Frequently Asked Questions
1. What assets can I use to make a gift to the University of California, Berkeley?
Generally speaking, during your lifetime you can make an outright
gift of cash, securities or
other property (e.g., real estate, personal
property).
Through your will or living trust or with a distribution from a retirement plan or life insurance policy, your gift can be designated to Berkeley in accordance with your wishes.
2. What sort of gift plans also return income
to me?
You have the option of making a gift that returns income to you,
your spouse, or other individuals, by using a charitable
gift annuity, or charitable remainder unitrust or annuity
trust.
3. What tax deduction will I receive for
my gift?
Your tax benefits will depend on several factors: the type of gift,
the time at which it is made, whether it is outright or deferred
or has any income payments. In general, though, here are some guidelines:
- Outright gifts of cash to University of California, Berkeley generate a full income-tax charitable deduction. Outright gifts of appreciated securities are deductible at fair market value, with no recognition of capital gains -- a great tax benefit!
- Gifts of personal property, like art, books and collectibles, are fully deductible at fair market value so long as they are relevant to our mission. We can provide more information to you on this point. Click here for contact information.
- Bequests do not generate a lifetime income tax deduction, but can generate an estate tax deduction.
- Similarly, life insurance distributions to the University are not income-tax deductible, but can generate an estate tax deduction. If you have made us the irrevocable owner and beneficiary of a policy during your lifetime, you may deduct annual gifts that offset premium payments (for more details on this point, see Question 4 below).
- The charitable deduction for a gift that returns income to you, such as a charitable gift annuity or a charitable remainder trust, is the fair market value of the gift asset minus the present value of the income interest you retain. Contact us for more information.
4. I want to set up a life insurance policy,
name University of California, Berkeley as beneficiary, but retain ownership
of the policy. Can I deduct the premium payments I make?
No. The IRS would not consider that a "completed gift" – unless
you make Cal the irrevocable owner of the policy for gifts offsetting
premium payments to be deductible.
5. I've heard that transferring IRA assets
to charity is advantageous. Why?
Qualified retirement plans such as IRAs, 401(k), 403(b), and Keoghs
allow individuals to defer paying taxes on a portion of their income
until the assets are withdrawn during retirement years. However,
after a person's death, these accounts are often exposed to income
and estate taxes, at a combined rate that could rise to 75% or
even higher on large taxable estates. The tax will be paid at some
point—by your estate and your heirs unless contributed to
charity. In other words, by giving retirement assets to charity
you receive double benefits. Your estate and heirs will not be
taxed on the portion that goes to charity and you will support the University of California, Berkeley!
6. Can I transfer my IRA to Berkeley to
set up a life-income gift, and avoid income tax on the transfer?
No, once funds are withdrawn from an IRA account (or other retirement plan account like a 401(k) or 403(b)), those funds must be included in taxable income. In years 2006 and 2007, there was special legislation which allowed direct transfers from only IRA accounts to charities without the funds being included in the account holder's taxable income. Many think this legislation will be extended to 2008, but at this point it has not. The new law only applied to donors over 70½ years old and withdrawals up to $100,000 per account holder. It did not allow transfers to establish life income gifts, only outright gifts.
Of course, anyone can withdraw funds from their retirement plan account(s), then use the funds to make a gift. For an outright gift, the donor may be able to claim a full deduction thereby "washing out" the income triggered by the withdrawal. If the funds are used to establish a life income gift, there will normally be a partially offsetting deduction thereby cushioning the effect of the added taxable income. Either of these strategies can be particularly effective when the donor has reached age 70½ and is required to take withdrawals from their accounts each year.
Please click here for more information or contact us for assistance.
7. I'd like to donate a painting. Will you
determine its value for my income tax deduction?
The IRS requires that donors of artwork
and collectibles secure an independent appraisal of the items
to establish fair market value. The appraisal has to be related
to the gift, too – an insurance appraisal won't suffice.
We can assist you on this point.
8. I'm interested in establishing a charitable
gift annuity. What financial provisions will you make for the
income payments to me and my spouse?
Your charitable gift annuity will be treated as a general obligation
of University of California, Berkeley, backed by all of our assets. We
have an unbroken record in making timely payments to our annuitants,
and that ongoing responsibility is a key element in our financial
policies.
9. If I create a bequest or life-income gift,
will you continue to ask me for annual contributions?
Your planned gift is a significant addition to our long-term financial
strength and our ability to meet the challenges and opportunities
the future will bring. However, current campus activities and needs
are supported through annual gifts and we greatly appreciate and
encourage any ongoing support you may want to consider.
