Building-a-Legacy by William Mitchell College of Law

Building a Legacy a financial and charitable newsletter

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winter 2006

Establishing an IRA-Based Legacy With Sense and Sensibility: The Welter Intellectual Property Endowed Scholarship

Inside this issue: • New Tax-Saving Opportunity for Donors Aged 701⁄2 or Older

• Give William Mitchell the Gift You Always Intended

re you under the impression that it takes tremendous wealth to establish an endowed fund in your name? In reality, that’s not the case. You can leverage your individual retirement account (IRA) assets to create your legacy at William Mitchell—a strategic financial move that allows you to maintain your current standard of living, preserve inheritable assets, and provide opportunities for future law students. In a nutshell, charitable gifts from an IRA are nontaxable. The assets can be transferred directly from your IRA to an endowed fund after your lifetime. Currently, when an estate is large enough to be taxed, children who inherit an IRA pay both income tax and estate tax. A charitable gift eliminates that double taxation.

The Welter Story After growing up on a Minnesota farm, getting a college degree in chemistry, and serving in the U.S. Navy, Paul Welter went to work teaching in the Honeywell sales school. Shortly thereafter he was persuaded by a buddy studying at William Mitchell to enroll here at night. Paul graduated in 1964, and in 1965 he married Phyllis and joined the law firm of Merchant & Gould, where he found the vocation he loved. He spent 40 years there, eventually serving as president, member of the board of directors, and managing director.

Paul and Phyllis Welter Paul was regularly listed in Best Lawyers in America for his work as an intellectual property lawyer and was dubbed a “Super Lawyer” in the Minnesota Journal of Law and Politics. He built a reputation among colleagues, clients and the legal community for unwavering integrity and was active in community organizations, including the United Way and the Legal Aid Society. Phyllis, who had an M.B.A. when they married and worked in the consumer survey department at General Mills, took time off to raise their two children. Once the younger child was in first grade, Phyllis, too, decided to attend William Mitchell at night. As she jokes, “I had to go to law school. It was the only way I could keep up with Paul!” Phyllis also became fascinated with trademark law and eventually started her own company, Survey Counsel, Inc. In addition to shared professional interests, Paul and Phyllis kept things in balance with Continued on Page 2

Charitable gifts from an IRA are nontaxable. The assets can be transferred directly from your IRA to an endowed fund after your lifetime.

Establishing an IRA-Based Legacy With Sense and Sensibility Continued from Page 1 family time at their cabin and travel. Their last years together were shadowed by Paul’s struggle with cancer, but a highlight of his life during that difficult time was the invitation to join the board of trustees of William Mitchell, which Phyllis said “kept him going.” After making a generous gift to the Capital Campaign, Paul and Phyllis decided to set up an IRA gift. They did the paperwork in 2004 while Paul was still alive. Initially, their intention was to make a deferred gift from their estate, with proceeds going to the endowed scholarship. But after Paul passed away, some months after their 40th wedding anniversary, Phyllis decided she did not want to defer the gift. She rolled over Paul’s IRA into her name and made the gift immediately.

“There’s a certain satisfaction to doing it now and honoring him,” Phyllis says. “But the credit goes to Paul. It was his idea to establish the scholarship. He had to work and could not have gone to law school if it hadn’t been for William Mitchell. Although I needed to attend school at night, too, our gift resulted from his passion for William Mitchell and my passion for him.” Merchant & Gould also continues to honor Paul’s memory through the Paul A. Welter Award for Excellence in Trademark Law. Beginning in 2007, William Mitchell will co-sponsor the award that will honor outstanding in-house trademark counsel at a corporation.

New Tax-Saving Opportunity for Donors Aged 701⁄2 or Older

n Aug. 17, 2006, President Bush signed into law new tax incentives for charitable gifts from donors who are 701⁄2 or older. The Pension Protection Act of 2006 encourages financial support of the good work done by charitable organizations across the United States. Under the new law, you can make a lifetime gift using funds from an IRA without any undesirable tax effects. Prior to the new law, you would have had to report any amount taken from your IRA as taxable income. You could then taken a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. Fortunately, now these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gift now—while you are living and able to witness the benefits of your generosity. You may contribute funds in this manner if: • You are age 701⁄2 or older. • The gift is not more than $100,000 per year.

• You make the gift on or before Dec. 31, 2007. • You transfer funds directly from an IRA or Rollover IRA. • You make the gift to a public charity. (This excludes gifts made to charitable trusts, donor advised funds, and supporting organizations.)

How the New Law Works Pat, aged 80, has $450,000 in an IRA and made a pledge to give $75,000 to us this year. If Pat transfers $75,000 from the IRA directly to us to satisfy the pledge, she will avoid paying income tax on $75,000. At the same time, however, Pat will not be able to use that gift as a charitable deduction—it is a pure “wash.” It is an easy and convenient way for her to benefit us without tax complications.

How to Make a Gift Simply contact your IRA custodian for the forms necessary to transfer your desired gift to the charitable organization of your choice.

The information in this publication is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are based on current rates at the time of printing and are subject to change. References to estate and income tax include federal taxes only; individual state taxes may further impact results.

Questions and Answers Q: I receive minimum distributions each year from my IRA. Can I use those funds as a gift under the law? A: Yes. Contact your IRA custodian and advise them of your desires. Q: I’ve already named a charitable organization as the beneficiary of my IRA. What are the benefits if I make a gift now instead of from my estate? A: If you have already named a charitable organization as a beneficiary of your IRA, you are familiar with the double taxation your heirs face if they inherit it. The IRA is subject to estate taxes and whoever inherits the account must pay income taxes on the proceeds. By naming a charitable organization as the beneficiary, both taxes are eliminated. By making a lifetime gift of up to $100,000 per year from your IRA, you can see your philanthropic dollars at work. You are jumpstarting the legacy you would like to leave and giving yourself the joy of watching your philanthropy take shape. Q: I’m turning age 701⁄2 in a few months. Can I make this gift now? A: No. The legislation requires you to reach age 701⁄2 by the date you make the gift. Q: I have several retirement accounts—— some are pensions and some are IRAs. Does it matter which retirement account I use? A: Yes. Under the new legislation, gifts can be made from IRAs or Rollover IRAs. Pension, profit sharing, and other forms of retirement funds do not fall under this tax legislation. Q: Do I need to give my entire IRA to be eligible for the tax break? A: No. You can give any amount under this

provision, as long as it is $100,000 or less per year. If your IRA is valued at more than $100,000, you can transfer a portion of your IRA to fund a charitable gift.

Charitable Gifts From Your IRA

Q: Can I make a gift to a charitable remainder trust? A: No. You can benefit from the legislation only if you make a gift directly to a charitable organization—as an outright gift. Gifts that provide payments to you, such as charitable remainder trusts, are not eligible. Q: I have two organizations I want to support. Can I give $100,000 to each? A: Under the law, you can give a maximum of $100,000 each year. For example, you can give each charitable organization $50,000 this year, or give one organization $100,000 in 2006 and the other organization $100,000 in 2007.

Office of Institutional Advancement 875 Summit Avenue St. Paul, MN 55105 (651) 290-6370 • 1-888-WMCL-LAW E-mail: mruzek@wmitchell.edu Web site: www.wmitchell.edu/alumni

The Secret to Maximizing Your Tax Advantages

Q: I’d like to give more than $100,000. How can I do that? A: The legislation allows you to make a gift in the 2006 tax year and the 2007 tax year. So if you make a $100,000 gift each year, you can give $200,000 over the two-year period. Plus, if your spouse is 701⁄2 or older and has an IRA, he or she can also give up to $200,000 over the same period.

Learn how the Pension

For More Information

From Your IRA using

It is wise to consult with your tax professionals if you are contemplating a charitable gift under the new law. Please feel free to call Marie Ruzek ’01 at (651) 290-6412 with any questions you may have.

the enclosed reply card.

Protection Act of 2006 makes it easier to make charitable gifts from your IRA now and in the future. Request your FREE copy of Charitable Gifts

Give William Mitchell the Gift You Always Intended

erhaps you have always said that once you’re comfortable and secure, you’d like to help those causes near to your heart. Only you haven’t yet implemented your philanthropic plans. Are you one of these well-intentioned people? If so, here’s the easiest way to turn your good intentions into action.

A Gift in Your Will You can make a charitable gift by including a bequest to William Mitchell directly in your will or in a codicil to your will. In doing so, you provide a pledge of future support for our mission. We can help you and your estate planning advisors develop a plan best suited to satisfy both family and philanthropic goals. Please give Marie Ruzek ’01 a call at (651) 290-6412.

Sample Bequest Language To expedite your good intentions, here’s a recommended clause for making an outright, unrestricted bequest to us. I give William Mitchell College of Law, 875 Summit Avenue, St. Paul, MN 55105, (_______% of the residual) or (the sum of $__________), to establish the John and Jane Doe Permanently Endowed Fund, to be used by William Mitchell College of Law wherever the needs and opportunities are greatest. Should you wish to make a bequest to William Mitchell that is restricted to a specific purpose, please contact us before you do, so that we can make sure we are able to meet your request.

Do you want to leave a legacy for your family, friends, and William Mitchell College of Law? Learn how to plan for tomorrow at our Web site, www.wmitchell.edu/alumni.

For more information about planned giving opportunities, contact William Mitchell’s Office of Institutional Advancement. Office of Institutional Advancement 875 Summit Avenue St. Paul, MN 55105 (651) 290-6370 • 1-888-WMCL-LAW E-mail: mruzek@wmitchell.edu Web site: www.wmitchell.edu/alumni

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