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Sunday, February 8, 2004
 
In retirement

Ways to give something back

Suzanne Monson
Special to The Seattle Times

Living on a shoestring with five young children, Linda Gleadle's father pushed a broom to make ends meet for his family.

While he was working his way up to better-paying jobs, Gleadle's mother was pinching pennies and shuttling the brood to what is now Children's Hospital & Regional Medical Center. The weekly journeys were for three of the children to undergo tests and treatments for a rare blood condition.

"My oldest sister, Diana, wasn't expected to live past the toddler stage," says Gleadle. Thanks to research, and the blood transfusions she received every six weeks of her life, she lived to age 24. "If it wasn't for the uncompensated-care program at Children's, it would have devastated my parents," Gleadle says. "I always knew that I just wanted to be able to give back to (the hospital) what they gave to my family."

Now these powerful memories shape the way Linda and her husband, Ian, a Woodinville couple in their early 40s, look at their charitable giving — and the way it fits into their recently drafted will and retirement plan.

"I call this the 'aha moment,' " says Anne Knapp, director of planned giving for the American Heart Association, Northwest Affiliate. "Eventually, many people reach a time when they look back on what their time on Earth has meant. ... They realize it's time to pay that back."

Returning such goodwill motivates a small but growing number of Americans making estate gifts to charities and schools while planning for retirement and making wills. Of the 42 percent in this country with a will, just 8 percent assign a portion of their estates to charity.

"No matter whether somebody feels wealthy during their lifetime, by nature they don't want to run out of money," says Knapp. "But there are really only about three places for your nest egg to go after you're gone: to friends and family, to the government or to a charity, if a charity is one of the things you care about."

Bequests

For those considering a charity in their retirement or estate plan, planned-giving professionals frequently cite 10 choices for channeling gifts, from life insurance to tax-deferred IRA plans. Tax implications vary greatly with each option.

With a life-insurance policy, a charity can be named as a beneficiary; a premium payment then becomes an annual gift to the charity and is eligible for an income-tax deduction.

Current tax law now under review by Congress penalizes those who, during their lifetime, direct money from their IRA to a charity. That could change, however, with legislation that would permit people older than age 59 1/2 to move money from an IRA directly to a trust with a charitable beneficiary, says Judd Marten, a tax attorney with LeSourd & Patten in Seattle.

The simplest and most popular way to make a planned gift is through a bequest — a direct gift of cash or assets from an estate after death; nearly 75 percent of donors choose that method, according to Tanya Howe Johnson, chief executive officer of National Council on Planned Giving.

A bequest is typically a good fit for those younger than 50, says Marten, because people that age "need flexibility. You can always change your will. You don't know, for example, how market investments will go, and you may still have to help the kids or even the grandkids."

What surprises many, says Howe Johnson, is that such gifts aren't limited to the wealthy: "Anyone can leave bequests, regardless of the size of their estate."

Howe Johnson's group surveyed donors with incomes of more than $100,000 and assets in excess of $500,000, and compared them with American donors with smaller estates. "There was relatively no difference" she said "in the incidence of bequest giving among the affluent as compared to the general population."

Asking the hard questions

When 70 percent of Americans donate to charities in their lifetime, why don't more include planned giving in their estates? Some believe that's because Americans fear retirement and estate planning — particularly those in middle age. They may find it more stressful than seniors to confront the idea of mortality, and their lives, needs and financial situations are more in flux.

"That whole process was daunting," agrees Linda Gleadle. "There was so much to do. You have to decide who is going to take care of your kids if you die, and figure out what assets your kids need in their lifetime and then decide if what's left over can go to help charitable groups."

Even as a CPA, Gleadle says, she doesn't understand all the details of tax planning, and she and her husband benefited from using a professional.

As "one of the lucky ones who got in at the right time and qualified for early retirement," former high-tech worker Ian Gleadle tapped into references from former colleagues for estate-planning advice.

From the first soul-searching phase, through early meetings with a financial adviser and consultations with Children's Hospital, until final conferences with an attorney, the Gleadles' process took several months.

Gift annuities

A bequest may not be the best option for those in their 60s or 70s, says Marten.

That's why after teaching nursing at Seattle University for 34 years, Rose DeGracia and her husband, Cesar — retired after 26 years teaching in Renton and at South Seattle Community College — finalized a gift annuity to the university a little more than a year ago.

A gift annuity is a contract between a charity and a donor. In exchange for a transfer of cash, marketable securities or other property from the donor, the charity agrees to pay the donor a stream of income in equal, tax-free installments spread out over his or her life. These installments typically range from about 6.3 percent to 11.5 percent interest on the initial donation, depending on the donor's age. A substantial income-tax deduction is awarded in the year of the gift.

"We started thinking about this while we were still teaching, but of course we didn't have the wherewithal then," says Rose DeGracia. "But it was something that was always in the back of my mind, if ever we could afford it."

When the Mercer Island couple sold some real estate in 2002, they used the proceeds to set up a gift annuity that will provide fixed payments for both of them as long as both live. Rose is 72, Cesar is 75.

"We thought of the tax credits we would earn and that sounded enticing, so it's helping us and helping the university," says Rose DeGracia. "It's a win-win situation.

"It's not only heartwarming, but it's really working for you while helping others at the same time. It fills your heart with joy."

Eventually, their gift will fund the Cesar and Rose DeGracia Endowed Nursing Scholarship at the school for undergraduate Filipino-American or other Asian-American nursing students.

Photo
Rose and Cesar DeGracia, of Mercer Island, used profits from a real-estate sale to set up a gift annuity that gives them an income stream and tax benefits now and eventually will endow a Seattle University scholarship to help nursing students.


By the numbers

Who's leaving what

• 42 percent of Americans have a will.

• Of those with a will, 8 percent designate part of their estates for charity. That's up from 5.7 percent in 1992.

• Bequests — a direct gift of cash or assets from an estate after death — are by far the most popular form of estate giving. Nearly 75 percent of those who give to charity after death make bequests.

• The largest percentage of bequests were initiated by people between the ages of 45 and 54.

• The average age of those including a charitable bequest in their will is 49.

• The average age of those making their first will is 44.

— Sources: Leave a Legacy; the National Committee on Planned Giving

Resources

Online help

American Council on Gift Annuities: More about gift annuities and other forms of planned gifts through this nonprofit organization that provides educational and other services to American charities
www.acga-web.org or (317) 269-6271

Estate Planning Council of Seattle: Estate-tax planning strategies, wills, trusts and more, from a council that includes local attorneys, CPAs, trust officers, insurance professionals, financial planners and planned-giving experts
www.epcseattle.org or 206-285-4066

Leave a Legacy of Western Washington: Local and national resources for starting or improving a personal planned-giving program
www.leavelegacy.org

New Tithing: "How to Evaluate Non-profit Organizations" and other resources from this nonprofit group and private foundation
www.newtithing.org

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