As Chairman of the Planned Giving Committee of the NPS Foundation, I thought I would explore the actual process. Who better than the Chairman to be a planned giving guinea pig! I was pleasantly surprised at what I found.

By way of background, I am a retired naval officer and am currently on faculty at the Naval Postgraduate School (NPS). My wife Susan and I have long been supporters of NPS and are founder members of NPSFI. We believe strongly in the mission of NPS to properly educate the future military and civilian leaders of our nation in an academic setting that strongly promotes interaction among all our armed forces. In addition, the presence on campus of international students from over 60 allied nations presents an extraordinary opportunity for coalition building at a grass roots level that will serve our nation well as these students advance through the ranks and assume leadership roles in their respective nations. This makes NPS unique as a national institution. We are pleased to be able to help the NPSFI enhance the student educational experience through financial and equipment support and want to commit to that support continuing for the long term. With that in mind, we found the gifting mechanism of the Charitable Remainder Trust (CRT) well suited to our situation. Here’s how it works.

An NPSFI trustee, Ken Petersen, outlined the potential benefits of a CRT as follows:

• a substantial charitable gift to NPSFI
• increased hassle-free income
• a significant current income tax deduction
• avoidance of tax on the sale of appreciated assets
• removal of the appreciated assets from exposure to estate tax.

We were able to take advantage of all these benefits. We established a version of CRT called a Charitable Remainder Unitrust (CRUT) which pays an annual income to us on a selected fixed percent (nominally 5-6%) of the asset value by transferring highly appreciated and low income producing stock assets to the CRUT. The assets in the CRUT were then sold, with no capital gains tax, and reinvested in higher income producing assets. In a very simple process and short time frame, the CRUT was set up with the advice and assistance of a local attorney at nominal cost and we retained the role as trustee of the CRUT. We also found ourselves in a situation with significant “windfall” income this year and were looking for offsetting tax deductions. The CRUT did this as well—and substantially. For example, a $100,000 gift can generate up to approximately a $48,000 tax deduction in the year of giving. This number can vary greatly depending on a number of variables such as age of the donor, percent payout selected, term of the trust, number of lives included (own or spouse also). Your attorney/financial advisor will have software that can run the numbers for you for any situation in an instant. It is important to know that a CRUT, once put in place, is irrevocable but it can be set up to enable change to the beneficiaries selected. Once the donor(s) are deceased, the assets of the CRUT pass to the beneficiaries.

For Susan and me, the CRUT proved to be a very effective financial planning tool and we were able to assure our long-term commitment to the goals of the NPSFI. As with any estate/financial planning decision, consult with your attorney or financial advisor to see if a CRUT might work for you as well. For more information, contact RADM Merrill Ruck at the Foundation.

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