As you talk with your clients about estate and tax planning, you can be assured that a planned gift through the Rochester Area Foundation will continue to make a difference for generations to come.

Your client can leave an endowment to the Rochester Area Foundation or utilize one of our many funds to meet their philanthropic goals. Whatever your clients' needs, the Rochester Area Foundation offers an array of options.

In many cases, we administer planned gifts that can allow your client to receive income for life, then benefit charity after they have passed on. This is possible through the creation of a charitable remainder trust or a gift annuity.

Creating a Family Legacy

Your clients can leave a philanthropic legacy for their children or grandchildren by utilizing Rochester Area Foundation. An endowment to Rochester Area Foundation will help create a stable financial resource for the community for years to come, allowing us to adapt to changing needs.

If your clients want to ensure their family's charitable involvement continues after they're gone, they can create or add to a donor-advised fund through their estate plan.

Remembering Favorite Charities

Through Rochester Area Foundation, your client can make an endowment gift to a favorite charity - even if that charity doesn't have an endowment. With a planned gift, your client can create a designated fund to benefit a specific nonprofit in perpetuity. Rochester Area Foundation grants 5% of the value of the fund to the agency each year.

Remembering Favorite Causes

For clients who are passionate about specific causes (affordable housing, seniors, etc.), a planned gift can provide funding in perpetuity for the causes they are most passionate about. Your client's legacy gift can create a field-of-interest fund at Rochester Area Foundation, and the Community Foundation's expert staff will ensure that grants are made each year to the organizations doing the best work in that field.

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Types of Planned Gifts

Charitable Bequests
Bequests are the most frequent type of planned gift made to charity. Your client's estate receives a charitable deduction for the full amount given, so their heirs pay no estate tax.

Life Income Plans
Your client makes a gift to charity, earns immediate tax savings, but keeps the income the gift earns for as long as he/she lives by using one of the life income plans available through CFSV. Life income options include the charitable remainder unitrust and the gift annuity.

Life Insurance & Retirement
Life insurance policies or retirement plans (IRA, 401k) can be used as a charitable gift.

Charitable Lead Unitrust
The increasingly popular lead trust makes regular income-tax-deductible gifts to charity as the income beneficiary. When the trust terminates, the entire principal is returned to your client or to their family.

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CHARITABLE BEQUESTS
You can ensure that your commitment to the community continues with a bequest to the Rochester Area Foundation through your will or trust.

Bequests are the most frequent type of planned gift made to charity. Your estate receives a charitable deduction for the full amount given, so your heirs pay no estate tax on the amount you give to charity.

You may direct your bequest to the Rochester Area Foundation, which will benefit our work in the community, or to our Endowments for Community Excellence, which are our endowments for local programs.

Or you may choose to use the bequest to set up named funds, such as donor-advised, designated (for a specific nonprofit), or field-of-interest funds (for a cause you care about). If you have an existing fund at the Rochester Area Foundation, the bequest may be directed to the existing fund.

Should you wish to create a new fund through the bequest, you should also contact the Community Foundation as there is additional information required by us to set up one of these funds that could affect the language used in your will or trust.

When you include a bequest provision in your estate plan, Rochester Area Foundation will invite you to join our Community Heritage Society, which honors those who make lasting gifts to the community.

If you are interested in making a bequest, sample language for different scenarios is provided below.

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Sample Language for a Charitable Bequest
The following four types of bequests direct your gift to the Rochester Area Foundation. You may restrict the bequest using additional language.

Percentage:
"I give, devise and bequeath to the Rochester Area Foundation, a nonprofit corporation of the State of Minnesota, located at 2200 Second Street SW, Suite 300, Rochester, MN, ____% of my estate."

Specific:
"I give, devise and bequeath to the Rochester Area Foundation, a nonprofit corporation of the State of Minnesota, located at 2200 Second Street SW, Suite 300, Rochester, MN 55902,

(Choose one)
1) The sum of $___________."
2) __________ shares of stock in __________Company.", or
3) my real property commonly known as ____________."

Residual:
"I give, devise and bequeath to the Rochester Area Foundation, a nonprofit corporation of the State of Minnesota, located at 2200 Second Street SW, Suite 300, Rochester, MN 55902, all the residue of my estate, including real personal property."

Contingent:
"In the event of the death of any of the beneficiaries, I give, devise and bequeath to the Rochester Area Foundation, a nonprofit corporation of the State of Minnesota, located at 2200 Second Street SW, Suite 300, Rochester, MN 55902 , (percentage, specific, or residual language as above)."

Creating a Fund by Bequest
You may also use the bequest to set up a named fund, using language outlined below. If you have an existing fund at the Rochester Area Foundation, place the fund's name in the examples below.

If your bequest would create a new fund, we recommend that you contact the Community Foundation as there is additional information required by us to set up one of these funds that could affect the language you use in your will or trust.

Donor-advised fund: "to establish the (choose name) donor-advised fund."

Field-of-interest fund: "to establish the (choose name) field-of-interest fund for (describe field- of-interest as programmatic, geographic or combination of both)."

Designated funds: "to establish the (choose name) fund to benefit (name of specific organization)."

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CHARITABLE REMAINDER UNITRUST
The Charitable Remainder Unitrust is a life income plan. You contribute an asset to an irrevocable trust and you, or someone you name, receive income for life.

When you, or those you have named, pass on (or after a term of years) the amount left in the trust - the remainder - goes to charity.

You can even start these trusts through your estate.

In addition to income for life, you receive several other benefits:

• You receive an immediate income tax deduction for your gift.
• You pay no capital gains tax when you give appreciated assets.
• The estate pays no tax, even though you, or a loved one, are receiving life income.
• You make a major contribution to charity.

Because of the significant capital gains savings, a charitable remainder trust is an excellent option if you own property that has appreciated in value.

You will make several selections in establishing your trust:

1. Choose the type of trust.
2. Set the payout rate by determining how much income you want the trust to generate.
3. Pick a charity (or charities) to receive the remainder.
4. Choose who will serve as trustee.

The Rochester Area Foundation will act as trustee at no cost to you. A financial institution would charge as much as 2%. The Community Foundation will pass on the investment management fee and the cost of the tax return (generally around one-half percent) to the trust. As you can see, you can save significantly by using Rochester Area Foundation as trustee.

When serving as trustee, Rochester Area Foundation requires that when the trust terminates, at least, one-half of the remainder go to one of the following:

• the Community Foundation's programs or an Endowments for Community Excellence Fund,
• a field-of-interest fund at Rochester Area Foundation for a cause or region you care about
• a designated fund at Rochester Area Foundation for your favorite charity.

Designated and field-of-interest funds created by the trust termination may be named for you or someone you choose to honor.

When you create a Charitable Remainder Trust, Rochester Area Foundation will enroll you in our legacy society, the Community Heritage Society (if you choose), which honors those who make lasting gifts to the community. Find out more about the Community Heritage Society.

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A Comparison: Life Income Plan Versus Selling the Stock

.	Life Income Plan	Conventional Stock Sale
Amount of stock	$1,000,000	$1,000,000
Capital gains taxes paid	$0	$200,000
Income tax savings	$100,527	$0
Proceeds of stock reinvested	$1,000,000	$800,000
First year income (6% of principal)	$60,000	$40,800
Total philanthropic legacy	$1,000,000	$0

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GIFT ANNUITY
Our charitable gift annuity is a simple contract between the donor and the Rochester Area Foundation in which we agree to pay a yearly sum based on the ages of the individual or individuals receiving the annuity and the value of the gift. Donors can decide whether to accept an annuity for their own life and/or another beneficiary.

The older the donor is, the higher the payout rate they receive on the gift annuity. Rates also increase with deferred annuity plans. You can talk with us to find out what would be beneficial to the donors needs. Those who establish a charitable gift annuity with the Rochester Area Foundation receive an immediate income tax deduction, which is calculated by subtracting the present value of the income from the gift value. This reflects the net amount of the gift after considering all the expected payments to the annuitant.

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CHARITABLE LEAD UNITRUST
Your gift of a charitable lead trust has an immediate benefit to charity and significant tax savings for you or your family.

This increasingly popular trust makes regular income-tax-deductible gifts to charity as the income beneficiary. When the trust terminates, the entire principal is returned to you or to your family.

The main tax advantage is that no estate tax will be due on the growth of principal. Some people use a lead trust to capture a deduction for future gifts in a high-income year.

When you create a Charitable Lead Trust, Rochester Area Foundation will enroll you in our legacy society, the Community Heritage Society (if you choose), which honors those who make lasting gifts to the community. Find out more about the Community Heritage Society.

General Description

You transfer cash or other assets irrevocably to a trust, creating two interests.

The income interest (either a percentage or fixed dollar amount) is paid annually to the Rochester Area Foundation for a term of years (more common) or for your life.

The remainder interest (the final value of the assets in the trust) is paid to you, or those you choose, when the trust terminates.

Tax Considerations

When the remainder is paid to someone other than you or your spouse (a non-grantor lead trust), you receive a federal gift or estate tax deduction for the present value of the income interest given to Rochester Area Foundation.

Any taxable income generated and capital gain realized is taxed to the trust.

However, the trust is allowed an unlimited charitable deduction each year for the income distributed to Rochester Area Foundation.

It is possible to transfer the remainder to others free of estate or gift tax.

When the remainder is paid to you (a grantor lead trust), you receive a federal income tax deduction for the present value of the income interest given to Rochester Area Foundation. However, taxable income generated and capital gain realized by the trust is taxable to you.

Example
Mrs. Smith transfers $1 million in cash to a non-grantor charitable lead trust. The trust makes a $70,000 payment to Rochester Area Foundation each year for 15 years. Mrs. Smith chooses to have the annual payments go into the J. Smith Family Fund, her donor-advised fund at Rochester Area Foundation. When the trust terminates, the remainder transfers to Mrs. Smith's heir, her granddaughter Nancy.

With this gift plan, Mrs. Smith accomplishes the following:

• She makes a gift totaling $1,005,000 over a 15-year period to Rochester Area Foundation.
• By choosing to have the payments go into her donor-advised fund at Rochester Area Foundation, she was able to support her favorite charities, recommending grants from the donor-advised fund to these organizations.
• She leaves a $1-million asset to her heir(s) when the trust ends.

She reduces the amount of her estate subject to gift or estate tax from $1 million to about $150,000.

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RESOURCES FOR PROFESSIONAL ADVISORS
The Rochester Area Foundation has been working with professional legal and financial advisors for many years. Our goal is to help you help your clients. Rochester Area Foundation provides accurate and timely information so you can better serve your clients' needs. We have printed materials, custom presentations, and seminars for advisors (with Continuing Education units available). Our mission is to increase philanthropy throughout the region, and many of the requests we receive are for technical assistance, not necessarily a gift to the Community Foundation.

For assistance, contact Al DeBoer, Development Director at (507) 282-0203 or

Consultations and Presentations

A consultation is a great way for Rochester Area Foundation to share more information with you about the services and giving options that we can provide your client. We are happy to arrange a phone call or in-person meeting at the time and date that works best for you.

Our expert staff can present to your team at your next department or staff meeting to identify charitable solutions to gift and estate planning problems. The presentations include ample time for discussion and can be tailored to fit your schedule.

Trust Illustrations

Rochester Area Foundation uses PG Calc Software to provide you with charitable gift planning illustrations. Contact Al DeBoer to request a free trust illustration. The illustration can be faxed to you or sent by email upon request.

Informative Tools for You and Your Clients

Professional Advisors often ask Rochester Area Foundation to provide materials they can use with their clients to describe how a community foundation works and what options are available to them. Rochester Area Foundation is pleased to present fact sheets that provide concise overviews of giving options (both current and planned gifts) and strategies for you to use or pass along to your clients.

Printed brochures on advised funds, planned giving, real estate donations and other topics are also available. Contact Al DeBoer for copies.

For Professional Advisors and For Your Clients:

Rochester Area Foundation Guide for Giving