will, most experts recommend that you have a durable power of attorney, which allows another person to act on your behalf should you become incapacitated. Also, a living will is helpful to your heirs in that it directs at which point you do not want your life artificially supported.

Can bequests be handled in a living trust?

Certainly. You may wish to consider a living trust as an estate planning tool. More information is available. Living trusts may be either revocable or irrevocable and there are advantages and disadvantages to consider in both.

What happens to my personal possessions?

Personal possessions are best distributed through a tangible personal property memo in which you list the personal items you wish to give to specific people. Your will must mention the existence of this memo and you should keep a copy of it with your will.

Questions about Trusts

If a trust agreement is established as irrevocable, it means that it can't be revoked (broken) except under unusual circumstances. Why would anyone want an irrevocable trust?

There are always specific reasons for making an irrevocable trust agreement. Perhaps it involves a family business where some of the family members are getting on in years and the family wants to make certain that management continues to run smoothly even if hindrances, such as senility, enter the picture.

Many times the reasons for an irrevocable trust involve estate and/or income tax avoidance. In order to be successful in such avoidance, the trustor must not have any direct or indirect power or control over the trust property or income. The regulations on this subject, set out in the Internal Revenue Code, must be carefully followed.

What is the difference between a charitable remainder unitrust and a charitable remainder annuity trust?

The major difference is in the valuation of the assets of the trust, which establishes part of the calculation for the determination of the amount of income received by the income beneficiary(-ies). The annuity assets are valued at the time the assets are placed in the trust and are never revalued. Annual payments remain the same, whether the assets appreciate (increase in value) or decline (lose value).

The assets in the unitrust are revalued annually. If the trust assets appreciate, the payment to the income beneficiary(-ies) will increase. If the trust assets depreciate, the payment will decrease.

What happens to my assets in a trust for a charity if the charity goes out of business before the expiration of the trust?

Your trustee is authorized to name a substitute, if that is the sole charity.

Should I name a charity as trustee of my charitable remainder trust?

This is often done if the organization is qualified to so act under local law. The organization's representatives can satisfy you in that regard. Often they will serve without fee, which is an additional incentive.

Can I use my insurance to benefit charitable organizations?

Yes. This is an area overlooked by many. You can name one or more charities as alternate or as primary beneficiary. Furthermore, if you no longer need the policy proceeds in your estate for use now, you can transfer ownership of the policy to the charity or charities. If the policy has cash loan value, the charity can draw this out and use it. In this case, you not only receive a charitable gift deduction, but any additional premiums you pay are tax deductible for you now. And, on your death, the charity receives the balance of the policy proceeds and none of it is included in your estate for tax purposes.

Questions about Charitable Gift Annuities

How can I fund a charitable gift annuity and how is my income calculated?

The usual funding sources for a charitable gift annuity are cash and marketable securities. There can be tax benefits associated with the gift of appreciated securities (the current market value exceeds the cost or basis value). As a gift annuity is considered partially a gift and partially an annuity, part of the gift avoids capital gain tax entirely. Real estate and other marketable assets may also be used, but in many cases acceptance of these kinds of assets are often on a case-by-case basis. Generally, the charity will convert the assets to cash to fund the annuity.

The income provided you by the annuity is determined by your age and the age of any additional beneficiary and is calculated using tables established and filed with regulatory agencies under which the charity operates its annuity program.

Can I set up a charitable gift annuity and delay the start of the income until I will more likely need it, such as at my retirement, when my income is lower?

Yes, the flexibility associated with establishing charitable gift annuities makes them a popular and effective retirement planning vehicle. Using a deferred gift annuity, the annuity earnings accumulate on a tax-deferred basis. Thus the deferred payment annuity accomplishes several things. First, the donor receives a tax deduction in the year the annuity is established, which is usually when the donor is in a higher tax bracket. Secondly, the gift to the charity becomes larger as the deferred earnings increase the annuity's principal. Finally, since the deferred payment annuity grows in size while income is deferred, the ultimate income will be more per year.

Questions about the Pooled Income Fund

Is there a limit on the amount of charitable deduction that can be claimed for federal estate tax purposes ?

No. It is unlimited.

How does the rate of return affect the size of the income tax charitable contribution deduction?

The lower the rate of return, the higher the deduction will be.

Who can receive income earned by the Pooled Income Fund?

1. YOU can receive quarterly income or the rest of your life.
2. YOUR DESIGNATED BENEFICIARY can receive quarterly income for rest of his or her life.
3. ANY TWO PERSONS can receive quarterly income for the rest of their lives, concurrently and/or consecutively:
   a. you and another
   b. two others

How is the income generated by the Pooled Income Fund treated for tax purposes?

All of your income from the Fund will be taxed to you as ordinary income.

Isn't a bequest just as good as a contribution to the Pooled Income Fund?

Certainly, The Actors Fund will always appreciate gifts made in the form of Bequests. However, when you make a contribution to the Pooled Income Fund, the gift works much like a bequest but with these additional benefits to your during your lifetime:

• You receive a life income.
• You may increase your spendable income.
• You can avoid capital gains tax.
• You are allowed an income tax charitable deduction.
• You can save estate taxes and estate settlement costs.

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