There are several types of bequests:

• A bequest of money may be designated for a particular purpose or for general use
• A bequest may name a specific monetary amount or an item to be donated
• A residuary bequest allows one to donate what remains of the estate (or a percentage thereof) after all obligations are met
• A contingent bequest makes the National Gallery the benefactor only if the original beneficiary is unable to accept the bequest

The creation of a will is a private matter; however, anyone considering including a bequest to the Gallery in a will is welcome to contact the Gallery. We would be delighted to know of any such intentions, so that the donor may be recognized as a member of The Legacy Circle.

Bequests of art, as always, are subject to acceptance by the Board of Trustees.

Sample Bequest Language:

Suggested language for making a bequest for general use at the National Gallery of Art:

“I bequeath to the Trustees of the National Gallery of Art in Washington, DC___________ (state a dollar amount, percentage of estate or trust, or residual).”

Suggested language to designate a specific purpose for the bequest:

“I bequeath to the Trustees of the National Gallery of Art in Washington, DC___________ (state a dollar amount, percentage of estate or trust, or residual) for __________ (state specific purpose such as art acquisition, the special exhibition program, scholarly research, education, etc.).”

Important Note:  If you do specify a use for your bequest, the following language will ensure that your gift will always remain productive: “If at any time in the judgment of the Trustees of the National Gallery of Art the designated use of this bequest is no longer practicable or appropriate, then the Trustees in their discretion shall use the bequest to further the general purposes of the National Gallery of Art, giving consideration, where possible, to my special interests as described above.”

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

Charitable Gift Annuities

A charitable gift annuity (CGA) is a simple agreement between the donor and the National Gallery of Art. In exchange for an irrevocable gift of at least $10,000, the Gallery agrees to pay the donor or other individual(s) whom the donor names, an annual fixed income for life—a fixed percentage of the original gift value, which is based on the age(s) of the annuitant(s). The remainder becomes available to the Gallery for its use at the death of the annuitant(s). A gift annuity can be established with a contribution of cash or securities; income beneficiaries must be at least sixty years old. Gift annuities are administered at no cost to the donor. A donor who establishes a gift annuity receives an immediate income tax deduction for the gift portion of the original principal minus the value of the income payments to be made to the annuitant(s). If a CGA is created with appreciated securities, the capital gains taxes due will be deferred and, in some cases, reduced.

The annuity payments are guaranteed and backed by the full, unrestricted assets of the Gallery. Part of the annuity may be income tax free, increasing overall return. The gift annuity may be set up over a period of one or two lifetimes—one of which is often the donor’s.

Benefits of Establishing a Charitable Gift Annuity at the Gallery:

• Provides for the future of the Gallery
• Establishes an important legacy for donors and/or their family
• Sets up a lifetime income stream at an attractive rate of return
• Offers the possibility of tax-free income*
• Allows for a charitable income tax deduction, and deferral and/or reduction of capital gains tax
• Transforms non-income or low-income generating assets into a potentially higher income stream

*A portion of the income you receive from the charitable gift annuity usually is a tax-free return of principal.

Deferred Gift Annuities

A deferred gift annuity is similar to a CGA, except that the annuity payments do not begin until a specified future date, chosen by the donor, which must be more than one year after the date of the contribution. Because the payments are deferred, the donor, or other individual(s) whom the donor names, receives a higher annuity rate as well as a higher immediate income tax deduction.

This type of annuity can also be an attractive supplement to the donor’s retirement income. If a donor has reached the limit of allowable contributions to an IRA account, Keogh plan, or other qualified pension plan, the deferred gift annuity can be an attractive tax-deductible source of guaranteed retirement income.

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

Retirement account assets, if left to anyone other than a spouse, may be subject to very high taxation. However, by designating the National Gallery as recipient of any benefits remaining in a retirement plan, donors may effectively reduce the taxes on those assets.

Generally, the undistributed balance of a qualified retirement plan is taxed as part of an individual’s gross estate for estate tax purposes. Because the funds in a retirement account usually represent deferred compensation that has not yet been subject to income tax, leaving retirement funds to individual heirs other than a spouse also exposes the funds to income taxes. Retirement dollars can be depleted by this double action.

There are several ways to make a charitable gift using retirement plan assets:

• A donor can specify that his or her retirement funds pass directly to the National Gallery of Art as the primary beneficiary
• Retirement assets can be transferred to a deferred giving arrangement (e.g., trust) that will pay an income for life to family members or other persons of the donor’s choosing, after which the remaining assets pass to the Gallery
• A donor can set up a deferred gift designed to pay a life income to himself or herself

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

A charitable remainder trust allows the donor to make a substantially larger gift in the future than he or she might be able to make at the present time. In addition, when the trust is created, an income tax charitable deduction may be taken (subject to the limitations provided by law) for the present value of the trust as of its termination. There are two basic kinds of charitable remainder trusts: the charitable remainder unitrust and the charitable remainder annuity trust.

The charitable remainder unitrust provides for payments to the beneficiary or beneficiaries in amounts that may vary and that have the potential to keep up with inflation. The unitrust pays a specified percentage of the market value of the trust’s assets, as determined each year; the unitrust may be augmented by additional contributions.

The charitable remainder annuity trust pays a fixed amount each year—a percentage of the original principal set at the outset; it does not permit additional contributions.

Example of a Charitable Remainder Unitrust:

Mr. and Mrs. Stuart have been actively involved with the National Gallery of Art for a number of years. The remainder of their estate, after other bequests, debts, taxes, and expenses have been paid, will pass to the Gallery, as stated in their wills. Their estate consists of residences, stock, cash, and other property.

To increase their retirement income the Stuarts set up a charitable remainder unitrust, with a designated trustee, using a vacation home and a rental property they no longer need. The trustee will sell these properties and invest the proceeds. The couple will receive an annuity, a fixed percentage of the trust’s value each year. As the trust’s assets grow in value, the annuity payments to the Stuarts will increase, allowing for a greater return in their retirement years. In addition, the Stuarts may be eligible for tax deductions and other benefits.

When the Stuarts’ charitable remainder unitrust terminates, the remaining trust assets will pass to the National Gallery of Art. In the process of making a charitable gift to the National Gallery, the Stuarts have increased their income, reduced their tax burden, and clarified their estate plans.

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

A charitable lead trust is created by transferring property, such as cash, securities, privately held stock, real estate, and limited partnerships, to a trust. A charitable lead trust can be funded during the donor’s lifetime or through a will. During the term of the trust, which is often a specified number of years, the National Gallery of Art receives either a fixed dollar amount or a fixed percentage of the trust principal, revalued annually. Additional contributions to the trust are permitted. At the end of the trust term, the remaining principal is distributed to beneficiaries—typically children or grandchildren—either outright or in further trust.

With a gift that passes to children or grandchildren, this type of trust can provide substantial gift and estate tax benefits. The transfer allows a charitable gift tax deduction for the present value of the annual payments to the Gallery, thereby reducing the gift tax on the eventual gift beneficiaries. Upon termination of the trust, any appreciation in the value of the trust property passes to beneficiaries free of estate and gift taxes.

If the trust term is long enough and the annual payment to the Gallery is large enough, the tax on the gift to beneficiaries can actually be eliminated. Additionally, because the donor has parted with ownership of the trust property, it is not taxable in the donor’s estate.

Example of a Charitable Lead Trust:

Mrs. Lane, a widow, wants to pay tribute to her late husband’s deep appreciation of the arts with a gift to the National Gallery of Art. She also wants to pass some of her wealth to her grandson.

Upon the recommendation of her financial adviser, Mrs. Lane chooses to create a $3 million charitable lead trust to last the duration of her life, naming the Gallery as beneficiary of an annual payment of 8 percent of the trust’s assets, valued annually, during that term. The Gallery will receive an annual payment amounting to $240,000 in the first year and a variable amount in each additional year of the trust. When the trust terminates at Mrs. Lane’s death, the assets will pass to her grandson.

By establishing a charitable lead trust, Mrs. Lane is able to accomplish many things: she makes a gift to the Gallery in memory of her late husband; she reduces the size of her taxable estate; and she passes on a large gift to her grandson at a reduced taxation level.

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

A gift of real estate can be an attractive way to support the National Gallery of Art and to realize tax and income benefits at the same time. The Gallery will sell the donated property and use the proceeds to support its mission, while the donor receives valuable tax benefits. Income from a rental property can also be donated to the Gallery. By making a gift of real estate, a donor may be able to reduce significantly the amount of income, capital gain, and estate taxes he or she otherwise would have to pay.

A primary residence, vacation home, or farm can be given to the Gallery:

• outright
• through a bequest
• to create a trust that would pay lifetime income
• with the stipulation that the donor retains the property for life

Example of a Gift of Real Estate:

Mrs. Kelly, a volunteer docent at the National Gallery, wants to make a significant gift to the Gallery. However, she cannot afford an outright gift at this time.

Upon her lawyer’s suggestion, Mrs. Kelly decides to pledge a remainder interest in her personal residence to the Gallery. She will retain the right to use the property during her lifetime and, at the time of her pledge, will receive an immediate tax deduction based on her age and the fair market value of the property. There will be no capital gains tax on the sale of the property upon her death, and the value of her estate will be reduced, thereby lowering any estate taxes due.

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.

A gift of a new or existing life insurance policy is a wonderful way to make a sizable contribution that not only provides immediate tax savings and helps ensure the future of the National Gallery of Art, but also allows the donor to avoid tying up current assets. By naming the Gallery the owner and beneficiary of a life insurance policy, the cash value of the policy becomes tax deductible to the donor. Designating a charity as a policy beneficiary may also remove the policy from the donor’s taxable estate.

The Gallery would expect the donor to make provisions for the payment of any future premiums, which would provide additional tax deductions for the donor.

Alternatively, one can name the Gallery as a contingent beneficiary on a life insurance policy. Should the primary beneficiary die before the insured, the Gallery becomes the primary beneficiary.

We invite you to contact us with questions or comments about planned giving; we would welcome the opportunity to discuss these options further with you. We highly recommend that you also speak to a financial adviser.