Earthtrust is an international organization dedicated to protecting
and conserving the Earth's threatened and endangered wildlife
and the environment, but with a critical difference. Earthtrust
campaigns are based on the simple premise that good intentions
alone are not enough: the myriad threats to our environment require
decisive and immediate action.
For nearly 20 years, Earthtrust has met that challenge with a
variety of innovative and effective programs. The results of these
hard-hitting campaigns are simply that: results. A decade and
a half of hard-won victories are a tribute both to the dedication
and perseverance of Earthtrust agents in the field--and to Earthtrust's
sponsors.
Earthtrust has repeatedly and effectively demonstrated its strong
commitment to protecting endangered wildlife and the environment.
To ensure Earthtrust's continued successes around the world, Earthtrust
maintains an innovative and comprehensive endowment and planned
giving program.
This WWW page is designed to answer the frequently-asked
questions of Earthtrust supporters interested in providing
the strongest long-term support for threatened and endangered
wildlife and minimizing their income, gift and estate tax liability.
CONTENTS
Designated Funds
Tax-deductibility
Cash vs. Property
Bargain Sale
Tangible Personal Property
Closely-held Stock Donations
Life Insurance
Charitable Remainder Trust
Annuity Trust & Unitrust
Gifts of Residences
Bequests
Save the Planet Fund: Advised Funds
Q: What's the best way for me to support Earthtrust campaigns?
A: There is no single "best" way for a concerned individual
to further Earthtrust's many campaigns. Different people have
different ecological priorities as well as different financial
circumstances. For that reason, Earthtrust offers a wide variety
of innovative and financially sophisticated plans that can be
tailored to meet the exact needs of every supporter.
Q: Do I have any say in how my contribution will be used?
A: Absolutely. Just as the stewardship of the Earth is a shared
responsibility, Earthtrust welcomes your advice on how best to
accomplish our common goats. Earthtrust makes extensive use of
"designated funds," allowing you to fund a specific
program or campaign. Your bequest can be restricted to a specific
purpose or Earthtrust program. For instance, the proceeds from
a bequest to protect dolphins will be used exclusively for Earthtrust's
dolphin-protection programs.
Q: Does Earthtrust provide special long-term giving options?
A: Yes. A "perpetual fund" may be established, with
its income available to carry out the campaigns you designate.
This fund may also be named in honor of you or your family in
recognition of your concern and support.
Q: When can I contribute and minimize my tax liability?
A: You may make a gift of cash or other valuable property to Earthtrust
at any time. When you do, your tax savings include:
Q: Are contributions of property to Earthtrust's wildlife campaigns
fully tax-deductible?
A: Yes; generally, the deduction for a contribution of long-term
capital gain property to Earthtrust is equal to the property's
fair market value.
Q: Are the tax savings worth reporting?
A: The government makes generous allowances for those who support
nonprofit organizations like Earthtrust. Let's assume you have
unappreciated securities with a cost and present value of $20,000.
If you're in the 30 percent tax bracket, the contribution of these
securities to Earthtrust's environmental protection program can
reduce your income tax obligation for the year of the gift by
$6,000.
Q: Isn't it usually better to donate cash instead of property?
A: Not always; in fact the opposite is frequently true. For example,
let's say you're filing a joint return with a taxable income of
$120,000 (before the sale of property or charitable contributions).
If you own appreciated long-term capital gain stock with a fair
market value of $30,000 which you originally purchased for $ 10,000,
the tax-wise approach is to give the stock directly to Earthtrust.
This approach will produce a tax savings of $6,600 more than had
the stock been sold and the cash proceeds donated. Here's why:
Gift of Stock Gift of Proceeds Taxable income before sale of property or charitable contributions $120,000 $120,000 Long-term capital gain arising from sale of stock None 20,000 Gift to Earthtrust (30,000) (30,000) Taxable income 90,000 110,000 Income Tax Obligation 21,934 28,534 Net cost of $30,000 gift $20,100 $26,700 Tax Savings $6,600
Q: Are there tax benefits for property that hasn't greatly
appreciated?
A: Yes, as in the case of bargain sales of appreciated property.
A "bargain sale" is the sale of property for less than
the property's fair market value. When such a sale is made to
Earthtrust, the transaction is viewed as part sale and part charitable
contribution. The excess of the fair market value over the sale
price is the measure of the gift to Earthtrust. This can be a
very good option when appreciated property must be sold.
Q: Are the tax benefits the same for contributing jewelry,
works of art, or other valuables?
A: It depends. While Earthtrust will gratefully accept donations
of these valuables, known as "tangible personal property,"
federal tax rules place restrictions on the charitable tax deduction
available to the donor.
If Earthtrust can use the donated property for its tax-exempt
purposes and functions, e.g. wildlife protection and education,
then the amount of your charitable deduction is the property's
full fair market value. If the use of the property is unrelated
to Earthtrust's exempt purposes or functions, the amount of the
donor's charitable deduction must be reduced by that amount which
would have been a long-term capital gain had the property been
sold at its fair market value. Still, the tax savings can be significant.
Q: Can I contribute stock in a closely-held corporation?
If so, how much may I deduct?
A: Yes, you may donate such stock, even if you control the corporation.
Your charitable deduction is equal to the appraised fair market
value of the donated property.
Q: What if I change my mind later? Is there a tax penalty?
A: A closely-held corporation may elect to buy back the stock
from Earthtrust for its appraised fair market value, using surplus
cash. In acquiring its stock from Earthtrust, the corporation
has not subjected you, the donor, to income tax on the proceeds
used to purchase the property. And while you have not realized
either dividend or other income from this transaction, you'll
still retain a substantial income tax charitable deduction for
the gift of the shares.
Q: Can I reduce my taxes by donating my life insurance policy
to Earthtrust?
A: Yes, and at a relatively low cost to you. For example, you
may have a policy transferred to the ownership of Earthtrust,
with Earthtrust named as the beneficiary. The proceeds of such
policies are excludable from the estate as a charitable contribution
to Earthtrust.
Q: A friend claimed he made a tax-deductible donation of
property to a nonprofit
organization but won't have to actually turn over the property.
Is this legal?
A: What you describe is known as a Charitable Remainder Trust.
You may legally make a gift of cash, securities or property to
a Trustee for the future benefit of Earthtrust and retain the
right to be paid a periodic fixed annuity in a specific sum or
as a percentage of the value of the gift--of at least five percent--for
a term of up to 20 years, or for the rest of your life. What's
more, this right to income may include your survivors as well.
Tax savings benefits from a Charitable Remainder Trust include:
Q: Is it difficult to establish a Charitable Remainder Trust?
A: No, an experienced Earthtrust representative will help you
establish a Charitable Remainder Trust. What's more, you'll be
able to take advantage of two different types:
Q: Does a Charitable Remainder Trust offer any other benefits?
A: Yes; you can generally achieve greater overall economic benefits
by contributing an asset to a Charitable Remainder Trust than
by retaining it in the estate for distribution to heirs. Since
you might have intended that the contributed asset pass to your
heirs, you can take advantage of the financial and tax benefits
which result from the creation of a Charitable Remainder Trust
and replace the value of the asset, perhaps through life insurance.
As a result, your heirs will receive, in many instances, a distribution
of value greater than had they been left the contributed asset.
In addition, this asset will go to them free of estate taxes,
a major savings.
Q: If I establish a Charitable Remainder Trust, do I have to
choose between having it benefit either Earthtrust or my heirs?
A: No; you may create a Charitable Remainder Trust in your will
for the benefit of named survivors. This option will provide them
with a steady income for their joint lives, with the remainder
of the Trust eventually supporting Earthtrust's campaigns.
Q: Are there arrangements for gifts of real estate that
have the same result as a Charitable Remainder Trust, that is:
can I donate real estate to Earthtrust yet continue to use it
during my lifetime?
A: Yes, in fact you may donate your primary or secondary residence
to Earthtrust and still retain uninterrupted use and occupancy
for life. The tax benefits, however, are immediate: this gift
to Earthtrust of a future interest generates an immediate income
tax deduction and excludes the property from the your estate.
Q: Is it necessary to contribute the entire property in order
to take advantage of such immediate tax deductions?
A: No; you can also contribute a partial interest in real estate.
In that case, you retain ownership of the balance of the interest
in the property equivalent to the amount you use it. For example,
if you use a vacation home for three months of the year (and it
remains unoccupied and unused for the balance of the year) you
can convey the three-fourths interest in the property (nine months)
to Earthtrust. You'd then receive an immediate charitable income
tax deduction equivalent to three-fourths of the fair market value
of the property while continuing to enjoy the property for three
months a year.
Q: If I choose to simply leave a bequest to Earthtrust in
my will, do I have to specify an
exact amount?
A: No. While you may of course make a specific bequest to Earthtrust
in a specified sum, you may also choose to leave Earthtrust a
percentage of the estate.
Q: To be frank, I'm not interested in supporting Earthtrust
per se, but rather critical ecological concerns addressed in different
ways by different organizations. Is there a way to do this without
drowning in paperwork?
A: In a word, yes. Earthtrust, working in close cooperation with
other organizations, has established the Save the Planet Fund.
This centralized fund at Earthtrust offers you an unprecedented
opportunity to support Earthtrust campaigns as well as those managed
by a variety of other related charitable organizations. In addition,
this Advised Fund allows you to clearly identify your exact
charitable priorities. Earthtrust will handle all administrative
and investment responsibilities and provide you with a full account
of how granted funds were used.
Q: Must I establish these priorities at the time of my donation
, or may I change them later?
A: By contributing to Earthtrust's Save the Planet Fund, you'll
be able to maintain your own personal subfund. This arrangement
will allow you to recommend the distribution of grants. You'll
even be able to have these funds disbursed only for "program"
and not "overhead" activities, thus greatly multiplying
the effectiveness of your gift.
Q: Do these funds have to be put into action immediately in
order for me to realize the tax benefits?
A: No. An income tax deduction may be taken immediately for the
fair market value of the contribution establishing your personal
Save the Planet subfund, even though these funds may be disbursed
at your request for years to come.
Q: If my donation isn't put to use immediately, will I have
to pay taxes on the investment income from my personal Save The
Planet subfund?
A: No. Although income earned on the your personal subfund is
available for charitable distribution at your recommendation,
such income is not your tax responsibility.
EarthTrust
Windward Environmental Center
1118 Maunawili Road
Kailua, HI 96734 USA
(808) 261-5339
FAX: (206) 202-3893
