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You can make a lasting commitment to the youth of Hawaii and to our community through the establishment of an endowment or other tax-advantaged plan. Your charitable gift will ensure that thousands of youth each year will benefit from the many services that Hale Kipa provides, and that our community will be strengthened and enriched. On this page, a series of questions are posed and answered to help you understand Hale Kipa’s Planned Giving Program.

In the past year, Hale Kipa has initiated its Planned Giving program, and has already seen good response from the community. The main instrument of Planned Giving, the Hale Kipa Charitable Gift Annuity (CGA), combines a gift with an investment. Under the gift annuity agreement, Hale Kipa makes fixed rate, lifetime payments to the giver. For individuals under age 65, there is also a Hale Kipa Deferred Gift Annuity (DGA).

Frequently Asked Questions

Q: What’s the best way for me to support Hale Kipa?
A: There is no single “best” way for a concerned individual to help Hale Kipa provide for the needy in our community. Different people have different priorities as well as different financial circumstances. For that reason, Hale Kipa offers a wide variety of innovative financial plans that can be tailored to meet the needs and interests of every supporter.

Q: Do I have any say in how my contribution will be used?
A: Absolutely. Hale Kipa welcomes your advice on how to best accomplish our goals. Hale Kipa makes extensive use of “designated funds”, allowing you to fund a specific program. Your contribution, whether made during your lifetime or through your will or trust, can be restricted for a particular purpose or program that Hale Kipa provides for now and in the future.

Q: Does Hale Kipa provide special long-term giving options?
A: Yes. A “perpetual endowment fund” may be established, with its income available to carry out the programs you designate. This fund will bear your name or the name of your family in recognition of your concern and support.

Tax Deductibility
Q: When can I contribute and minimize my tax liability?
A: You may make a gift of cash or other valuable property to Hale Kipa at any time. When you do, your tax savings include:

• An immediate income tax charitable deduction
• The value of the gift is excluded from your estate for federal estate tax purposes.
• If appreciated property is contributed, you will not be required to recognize the long-term capital gain for income tax purposes.
• The net cost in making the contribution is reduced by your tax savings.

Q: Are contributions of property (stocks, bonds, real estate, etc.) to Hale Kipa fully tax-deductible?
A: Yes. The deduction for a contribution of long-term capital gain property to Hale Kipa is equal to the property’s fair market value, and there is no tax to pay on the capital gain. Gifts of tangible personal property (art, collectibles, heirlooms, etc.) may be subject to a different set of rules with regard to the amount of the deduction, but there will be no tax on the capital gain as well. A gift of personal property to Hale Kipa that may be used by it to carry out its mission to provide youth services may be eligible for a full fair-market value deduction under IRS regulations that apply specifically to charitable contributions of tangible personal property.

Q: Are the tax deductions worth claiming?
A: The IRS provides generous incentives for individuals to make charitable contributions to organizations like Hale Kipa. Let’s assume that you have appreciated securities worth $20,000 which cost you $5,000. If you are in the 40% combined income tax brackets (federal and state), the contribution of these securities to Hale Kipa can reduce your income tax obligation for the year of the gift by as much as $8,000 (40% x $20,000). In addition, there will be no tax on the capital gain. This can result in an additional savings of more than $2,250 (15% x the $15,000 capital gain).

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 $70,000 (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 Hale Kipa and claim its full value as an income tax charitable deduction. This approach will produce a tax savings of $3,000 more than had the stock been sold and the cash proceeds donated instead (the federal capital gains tax, at the 15% rate, would result in tax of $3,000, 15% times the gain of $20,000). This is because selling the stock first, before making the contribution, will require you to pay the tax on the capital gain. Thus, the $3,000 in capital gain tax that you could have avoided will be due, making the cost of your contribution greater than had you given the stock directly to Hale Kipa.


Bargain Sale

Q: Are there tax benefits for gifts of property from which I might like to have some portion of its value returned back to me in cash?
A: Yes, as in the case of bargain sales of appreciated property. A “bargain sale” is the sale of property to a charity for less than the property’s fair market value. When such a sale is made to Hale Kipa, the transaction is viewed as part sale and part charitable contribution. The excess of the fair market value over the sales price is the measure of the charitable gift to Hale Kipa. This can be a very good option when appreciated property must be sold.

Tangible Personal Property
Q: Are the tax benefits the same for contributing jewelry, works of art, or other valuables?
A: It depends. While Hale Kipa will welcome these contributions, there are tax rules that may restrict the amount of the deduction in certain circumstances. If Hale Kipa can apply the donated property for its uses, then the amount of your charitable deduction is the property’s full fair market value. If the use of the property is unrelated to Hale Kipa’s exempt purposes or functions, the amount of the donor’s charitable deduction is limited to the original cost of the property. Moreover, a gift of tangible personal property can generate significant tax and economic benefits for an individual if contributed to a charitable remainder trust under Hale Kipa’s Planned Giving Program. Since the mission of Hale Kipa is broad, many items of personal property, such as art and books, may prove useful to it and, thus, enable the contributor to deduct the contribution at its fair market value, not at its cost.

Closely Held Stock
Q: Can I contribute stock in my closely held corporation? If so, how much can I deduct?
A: Yes, you may donate such stock, even if you control the corporation. Your charitable deduction is equal to the appraised value of the donated stock at the time of the contribution as verified by a qualified appraiser.

Q: Can my corporation purchase the stock from Hale Kipa? Is there a tax penalty?
A: A closely-held corporation may choose to buy back its stock from Hale Kipa for its appraised value, perhaps using surplus cash. In acquiring its stock from Hale Kipa, the corporation has not subjected you, the donor, to income tax on the proceeds used to purchase the property nor to any tax penalties. And while you have not realized either dividend or other income from this contribution, you are still entitled to claim an income tax charitable deduction for the gift of the shares based on their appraised value when contributed.

Life Insurance

Q: Can I reduce my taxes by donating my life insurance policy to Hale Kipa?
A: Yes, and at a relatively low cost to you. For example, you can transfer an existing policy that you own to Hale Kipa, which becomes the owner and beneficiary of the policy. You are able to deduct an amount equal to the cash value of the policy and can also deduct subsequent premium payments that you make as charitable contributions for income tax purposes. In addition, the proceeds of such policies are excludable from your estate for estate tax purposes.


Charitable Remainder Trust

Q: Is it possible to contribute property to Hale Kipa and still retain income from it for the rest of my life?
A: What you describe is known as a Charitable Remainder Trust. You may make a gift of cash, securities, real estate, tangible personal property or certain other property interests to a Charitable Remainder Trust for the future benefit of Hale Kipa but for your present benefit. You can retain the right to a fixed annuity in a specific sum or as a percentage of the initial value of the gift – at least 5 percent – for a term of up to 20 years or for your lifetime. What’s more, this right to income may include a survivor as well. Tax benefits from a Charitable Remainder Trust include:

• An income tax charitable deduction for the value of the property or cash contributed to the trust reduced by the value of the income interest based on IRS life expectancy tables.
• Continued enjoyment of payments for life or a term of years from the contributed assets in the form of either a fixed annuity or an adjustable unitrust amount often at rates higher than were received on the property before contribution.
• Avoidance of recognition of any initial capital gain on the contribution of appreciated long-term capital gain property.
• Removal of the contributed property from your taxable estate.

Q: Is it difficult to establish a Charitable Remainder Trust?
A: No. An experienced representative of Hale Kipa will work with you and your professional advisors to help you establish a Charitable Remainder Trust. What’s more, you’ll be able to take advantage of two different types of Charitable Remainder Trusts:

• An Annuity Trust pays an annual fixed amount of income of at least 5 percent of the value of the donated assets when contributed to the Trust. Once established and funded, there can be no further contributions to an Annuity Trust nor can there be any adjustment to the annuity payments as a consequence of market conditions.
• A Unitrust pays a fixed percentage (also at least 5 percent) of the Trust principal as revalued annually. If the Trust principal grows, the payment of income grows proportionately at the stated rate as a hedge against inflation. Certain Unitrusts may be appropriate to receive gifts of real estate in order to enable individuals to increase income productivity from this type of investment, avoid tax on the long-term capital gain and permit the trustee the flexibility to time the sale of the real estate to maximize its value for the benefit of the beneficiaries of the Unitrust.

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 originally intended that the contributed asset go to your heirs, you can take advantage of the financial and tax benefits which result from the creation and operation of the Trust and replace the value of the asset for your heirs, perhaps through the use of a life insurance product or Deferred Gift Annuities. Often, your heirs will receive the life insurance proceeds, for example, as a replacement asset free of both gift and estate taxes, thereby receiving a distribution of greater value than had they inherited the property directly from you. This often enables a family to have a “win-win” result from the use of a Charitable Remainder Trust.

Q: Can I use a Charitable Remainder Trust as a planning vehicle to shield my retirement plan from the large amount of potential taxes to which it may be exposed at my death?
A: Yes, either as part of a plan during your lifetime or through designation to take effect at the end of your lifetime. You can withdraw all or a portion of the plan after you reach the threshold age (59 1/2) and place the net amount (after taxes, which are reduced by the deduction from the use of the Charitable Remainder Trust) in a Trust. The Trust may be able to pay you tax-free income for the rest of your and your survivor’s lifetimes, and you may choose to use this income to replace a substantial portion of the value of the assets withdrawn from the plan for the benefit of your heirs, free of estate and other taxes. You can also accomplish this by creating a testamentary Charitable Remainder Trust, funding it with assets in your qualified retirement plan by designation, and, if your spouse is the beneficiary, avoid both estate and income taxes.


Charitable Gift Annuities

Q: Can I contract with Hale Kipa to pay me an annuity without creating a Charitable Remainder Trust?
A: Yes. You can do this by entering into a Gift Annuity Agreement for the payment to you (and another, if you choose) assuming that you are at least age 55. If you are under age 65, you may elect to defer the payment of your annuity until age 65 or later and obtain a higher lifetime fixed annuity rate. The rate for a current or deferred Gift Annuity is fixed for lifetime.

Q. Can I contract with Hale Kipa to have annuity payments made to me in the future, especially if I am under age 65?
A: You can enter into an agreement for a Deferred Gift Annuity and can specify the date in the future to commence your annuity payments. The deferral period allows for a higher annuity rate than if you had purchased an immediate Charitable Gift Annuity.

Q: How is the amount of the annuity determined?
A: There are tables that are used to determine the amount of the annuity depending on the age or ages of the applicant(s). The amount of the charitable deduction and the portion of the annuity payments that you will be receiving that are tax-free are both determined precisely when the annuity is calculated.

Q: Is there any advantage to a Charitable Gift Annuity over a Charitable Remainder Trust?
A: Yes. In addition to ease of application (there is no trust agreement to be prepared and executed), Charitable Gift Annuity rates can often be higher than rates fixed in Charitable Remainder Trusts, particularly for older individuals, and a fixed percentage of tax-free income may be part of annual annuity amounts.

Q: Can I establish a Charitable Gift Annuity to help pay for the future cost of a beneficiary’s college education?
A: Yes. This is called a College Gift Annuity and it is a way to lock in a fixed amount that will be available at a date in the future to pay all or a portion of educational expenses. The amount of the future annuity to be used by your beneficiary to pay college expenses is determined at the time you establish the College Gift Annuity. Your income tax deduction is available immediately.
Gifts of Residences

Q: Are there arrangements for gifts of real estate that have the same results as Charitable Remainder Trusts — that is, can I donate my house to Hale Kipa yet continue to use it during my lifetime?
A: Yes. In fact, you may donate your primary or secondary residence to Hale Kipa and still retain uninterrupted use and occupancy for the rest of your (and your survivor’s) lifetime (a “Life Estate”). The tax benefits, however, are immediate. This gift to Hale Kipa of a future interest in your home generates a current income tax charitable deduction for you and excludes the property’s value from your estate for estate tax purposes.

Q: Is it possible to receive an annuity in addition?
A: In certain circumstances, you may be eligible to receive a current lifetime annuity from Hale Kipa while you remain in your residence after it is contributed to Hale Kipa under a life estate agreement. This is called a Charitable Reverse Mortgage. Instead of a current annuity, you may choose to have a future annuity provided for in the gift agreement. This can allow you the flexibility to move to another residence and receive a generous annuity to assist in your future costs of living. This can also be tailored to provide income in the event of your need for long-term health care in order to protect your other assets for the benefit of your heirs.

Q: Is it necessary to contribute the entire property in order to take advantage of the tax benefits?
A: No. You can 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 transfer the 3/4 interest (nine months) to Hale Kipa. You will then receive an immediate income tax charitable deduction equivalent to 3/4 of the fair market value of the property while continuing to enjoy the property for the same three months of the year that you presently use it.

Q: If I choose to simply leave a bequest in my will or through my revocable living trust to Hale Kipa, do I have to specify an exact amount?
A: No. While you may of course make a specific bequest to Hale Kipa in your will or through your revocable living trust in a specified sum, you may also choose to leave Hale Kipa a percentage of your estate or trust.

Q: Can I specify in my will what I want my bequest to be used for?
A: Just as you can when establishing a Designated Fund or Endowment with Hale Kipa during your lifetime, you may restrict your bequest or transfer from your will or revocable living trust for a particular program or service of Hale Kipa and direct that the gift be named in your memory and/or in honor of others you select.

Information contained in this website is not intended to represent legal or tax advice or to substitute for such advice. Individuals are urged to consult with their professional advisors when considering charitable planned giving transactions.