- Meet Consumers/Patients
Bequests - Gifts for a Brighter Future
What would it take to make the Oley Foundation a more financially stable, forward looking organization? This question has been the focus of many board meetings over the past few years, as the pressures of fund-raising have demanded more and more of the staff’s time and energy. The need to raise funds detracts from the staff’s ability to provide member services and has been a major obstacle to program growth -- particularly attempts to resurrect the research program.
One answer to this problem is to establish an endowment that could generate perhaps 50 percent of the annual Oley budget. This would be enough to alleviate some of the ongoing pressure, but not so much that we become out of touch with the consumers we serve. Given Oley’s present annual budget of about $250,000, we’d need to raise a capital endowment of approximately 2.5 million dollars. (Endowments are invested conservatively, and a portion of the return is reinvested to offset the effects of inflation on the principal.)
How can people near and dear to Oley make this happen? One donation at a time. The Foundation’s major thrust initially, will be to pool together planned gifts already pledged toward the endowment campaign, and to ask other members and friends to consider a bequest to Oley. Members will also be offered the opportunity to make direct contributions to the endowment campaign.
What Is a Bequest?
A bequest is a planned gift, usually given to an organization through a will or living trust. Depending on the type of gift, there can be many tax advantages for the person planning the gift, such as reducing their income and/or estate taxes.
Making a bequest can be as simple as designating in your will that a certain amount of money or stock, or piece of property, be given to the Oley Foundation. Another way to make a bequest that delivers a lot of “bang for your buck,” is to take out a life insurance policy on yourself or a loved one, and designate Oley as the beneficiary. After meeting with a financial planner, Oley Foundation Co-founder, Lyn Howard, MD, did just that. How and why she did it, follows.
(Please note that the dollar amounts and other details will vary from one life insurance policy to another. This is simply an example to illustrate the potential benefits from one type of bequest. For a brief overview of the various types of bequests, call Oley at (800) 776-OLEY, or see the article on planned giving on our web page. For more details, you’ll want to consult with your own financial, tax or legal advisor.)
How Does It Work?
Over a period of nine years, Dr. Howard will make nine payments of approximately $13,000 into a life insurance plan. When she dies, the $500,000 policy benefit goes to Oley. This amounts to roughly 4 dollars going to Oley for each dollar she puts in. Dr. Howard had to pass a physical to qualify for the policy.
While bequests of this size go a long way towards helping Oley reach its endowment goal, gifts on a much more modest scale are welcome and needed.
What Are the Tax Benefits?
Each payment can be “written off” Dr. Howard’s income taxes for that year, because Oley is a charitable organization. (Technically speaking, the policy is set up such that the Oley Foundation will be invoiced for the payments and Dr. Howard will reimburse Oley. Dr. Howard was advised to set it up this way, so it is clear that the payments directly benefit a charitable organization and thus are income tax deductible.)
In addition, by giving the money to Oley while she is living, Dr. Howard has reduced the amount of her taxable estate -- avoiding death/estate taxes which can run as steep as 55 percent.
What Are the Other Benefits?
This type of bequest allows Dr. Howard, who is 62 but in good shape, to make a sizable gift to Oley that she could not otherwise afford. It helps her meet her goal to contribute significantly to Oley’s long-term stability.
Why Not Give the Money Directly to Oley for It to Invest?
One unquestionable benefit of putting the money into life insurance, rather than giving it directly to Oley, is to relieve Oley of the burden and responsibility of investing the money.
Otherwise it’s a calculated risk. The life insurance policy payments and benefits are based on statistics that estimate Dr. Howard will live another 25 years or so. (The insurance company is willing to pay $500,000 when Dr. Howard dies, because they know an average woman’s life expectancy is 87 years. This is enough time for the insurance company to make $500,000 and more from her $115,000 down payment over the next 9 years.)
The obvious drawback to this approach, is that Oley receives no money until Dr. Howard dies.
What if She Dies Early, or Doesn’t Make the Payments?
If Dr. Howard dies before making all nine annual payments, but has kept up to date with the payment schedule, the full $500,000 will go to Oley upon her death.
If the insurance company does not receive the payments while Dr. Howard is still alive (say Dr. Howard becomes financially devastated or incapacitated), the Oley Foundation will receive only a small settlement upon her death. Having the Foundation invoiced for the payments helps avoid this from happening. If Dr. Howard doesn’t make a payment, Oley would have the option of making the payment for her in order to keep the policy viable.
Why Did She Make the Gift Now?
At age 62, Dr. Howard has led the Division of Clinical Nutrition at Albany Medical Center for 27 years and has been on the Oley board since its inception in 1983. She is looking forward to retiring soon. She chose to make her gift now so she can continue to stand behind Oley financially, but operationally speaking, she can back off. Dr. Howard is proud of what the Foundation has accomplished. The Oley Foundation has been through many financial ups and down, but through it all has remained a tenacious, vivid and caring organization. As she put it, “Oley has won its stripes. It is a survivor, just as much as its members are survivors. Kicking off an endowment campaign is a perfect way to help Oley be here for homePEN consumers for years to come.”
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