Building-a-Legacy-Spring-2006

Engaging Your Family in Philanthropy

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umerous financial courses and textbooks exist, but how many of those courses focus on financial values? Where do we learn financial values?

How do we learn about stewardship and financial responsibility? Although we understand the values that build character, such as generosity, honesty, and integrity, how can we share what we have learned and pass those values on to our loved ones?

Fortunately, values can easily be passed from one generation to the next by involving your family in your philanthropic plans. In addition to spending time with one another, family philanthropy is a great way to share your values and allow your children (and their children) to learn firsthand what is important to you. Family philanthropy can include anything from volunteering as a family to giving money as a family.

Begin by sharing with your family why you give to a particular organization and how you determine the amount it will receive. Be sure to share the positive feelings and inspiration that comes from helping others. Once your family has been introduced to your charitable values, ask them to participate in the decisionmaking process. Decide as a family which charitable projects should be supported in the future. Perhaps your family will decide to make a gift in honor of a loved one who has passed. Or maybe your family wishes to fund a specific project or annual event. Regardless of the type of gift, including your family in philanthropy will naturally bring your financial, character, and charitable values to the forefront—values that may be passed on to future generations.

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. Click on “Alumni” in the left-hand column, then on “Make a Gift.” Then click on “Planned Gifts.”

For more information about planned giving opportunities, contact William Mitchell’s Development Office.

Office of Development and Alumni Relations 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

recycled paper

Building a Legacy a financial and charitable newsletter

• spring 2006

Giving Students Options—Giving to William Mitchell Scholarships allow students flexibility

Inside this issue: • Preserving Retirement Assets for Life

• Engaging Your Family in Philanthropy

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ome years ago Margaret Leary ’73 named William Mitchell as the beneficiary of her retirement plan assets. She didn’t stop there. More recently Leary created The Margaret A. Leary Scholarship with a combined gift of cash and appreciated stock. Not only will her endowed scholarship leave a legacy for the benefit of William Mitchell students in the future—it is helping students now. The first scholarship was awarded this year to third-year student Laura Beito.

What is her advice for other alumni?

“Don’t wait too long to create a planned gift—if you have seen great appreciation, you don’t have to wait to see how much more there will be—take advantage and let the college benefit.”

Alumna Margaret Leary ’73 “I could not have attended law school without working full time, and that was possible at William Mitchell because of its flexibility,” says Leary, director of the University of Michigan Law Library. “For others, the chance to schedule school around child care, work, and other responsibilities is essential. Mitchell’s schedule allows students to use the resource of time effectively. I wanted to help with the other resource—money— because my career would not have been possible without my legal education. More important, I also wanted to help ensure entry to the legal profession for all who have the talent to do well. As law school becomes more expensive, the profession must ensure entry for all talented people, not just those who are talented and can afford it.”

Laura Beito

Student Laura Beito “I wanted to be able to go to law school full time, so I knew I would have limited hours available to work. Receiving The Margaret A. Leary Scholarship lessened my financial burden and played a part in allowing me to continue going to school full time and still have the chance to volunteer,” says third-year student Laura Beito. Beito was able to use her time outside of class to volunteer for the Minnesota Aids Project and the Chrysalis Center for Women. She will graduate in May and plans to work in family law.

Margaret Leary ’73 “wanted to help ensure entry to the legal profession for all who have the talent to do well…not just those who are talented and can afford it.”

Margaret Leary ’73

Preserving Retirement Assets for Life

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f you are like many people planning for retirement, you’ve been building a retirement nest egg in the form of a qualified retirement plan. You probably intend to preserve those funds for your lifetime, withdrawing as little as possible and conserving the rest “just in case.” You feel secure in the knowledge that your wellthought-out financial plan is in place. But what happens to your retirement assets after you are gone?

In many cases, they are subject to both income taxes and estate taxes. Upon your death, the remainder of your qualified retirement plan generally will be included

Nearly 65 percent

in your gross estate for federal taxation purposes. For large estates, this tax rate is as high as 46 percent. If left to your heirs, the funds are considered “income in respect of a decedent,” and income taxes will be due at distribution. (Your spouse may roll any inherited amounts into his or her individual retirement account and delay taxation.)

Nearly 65 percent of your retirement assets may go to the government, not your heirs.

See the chart [below] for an illustration.

Many people, including Luella and Donald Zibell ’62, found that much of their hardearned retirement assets would end up going to pay taxes rather than benefiting their

of your retirement assets may go to the government, not your heirs.

$100,000 IRA Gift to Heirs Versus William Mitchell College of Law Type of Gift Beneficiary Federal Estate Tax

$100,000 IRA

$100,000 IRA

Heirs

William Mitchell College of Law

($46,000)

$0

$54,000

$0

($15,120)

$0

$38,880

$100,000

$61,120 (61%)

$0

(Assumed 46 Percent Marginal Estate Tax Bracket)

Net Amount Subject to Federal Income Tax Federal Income Tax (Assumed 28 Percent Marginal Tax Bracket)

Net to IRA Beneficiary Amount to the IRS in Taxes

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.

family or one of their favorite charities, like William Mitchell. Don, being a CPA and an avid investor, has kept abreast of the various estate planning and charitable giving techniques. Both Luella and Don have a wide range of charitable interests and as one of their legacies they wanted to help future William Mitchell students by endowing the Zibell Family Scholarship Fund. When asked why, Don explained, “student loans these days are quite a burden. I was able to get through law school without any loans. First you make sure your family is taken care of, then you have a responsibility to give back.”

Acting on his desire to give back, Don found two advantages to an IRA gift over his previous bequest gift. First, he was able to make a significant gift to the college by establishing an endowed scholarship. Second, he helped his heirs avoid steep income taxes on their distribution from his IRA. Although some time has passed since Don changed his gift designation for William Mitchell from his will to his IRA, he still thinks it was a smart decision. Don has enjoyed watching his investment for the college grow. On a recent visit, he delighted in sharing that “it’s up 50 percent” from when he designated the gift.

Like Don, you may benefit from creative estate planning. Many taxes can be avoided by using qualified retirement assets to fund charitable gifts. These gifts are not at the expense of your heirs; it is Uncle Sam who is disinherited! Consider the following options to discuss with your estate planning attorney.

■ Name William Mitchell College of Law as the beneficiary of your qualified plan account. Your estate will get a charitable deduction for the entire amount, and no income taxes will be triggered because the beneficiary is a tax-exempt entity.

© 2006 William Mitchell College of Law and The Stelter Company

■ Use the annual distributions from your plan to fund a charitable gift annuity.

You’ll get fixed annual payments from the gift annuity, and your charitable deduction will help to offset the taxable income from the annual distribution.

■ Create and then name a tax-exempt charitable remainder trust as the beneficiary of the retirement plan. After your death, the trust can pay income to your heirs during their lifetimes or for a certain period of years. Income taxes will be spread over this period, providing much greater tax deferral than would otherwise be available. The remainder then is distributed to William Mitchell and any other charitable organizations named as beneficiaries of the trust.

How to Make Charitable Gifts From Your IRA

Office of Development and Alumni Relations 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 Learn how the latest tax law changes make it easier to make charitable gifts from your IRA accounts.

Complete and return the enclosed reply card to receive your FREE copy of How to Make Charitable Gifts From Your IRA.

Donald ’62 and Luella Zibell