Gift Planning Discover the Possibilities of Gift Planning

Making a wise planned gift can create a win-win situation for you, your family, and your alma mater. Planned gifts allow you to give back in a way that is meaningful to you, and also can help you prepare for your future. For example, planned gifts can allow you to take income, gift, and estate tax deductions and provide favorable capital gains tax treatment. They can provide reliable income for you and your loved ones for life.


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Repatriating Hedge Fund Offshore Deferred Compensation:

Charitable Gifts to W&L Can Minimize Your Tax Burden

If you have benefited from offshore deferred compensation through your work in hedge fund management and face significant taxes in 2017 as mandated by IRC Section 457A, Washington and Lee University can provide charitable strategies that offset your tax bill and benefit your alma mater.

As part of the Emergency Economic Stabilization Act of 2008, IRC section 457A imposes significant restrictions on programs prior to 2009 that enabled managers of offshore hedge funds to defer the receipt of fee compensation and grow the savings tax-free. IRC Section 457A ends this practice.

Managers of offshore hedge funds who earned deferred compensation for services performed before January 1, 2009 must repatriate it no later than December 31, 2017. That income then becomes subject to US taxation, often at the highest marginal tax rates.

If you are affected by IRC Section 457A, your best strategy may include making a charitable gift to W&L. Your gift must be received by December 31, 2017 to receive a charitable deduction that offsets your 2017 tax bill, so act now!

Four Charitable Strategies to Minimize Your Tax Burden

1)      An outright gift to W&L of cash or long-term appreciated assets - such as publicly traded stock, mutual funds, real estate, or, in certain circumstances, non-publicly traded assets - produces an immediate charitable deduction equal to 100 percent of the market value of the gifts.  

Gifts of cash produce tax deductions of up to 50 percent of adjusted gross income in the year of the gift and can be carried forward for an additional five years. Gifts of long-term appreciated assets produce tax deductions of up to 30 percent of adjusted gross income in the year of the gift and can be carried forward for an additional five years.  

2)       A charitable gift annuity provides an immediate charitable deduction, reduced capital gains taxation when funded with long term appreciated assets, a future income stream, and an impactful gift to W&L. Through a contract with W&L, a charitable gift annuity produces lifetime fixed payments to the annuitant(s) based upon the annuitant's age and life expectancy. The donor receives an immediate tax deduction based upon the present value of the future gift to W&L.   

3)      A charitable remainder unitrust provides an immediate charitable deduction, reduced capital gains taxation when funded with long term appreciated assets, a future income stream, and a significant gift to W&L.  A charitable remainder unitrust is a tax exempt irrevocable trust funded with cash or long term appreciated assets that makes income payments to individual beneficiaries for life, lives, or a term of years.  It provides the donor with an immediate charitable deduction equal to the present value of the W&L's remainder interest.  To qualify as a remainder unitrust, the trust's payout percentage must be at least 5 percent, and payout amounts vary depending upon the December 31 market value of the trust.  

4)      A grantor charitable lead trust funded with cash or long-term appreciated assets provides the donor with a current income tax deduction while providing a stream of revenue to W&L over a set period of years. At the end of that term, the remaining trust assets return to the donor.  

For more information on any of these charitable giving strategies, please contact Margie Lippard in the Office of Gift Planning at mlippard@wlu.edu or 540-458-8902.  

Please consult your personal advisors on all legal, tax, or financial issues related to gift or tax matters. The strategies outlined above should not be considered legal, tax or financial advice.