Gift Acceptance Policy
For Fiscal Year 2012 - 2013
INTRODUCTION
Sterling College (“College”) wishes to provide corporations, foundations, and individuals (“donors”) with flexibility in formulating their gifts and grants while simultaneously administering giving within policies adopted by the College’s Board of Trustees (“Board”) and appropriate legal parameters to ensure that all gifts support programs consistent with the mission of the College.
The College seeks support for its core programs and gifts that preserve its independence, integrity and academic freedom and thus it reserves the right to decline any financial commitment, gift, grant, pledge, or bequest as well as the right to determine how a gift will be credited and/or recognized. The College may also decline gifts that it determines expose the College to adverse publicity, require undue expenditures, or for any and all other reasons in the Board’s discretion.
Further, the College will not accept financial support which it believes to involve discrimination based upon race, religion, gender, sexual orientation, age, national origin, color, disability, or any other basis prohibited by federal, state, and local laws.
The policies outlined in this document were developed by the Director of Advancement in consultation with the Advancement Committee of the Board and are designed to provide guidance to both College officials and to donors. At the request of the Director of Advancement, the Board will serve as the final authority on decisions to accept or decline gifts to the College.
POLICY OVERVIEW:
All gifts, including cash, publicly traded securities, and tangible personal property are accepted and administered on behalf of the Board through the College’s Office of Advancement.
In accepting a gift from a donor, the College also accepts a responsibility to steward each gift. This includes administering the gift properly, providing the donor with appropriate financial information about the gift, and reporting to the donor about the use of the funds.
Unrestricted resources are essential to ensure the continued quality of the College’s programs, supporting services, and to sustain and enhance its financial strength and flexibility. Unrestricted gifts are, in most cases, the gift of choice for the College and will be encouraged as such unless, the donor indicates a wish to make a restricted gift or a restricted gift will significantly enhance the opportunity for the donor to give.
Under Internal Revenue Service (“IRS”) regulations, donations for certain purposes such as the payment of tuition, fees, loans, room, board, or other expenses for a particular student are not acceptable charitable gifts to the College. Gifts made for the personal benefit of a named individual or individuals are not deductable as charitable contributions.
Unrestricted bequests and unrestricted matured deferred gifts of $50,000 or more will be added to the unrestricted endowment of Sterling College. The Board must approve any exception to this policy. The Director of Advancement and the Director of Finance & Operations will direct the use of any unrestricted bequests or matured gifts of $50,000 or less and establish or add to restricted accounts when the donor has indicated a restriction. All restricted gifts of $50,000 or more received since the last board meeting will be presented to the board for acceptance at the next board meeting, upon recommendation of the Executive and Advancement Committees..
While officers of the College strive to maintain a high level of familiarity with current federal and state tax laws and policies, neither they nor the College are able to give legal or tax advice to donors. The information that officers of the College provide, and the information provided in this document, are presented for discussion purposes only and should not be considered or used as legal or tax advice. Donors and prospective donors should always confer with their own legal counsel, tax or financial planning advisors for opinions about tax or other legal consequences of specific situations.
On behalf of the College and Board, the Director of Advancement will seek legal counsel as needed in all matters pertaining to gifts of a complex nature, such as trust and planned gifts.
PUBLICLY TRADED SECURITIES & MUTUAL FUND GIFTS:
Policy. The College may accept gifts of publicly traded securities and mutual fund gifts, subject to any restrictions set forth below.
Procedure.
The gift of a stock, bond, or mutual fund gift cannot be considered a charitable contribution until the donor relinquishes control of the asset. This occurs at different times depending on the nature of the transaction. The donor and/or donor financial advisor is strongly encouraged to notify the College’s Office of Advancement of an intended transaction. Also, the donor should know the following information before making a stock, bond or mutual fund gift:
The College sells all stock and bond gifts as soon as practicable after receipt.
When donating stocks that have appreciated since the donor purchased them, the donor may avoid the capital gains tax. However, if the donor has experienced a decrease in value since purchase they may not wish to gift these securities directly to the College. Rather, the security could be sold so that the donor may take a loss for tax purposes, and the proceeds may then be donated to the College. In addition, if the donor has held the securities for less than one calendar year, the deduction will be limited to the cost basis of the securities rather than the full fair market value of the gift.
Depending on the nature of the securities being transferred, the transfer process may take anywhere from one to three business days in the case of an electronic transfer and between one and two weeks in the case of securities being held by mutual funds or on deposit with the company.
As required by the IRS regulations, the gift value for a publicly traded stock or bond will be determined by taking the average of the high and the low trading price as of the day the gift is complete. If there were no sales on the date of the gift, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and after the valuation date. Mutual fund shares are valued for gift purposes at the net asset value at the close of the day on which the gift was received. A gift is only considered complete on the date that control of the asset is given to the College, or in the case of mailed securities, the postmarked date.
The donor should note that securities should be transferred in “as is,” and not sold within the donor’s account with the proceeds transferred to the College. The latter will result in any capital gains being taxed to the donor.
The determination of whether to accept or decline gifts of marketable securities of companies that profit from selling weapons or other economic activities inconsistent with the mission of the College will be made by the Advancement Committee at the request of the Director of Advancement.
Transfer Methods.
Electronic Delivery.
The preferred and most efficient means to transfer stocks or bonds to the College’s account is via electronic transfer. In order to ensure prompt and accurate completion of the gift, the College will need the name(s) of the security, number of shares, date of transfer, and designation of the gift.
If the donor holds securities in a brokerage or bank trust account, then the donor should be given the following transfer instructions to relay to their broker:
Anthony R. Vitagliano
Vice President – Investments
Financial Advisor
UBS Financial Services, Inc.
67 Merchants Row, Suite 102
Rutland, VT 05701
802-775-3200
800-564-1265
Fax: 802-775-1881
Routing Number: 026007993
Account Number: 399 038787
It is also very important that the donor instruct the brokerage or bank trust agent to inform the Office of Advancement of the donor’s name, name(s) of the security, number of shares, date of transfer within 24 hours of stock or bond transfer.
Physical Delivery. Stocks and bonds delivered to the Office of Advancement will be complete for federal tax purposes on the day of delivery so long as the College has received the unsigned stock certificate with a separate stock power signed exactly as the names appear on the certificate. Once the certificate and all documentation have been copied it will be given to the Director of Advancement to be sold.
Mail Delivery. Stocks and bonds delivered to the Office of Advancement via the U.S. Postal Service will be complete on the date of the postmark on the envelope. The donor should send the unendorsed certificate in one envelope and the stock power, signed exactly as the names appear on the certificate in a second envelope.
Private Carrier Delivery. Stocks and bonds delivered to the Office of Advancement via Federal Express, United Postal Service, or similar services will be complete on the date of the “postmark” on the package, although IRS regulations are unclear on this point. The donor should also send the unendorsed certificate in one envelope and the stock power, signed exactly as the names appear on the certificate in a second envelope.
Re-Registration. If the donor instructs an agent of an issuing corporation to transfer ownership of a stock to the College, the donor may mail a stock certificate directly to the transfer agent of the issuing corporation and request that the agent re-register the certificate for Sterling College. For gift purposes, this gift will not be complete until the corporation finalizes the transfer on their books. There can be a significant delay in the completion of this transfer and therefore it is generally not an efficient means of making a transfer of stock.
Dividend Reinvestment. If a donor holds shares in a dividend reinvestment plan and wishes to use those shares to make a gift to the College, the donor must notify the transfer agent to transfer these shares into an account set up in the name of the College:
Sterling College
Office of Advancement
16 Sterling Drive
PO Box 72
Craftsbury Common, VT 05827
EIN: 03 0197728
The Director of Advancement should be notified of the number of shares, name of the company, and the transfer agent’s name and telephone number so that an account may be opened to receive, track, and redeem the shares as soon as possible to avoid possible loss in market value. The gift will be complete when the account is established and the shares have been transferred into the College account.
Mutual Funds. Some mutual fund companies are considered close-end companies and shares of those funds are transferable through the same process as stock and bonds. However, most are open-end mutual fund companies and are subject to a different transfer process. Generally, mutual fund companies require the donor to sign a form authorizing them to transfer shares to the College’s account, and then for the College to complete a required form that establishes that account and also submit a corporate resolution, which authorizes individuals to act on behalf of the College. Sterling’s policy is for the Director of Advancement to be the individual listed on the account and to redeem the shares and close the account once the transaction is complete. The date of the gift for IRS purposes is established once the account is set up in the College’s name and the shares transferred into that account. This process will generally take between two and three weeks.
Closely Held Stock.
Gifts of closely held stock must be reviewed by the Director of Advancement prior to acceptance to ensure that there are no restrictions on the security that would prevent Sterling from converting the stock to cash, that the security is marketable, and that it will not generate undesirable tax consequences for the College.
If potential problems arise on initial review of a proposed gift of closely held stock, further review and recommendation by an external professional may be sought before a final determination to accept the gift may be made. The Advancement Committee will make the final determination on the acceptance of closely held securities. A qualified appraiser, at the donor’s expense, prior to the transfer to Sterling, must value all gifts of closely held stock.
Gifts-in-Kind:
Policy. The College may accept Gifts-in-Kind, subject to any restrictions set forth below. Gifts-in-Kind are gifts of tangible personal property that represent non-cash charitable contributions to the College. Acceptance of these gifts allow donors to make gifts of tangible property including, but not limited to, works of art, books, scientific equipment, furniture, appliances, vehicles, and other physical items that can be used by the College in its programs or to increase its holdings of artwork or historical materials.
The following provisions for accepting gifts-in-kind must be considered before acceptance of such items:
They should be useful to and related to the mission of the College. If the gift is not useful or related to the College’s mission, then it should be easily salable.
Cost to the College of insuring, selling, storage and transportation, maintenance and repair of the item or items. Undue restrictions on the use, display, or sale of the property must also be taken into account.
Procedure.
All gifts-in-kind must be receipted through the Advancement Office. In some cases, other representatives of the College may accept gifts-in-kind but only after informing the Director of Advancement about the gift and with the office’s approval. Such gifts will still be receipted through the Advancement Office.
In the case of gifts of artwork, gifts will only be accepted if a curator has reviewed the proposed donation prior to acceptance. This will be facilitated by providing photographs or correspondence or visiting the prospective donor. All objects must be accompanied by the following documentation: appraisal; correspondence; catalogue entry or other publication; provenance information, chain of ownership; purchase receipts; and transfer of ownership documentation, i.e. a letter from the donor.
The College requires a transfer of ownership letter for all gifts-in-kind and a valid independent appraisal, at the donor’s expense, for gifts valued at $5,000 or greater.
The College issues receipts for all gifts-in-kind, describing the donation and the date it was received by the College but indicating no dollar amount for the value. It is the responsibility of the individual donor to obtain appraisals for their tax purposes.
Every donor should be informed of the IRS regulations governing gifts of tangible property.
As a result of the Pension Protection Act of 2006 there are new rules that affect gifts of tangible personal property to qualified charities. Specifically, the legislation affects gifts of appreciated tangible personal property such as art, jewelry, antiques and other collectibles for which a fair market value deduction of more than $5,000 is claimed.
For gifts claiming a fair market value deduction of more than $5,000, Sterling College must send the donor the IRS Form 8283 with Part IV of the form completed by the College. In Part IV, the College is required to state if the property will be used for an unrelated use. As long as the College indicates “no” to this question, donor is allowed to use the higher of the fair market value or cost basis for the charitable deduction. The new rules also require that, if the College disposes of the property within three years of the date of gift (previously two years), then the donor is subject to an adjustment of the tax benefit to the extent that the charitable deduction exceeds donor’s cost basis. The College is required to file IRS Form 8282 at time of disposal or sale and provide a description of its use of the property. The statement must include whether the use of the property was related to the College’s exempt purpose, and a certification that College either used the property for such purpose or had intended to use the property for such purpose at the time of the gift, but that such use became impossible or infeasible to implement. If the IRS does not accept the College’s certification, the donor becomes subject to recapture. A $10,000 penalty applies to a person who identifies applicable property as having a use that is related to the College’s charitable purpose knowing that it is not intended for such use. Form 8282 must be signed by someone authorized to sign a tax return on behalf of Sterling College.
Gifts of an undivided portion or fractional interest in property are deductible only if it consists of a fraction or percentage of each and every substantial interest or right owned by donor in such property and extends over the entire term of donor’s interest in such property. Gifts of partial, versus fractional or percentage, interests are generally nondeductible. Donor may take a deduction for a charitable contribution of a fractional interest in tangible personal property, such as artwork, provided donor satisfies the usual requirements for deductibility, and in subsequent years makes additional charitable contributions of interests in the same property. The value of donor’s charitable deduction for the initial contribution of a fractional interest in an item of tangible personal property is based upon the fair market value of the artwork at the time of gift and considering whether the use of artwork will be related to the College’s exempt purpose.
The Gift Acceptance Committee shall make the final determination on the acceptance of tangible property gifts. Sterling College maintains the right to decline any gift in kind. The following statement should appear in all tangible property acknowledgement letters:
The Internal Revenue Service requires us to advise you that you have received no substantial benefit in exchange for this gift; it is deductible based on the fair market value. If this gift alone or in combination with other non-cash gifts you made to charitable organizations in [year of gift] totals more than $500, the IRS requires you, as the donor of a non-cash charitable contribution, to complete the appropriate section(s) of the enclosed Tax Form 8283 and attach it to your tax return. If you intend to claim a charitable donation of $5,000 or more for non-cash charitable gifts, then the IRS also requires that a qualified appraisal(s) for the donated property (or properties).
Gift-in-Kind Check List:
Appropriate department notified of gift and decision to accept gift made by department in consultation with the Office of Advancement, with the Director of Advancement serving as the contact person in the office.
Letter of transfer of ownership letter from Donor.
Copy of valid independent appraisal for gifts valued at $5,000 or greater (at the donor’s expense).
Gift-in-kind donation form completed by Advancement Staff and delivered to Receipting Clerk with letter of transfer of ownership attached (and qualified appraisal as needed).
Photo taken of property for Central Files by Office of Advancement.
Gift receipted by Advancement Office.
Acknowledgement letter signed by the Director of Advancement with 8283 Tax Form enclosed with Part IV of the form completed by the College.
Gift delivered to appropriate department with contact info of donor for thank you.
Real Estate Gifts:
Policy. The College may accept Real Estate Gifts, subject to any restrictions set forth below. Gifts of real estate include homes, condominiums, rental property, farmland and undeveloped land. Each gift of property offers different tax and other financial benefits to the donor as well as the potential of substantial monies for the College; however, the acceptance of properties can carry with it risks and expenses.
The College will consider the acceptance of gifts of real property including both improved and unimproved land including but not limited to single and multiple family residences, condominiums, apartment buildings, rental property, commercial property, and farms.
It is the College’s policy to dispose of all gifts of real estate that are not specifically identified by the Board for acquisition for the College or that cannot be used to further its educational purposes as expeditiously as possible. As required by law, any sale occurring within two years of the date of the gift will be reported to the IRS. The College will not accept gifts of real property with restrictions upon the ultimate sale of the property.
Because of the time, expense, and market risk associated with obtaining gifts of real estate, the property must normally have an aggregate market value of at least $50,000.
Gifts of partial interests or property with mortgages will not be accepted. The exception to this policy would be a retained life estate interest.
Before any gift of real estate can be made it must be reviewed by the Gift Acceptance Committee to determine whether or not it is acceptable.
Criteria for acceptance of the property shall include:
Is the property useful for the purposes of the College?
Is the property marketable?
Are there any restrictions, reservations, easements, or other limitations associated with the property?
Are there carrying costs, which may include insurance, property taxes, mortgages, or notes, etc., associated with the property?
Does the property require an environmental audit?
Procedure.
Within the Office of Advancement, the Director of Advancement is responsible for working with the donor to obtain the following.
Current Appraisal. In order for the donor to take a charitable deduction, the IRS requires that the donor get an independent qualified appraisal of the property made no earlier than 60 days before the gift and no later than the day before the date on which the tax return claiming the deduction is filed (including extensions). The College will need a copy of the appraisal and the appraisal's certification for the records. The IRS requires that the donor do the appraisal, and therefore the College cannot pay this expense for the donor.
Due Diligence. The College may choose to have a member of the staff view the property to assess potential risks before incurring the expenses associated with the acquisition of real estate. In cases where an environmental audit is needed it will be done at the College’s expense since it is for the benefit of the College and not the donor. This expense will be paid from the Advancement Office budget and, if the gift is accepted, will be reimbursed from the proceeds of the sale of the property. If environmental risks are identified, it will be necessary for the donor to rectify the problem at his/her expense before the College will consider accepting the gift. If the gift is accepted, the Director of Advancement will communicate the College’s decision to the donor in writing, including any conditions imposed prior to acceptance. The gift will be completed by the execution and delivery of a warranty deed or other appropriate conveyance device. If the property is transferred by the use of a quitclaim deed, title insurance must be acquired on the property in connection with acceptance. Upon acceptance of a gift, the Controller’s office will designate an expense account associated with the gift pending disposition.
Donor Disclosure Statement. In order to ensure that the College is not being subjected to environmental liabilities or other encumbrances, the donor must complete and sign the Real Estate Acquisition Data Sheet. This form incorporates an Environmental Checklist with financial information about the property including mortgages, restrictions, covenants, liens, easements, and other encumbrances. In addition, the donor may be required to provide a separate agreement releasing the College from any encumbrances on the property. The donor must also sign and notarize a Vendors Affidavit.
Title Information. The donor must provide a copy of the deed. Title Search and Insurance, Warranty Deed, and Sales Disclosure Form are all prepared at the expense of the College.
Completion of Gift. Once the Warranty Deed and Sales Disclosure are recorded at the recording office, the Director of Finance and Operations must be notified to ensure appropriate property and casualty insurance coverage is in place and that arrangements have been made for the next tax payment. It is necessary to remember to get keys and copies of leases as well as deposits or other documentation. The gift is acknowledged through the Office of Advancement. The College will not assign a value for the gift for the donor’s tax purposes, but will use the donor’s independent qualified appraisal to record a value. A Form 8283 with property description signed by appraiser will be included with the acknowledgement letter.
Disposition of Property. The Director of Finance and Operations is responsible for the disposal of all gifts of real property. If the Director determines that it is advisable to sell any property for less than fair market value, it is necessary that the tax consequences for the donor be reviewed.
Because of the complex nature of real estate transactions, the donor should be advised that a timeframe of at least six weeks to complete the gift acceptance process is standard.
Retained Life Estates:
Policy. The College may accept retained life estates, subject to any restrictions set forth below. A donor can give a remainder interest in a personal residence, such as a home, a condominium, or a farm to the College while continuing to occupy the residence or operate the farm without disruption for the duration of the donor’s life. The personal residence or farm does not have to be the donor’s primary residence, but must be a personal residence other than rental property. A retained life estate is an option for a donor who already plans to transfer a personal residence to the College at death. It is most appropriate for donors who are healthy and wish to reside in the property for the immediate future. Assuming the donor is the life tenant, he/she will receive an income tax deduction for the value of the remainder interest based on his/her life expectancy and the value of the property.
Procedure.
All gifts of retained life estates must be reviewed and recommended for acceptance by the Gift Acceptance Committee.
The procedures for evaluating proposed gifts of real estate, as outlined in this Real Estate Gift Acceptance Policy, also apply to gifts of a remainder interest in property.
As with an outright real estate gift, the value of the property must be at least $50,000.
A charitable gift of mortgaged property is considered a bargain sale. The donor must execute a hold harmless agreement in favor of the College and the property must be transferred to the College not subject to the mortgage.
A remainder interest will only be accepted if adequate provisions are made by the donor for any expenses in connection with ownership, including payment of mortgages, taxes, insurance, utilities and maintenance. This commitment must be provided for in the deed or other formal documentation.
If the retained interest is accepted, the donor must deliver an executed Deed with Retained Life Estate to the College. For information purposes, we will prepare calculations for donor’s deduction, but it is the responsibility of the donor to validate that information with his/her tax advisor.
Life Insurance:
Policy.
The College may accept gifts of life insurance policies, subject to any restrictions set forth below. There are two ways to make a gift of life insurance to the College: (1) by naming “Sterling College” as the beneficiary of a life insurance policy, or (2) by transferring ownership of a life insurance policy to the College, i.e., naming “Sterling College” as the owner and beneficiary. The beneficiary or ownership of a life insurance policy must be changed through the company where the policy was issued.
Life insurance gifts may take many years to realize, and the cost of administration and premium payments can be time consuming and expensive. It is therefore imperative that we have policies in place that assure that the value of the gift outweighs the possible expense and liability for both the donor and potentially the College.
The College will not be responsible for payment of any premiums for life insurance policies that are not transferred to the College.
The College may agree to accept ownership of a policy that is not paid up, if the donor contributes future premium payments on such a policy. In this situation the College counts the entire amount of the additional premium payment as a gift of cash in the year in which it is made. If the donor does not elect to continue to make gifts to cover premium payments on the life insurance policy, the College may:
continue to pay the premiums;
convert the policy to reduced paid up insurance; or
surrender the policy for its current cash value.
The College will not accept outright gifts from donors for the purpose of having the College purchase new insurance policies on their lives.
Under no circumstances will the College or any of its employees or agents acting on behalf of the College engage in the sale of life insurance, or accept sales or marketing fees or commissions thereon. The College will not endorse any particular insurance company, agent or product.
In no event shall lists of donors or prospective donors be furnished to anyone for the purpose of marketing insurance.
Procedure.
If a donor wishes to make a gift of insurance to the College by transferring ownership of a policy that still requires payments, the donor will be asked to sign a letter of intent indicating that he/she intends to make charitable contributions to the College annually in an amount equal to or greater than the premiums due on the policy. Contributions for premium payments made by the donor to the College are considered charitable deductions, and are acknowledged as such.
All policy information will be maintained in the donor’s central file in the Office of Advancement. The Advancement Officer will send the donor annual reminders for premium payments. It is also the responsibility of the Advancement Officer to notify the donor that if the premium is not paid within 30 days after the premium due date, the policy will be surrendered.
The Advancement Office must inform the donor that the College will not pay any premiums on policies for which they have not received a contribution and will surrender policies for which premium payments are in arrears.
If an individual names the College both owner and beneficiary of a policy, it is an irrevocable gift. If the donor intends to claim a charitable deduction of $5,000 or more, he/she will be required to obtain a qualified appraisal to substantiate the value of the property. The donor’s deduction will generally be the lesser of cash surrender value or the premiums paid to date on the policy.
In order for the gift to be complete the donor will need to deliver the original policy and/or a fully executed owner and beneficiary designation form to the Office of Advancement.
Policies where the College is not named as both owner and beneficiary such as group term policies or individual policies where a donor names the College as beneficiary but retains all incidents of ownership are considered revocable pledges. These gifts will be treated in the same manner as will provisions, retirement plan designations, and other gifts over which the donor retains control during his/her lifetime.
Bequests and Retirement Plan Designations:
Policy.
The College may accept bequests and retirement plan designations, subject to the restrictions set forth below. The College may accept gifts of retirement plan designations , subject to any restrictions set forth below. There are two ways to make a gift of retirement plan designations to the College: (1) by naming “Sterling College” as the beneficiary of a retirement plan designations, or (2) by transferring ownership of a retirement plan designations to the College, i.e., naming “Sterling College” as the owner and beneficiary. The beneficiary or ownership of a retirement plan designations must be changed through the company where the policy was issued.
The most common forms of estate provisions are bequests, retirement plan designations (where the donor continues to be the owner of the policy). The donor retains complete control over the distribution of these assets during his/her lifetime. Although a donor may tell the College currently that he/she has done an estate provision for the College, these gifts do not become irrevocable until the death of the donor. To secure this stream of revenue for the future, our role in advancement is to: (1) solicit gifts of estate provisions through wills and beneficiary designations during donor’s lifetime, (2) when meeting with donors, try to identify these provisions so that we can steward donors, determine their intent for the use of their gift, and keep them connected to the College, and (3) manage the process of estate settlement so we can begin benefiting from the gift as soon as possible.
The College is not equipped to perform fiduciary duties associated with the appointment as Executor of a donor’s will, and therefore cannot accept such an appointment.
Procedure.
Prospective donors will be strongly encouraged in all cases to consult with their own independent legal and/or tax advisors about proposed gifts, including tax and estate planning implications of the gifts. No representative of the College will provide legal or tax advice to any donor or prospective donor.
If a donor notifies Sterling that he/she has provided for the College in his/her estate plan, he/she should be encouraged to provide the College with a copy of the documentation. This may be a copy of the will or trust, a written Letter of Intent that outlines how the donor’s estate plans include the College, or the retirement plan designation.
When working with a donor who wishes to make a bequest to fund a specific named program, it is important to point out to the donor that the program will most likely cost more at the time of the donor's death, and therefore the will or trust provision required to fund the project should be greater than the current funding minimum.
Donors should also be encouraged to recognize that over the many years following the drafting of their estate plans, the College’s needs, policies, or circumstances could change. The College must have the flexibility to make use of funds in the best interest of the institution and in accord with donor interests and specifications. Thus, donors should be advised to describe the specific purposes of their gifts as broadly as possible and to avoid detailed limitations and restrictions. In addition, if restrictions are included, language should be included to provide for related use of the gift should the designated use no longer be available at the College.
The following is examples of sample will wording to share with prospective donors:
“I give, devise, and bequeath to Sterling College, a non-profit corporation existing under the laws of the State of Vermont and located in Craftsbury Common, Vermont,[ ]% of my estate, or $ [ ], or (description of property), located at (exact location) ”
or
“All the residue of my estate, including real and personal property, I give, devise, and bequeath to Sterling College, a non-profit corporation existing under the laws of the State of Vermont and located in Craftsbury Common, Vermont.”
Please note that a residuary bequest gives whatever is left after all debt, expenses and all other specific bequests have been granted.
Bequests.
Unrestricted Bequests. It is important to share with donors that bequests whose uses are left to the College’s discretion are the College’s preference since it is difficult to forecast what the future needs of the College may be. If the donors are interested in leaving an unrestricted gift through his/her Will the following language should be included: “…to be used in such manner as the Board of Trustees may direct:”
Restricted Bequests. Some donors prefer to direct their bequest to a specific purpose, such as an endowed scholarship, department or program. Donors should be encouraged to consult with Sterling in advance to assure that the purposes and wording will accomplish the desired result.
It is possible for donors to set the criteria for bequests such as scholarships with a preference based on area of academic study or region of origin. However, regardless of the specific criteria, all endowed scholarships at Sterling are used to assist students who have financial need. If, in any given year, no student meets the donor’s specific preference, the College will make every attempt to award the scholarship to a student who most closely matches the donor’s original intent.
Retirement Plan Designations.
The donor must execute a beneficiary designation form with his/her plan administrator to name Sterling as a beneficiary of the plan. Advancement Officers should be aware of the following points:
Retirement plans like 401(k) s, 403(b) s, IRAs, and other qualified retirement plans provide significant income during the lifetimes of most retirees. Many retirees, however, are unaware how severely their retirement plans will be taxed when it is given to a child, friend or relative after their death. When a spouse inherits the retirement plan, it can be simply “rolled over” into a new or existing IRA, and in most cases, no taxes will be due. But when the second spouse dies, the IRA may be subject to estate taxes as high as 50% depending on the size of the estate. In addition, the funds in the IRA are subject to income tax. In some instances, because of the taxation on retirement plans, heirs can receive as little as 30% of the plan after taxes. Because charities are tax-exempt, both of these taxes are avoided if the residual plan’s funds are given to charity upon the death of the plan participant.
In cases where the donor suggests making a withdrawal from their retirement plan during their life time to make a gift, they should be informed that there may be little net tax benefit because when the donor withdraws the assets they will be fully taxed. The donor may receive a charitable income tax deduction equal to the withdrawal, but depending on the tax circumstances, this may not always be the case. Donors should always be advised to work with their financial advisors in this situation.
IMPORTANT: The information in this document is for informational purposes only and is not intended to supplant the professional services of one’s attorney, accountant, trust officer, or others who are qualified to advise the donor. Sterling College encourages donors to consult with their tax of financial advisors to determine the most advantageous way in which to make a gift to the College under current tax legislation.
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