Invest In Lifetimes Today

by Jeff Crooke


You’ve done well for yourself - stocks, real estate, a nice house and car. Now you are looking to make a difference, to give back. What better use than financial planning with your alma mater, where your stocks can fund scholarships, your real estate can fund research, your collection of original artwork can enrich young lives?

What if you could do all that, yet still make an income from the gift you make, whatever that gift may be? You can, and best of all it’s relatively easy to do.

The first step is contacting your alma mater’s foundation or alumni services. A planner will meet with you, help you decide what is best for you and the university, and do much of the legwork. Jan Clarke, director of planned gifts at Radford University in Southwest Virginia, says the best way to approach establishing a life income gift is to outline what goals you wish to achieve.

“First we have to look at what the person wants to accomplish,” says Clarke. “The best approach is not to look at what the university can do for you, but at what the best marriage is between your goals and the university’s mission.”

That’s because, when you are making a life income gift, you are surrendering an asset to your university or college. It sounds like a sacrifice, and certainly it is, but there are important benefits that can be gained, too, depending on which type of financial instrument best suits your needs.

“There are essentially three kinds of plans,” says Clarke. Each one has its own strengths.

For those in the early stages of financial and estate planning, typically their 50s or 60s, an income deferred plan is often appealing. With this plan you surrender an asset under a contractual agreement that will begin paying a certain amount to you at a later date. While this plan doesn’t offer immediate recompense for your surrendered asset, you may take advantage of current tax benefits and enjoy greater returns in the future.

Another popular option is called a unitrust. In a unitrust the donor selects to receive a certain percentage of income from the surrendered asset, in the current economy, typically in the 6.5 to 7.5 percent range. This type of plan is appealing to donors whose liquidity is not an issue. Since the income payout to the donor can fluctuate, Clarke advises donors to be prudent in their income expectations. A lower initial income percentage rate could result in greater income over time.

“Another advantage of the unitrust is flexibility,” says Clarke. A unitrust allows the donor to move assets into the plan at any time, increasing the market value and income while simultaneously decreasing a potential tax burden.

A third type of financial instrument, often appealing to older alumni wishing to donate to their alma mater, is the charitable gift annuity. An annuity allows a donor to surrender an asset and lock into payments that occur at a consistent amount and time.

While these choices may seem overwhelming at first, Clarke says that working with a good financial advisor and your alma mater’s gift planning staff can help avoid that feeling. By listening to your goals, then beginning by generally outlining some possibilities, a win-win plan can usually be crafted.

“If I begin talking specifics too soon, the eyes glaze over,” laughs Clarke, “but if someone wants to invest in their alma mater, and they have assets they don’t need for their day-to-day survival or family obligations, then it can be good for them and us.”

While there is no such thing as “the sure thing” where your own returns are considered, private investment in colleges and universities is much needed to compensate for budget cuts made by many states during the last economic downturn. The academic impact of your investment may never be greater than right now. Contact your alma mater’s foundation or alumni services to find out how you can benefit the institution that helped you get where you are today.