As a community foundation the Beaver County Foundation is able to offer various forms of planned giving opportunities. These include bequests, charitable trusts, pooled income funds, gifts of life insurance, gifts of mineral rights and many others. The following is a summary of the types of planned gifts that are possible with the Beaver County Foundation.
When considering these types of contributions, donors should contact their legal and/or financial counsel.
Many non-profits organizations such and colleges, universities and healthcare organizations depend on bequests from their constituents and friends. In the broad category of planned gifts, bequests are the most significant planned giving instrument. Some 65% of planned gifts to colleges and universities are in the form of a bequest. Bequests are easy to designate, they happen after the donor has passed away and the bequest can be used to create fund in memory of the donor or loved one to accomplish the donor’s wishes. For example: the donor may want to bequeath a sum to an existing fund of the Beaver County Foundation or the Foundation’s general fund, The Acorn Fund. Perhaps a donor may want establish a separate fund to annually send a contribution to his/her church, school or favorite agency.
Why Write a Will
Whether you are married, single, widowed, or divorced, you need a will. Without one, your estate will not be distributed to those family members and organizations that you care about. Instead, the state will decide who gets your estate, and also keep a sizable chunk of it for itself. Without a will, not only will your family and friends suffer, but also your schools, churches and agencies you care about.. Your bequest contribution to the Beaver County Foundation can make a real difference in the financial future of the organization you value.
For more information, including sample wording, contact the Beaver County Foundation at 724 728 1331 or Charles O’Data, President email@example.com
A Charitable Remainder Unitrust.
In the planned giving world there are a number of gifting vehicles in which the donor makes a gift but retains the right to lifetime income. A Charitable Remainder Unitrust is one such instrument. Next to bequests the Charitable Unitrust is the most popular instrument used for philanthropic purposes. Sixty five (65%) of all planned gifts are in the form of a bequest and sixteen percent (16%) are in the form of a Charitable Unitrust. It is called a Unitrust because it needs to be treated as a single unit trust.
A donor transfers or two donors irrevocably transfer assets to a trustee (which can be the Beaver County Foundation) who invests and reinvests the assets as a separate fund. The designated beneficiary (called the “recipient”) receives an amount each year called the “unitrust amount” determined by multiplying a fixed percentage (a minimum of 5%) by the fair market value of the trust assets, as revalued each year. Any income not paid out is added to the principal. If income is insufficient to pay the required amount, the deficit is made up from principal. At the end of the trust term, the assets of the Unitrust become the absolute property of the designated fund of Beaver County Foundation which had been designated as the charitable remainderman.
What are the characteristics of a Unitrust?
• The most significant characteristic of a Unitrust is in the transfer of appreciated securities. The donor can transfer highly appreciated assets, receive income based on the appreciated value and not be subject to capital gain implications.
• In the case of the recent donor to the Foundation, he will receive a contribution deduction of $54,000 on the transfer of $100,000. The amount of the deduction is determined by the payout percentage and the age of the donor.
• If he had purchased stock at $10,000 that is now worth $100,000, he would receive income based on the $100,000 and not be subject to capital gain taxation.
• All of the income to the beneficiary is taxable.
• The percentage rate of return must be at least 5%.
• There may be more than one beneficiary.
Who are the prospects for a Charitable Remainder Unitrust?*
Research in the field indicates that donors age 65 to 80, with no children, and no mortgage, are the most frequent users of a Charitable Remainder Unitrust. They like the fact that a Unitrust is a hedge against inflation and that they can receive an income based on the capital appreciation of their securities and not be penalized by capital gain taxes.
• Research involving Charitable Trusts revealed that of 588 Unitrusts and Annuity Trusts, 422 (71.77%) examined were Unitrusts and 166 (28.23%) were Annuity Trusts.
• Some 63% were established in less than one year.
• Of the trusts reported (577), in this case 63% were established in the last half of the year with more than half of that amount coming in December.
• The mean payout for the Unitrusts was 6.99% while the mean payout for the Annuity Trusts was 7.31%.
• The asset of choice for the transfer was appreciated property, 79.60%. Cash was used 12.59% of the time, and real estate was used in 7.81% of the instruments.
• The “Standard” Unitrust was used in 55.5% of the instruments and the plan 2 Unitrust, net income with make up was used in 44.5% of the instruments.
• The dollar range of the Unitrust and Annuity Trust in this sample research was between $100,000 and $299,999.
• Prospects for a charitable remainder trust are usually over age 75, with no children and no mortgage. The average of the Unitrust and Annuity Trust donors was 79.5 years.
• The form of asset used: For the Unitrust cash was used just 12.59% of the time, however this was the asset of choice in 32.93% of the Annuity Trusts. Real Estate was used in 25.42% of all Unitrusts and just 8.45% in Annuity Trusts. Negotiable securities were used in 54.72% of Unitrusts and 49.39% in the reported Annuity Trusts.
• Research was conducted by Charles N. O’Data
The Charitable Remainder Unitrust with the income make up provision is an excellent instrument for retirement planning. A donor aged 55, can transfer, $100,000 to a trustee who agrees to pay the donor/beneficiary 5% or the actual income which-ever is less. The trustee invests in low yield growth instruments which produce little or no income. Later, when the donor/beneficiary reaches age 65, the trustee changes the investment strategy to produce more income and begins to “make up” for the income deficiencies of prior years.
Beaver County Foundation is able to offer a Charitable Remainder Unitrust to donors who wish to provide for the future of the region, but do not want to relinquish income currently being received. A donor or donors can transfer appreciated assets to the Foundation, receive a sizable charitable deduction, yet retain the right to the income from the amount transferred. At the passing of the survivor of the donors the assets are transferred to the Fund previously designed by the donor or donors. The following is a brief description of a Charitable Remainder Unitrust.
Four Types of Unitrusts
In addition to the description above, a variation calls for the trustee to pay the beneficiary only the trust income if the actual income is less than the stated percentage. Deficiencies in distributions (i.e. where the trust income is less than the stated percentage) are made up in a later year (s) when the trust income exceeds the stated percentage. Another variation provides that deficiencies are not to be made up. One more variation is an income tax-free Unitrust. A description of the four types of Unitrusts and examples follow.
(1) Plan 1 (“Standard” Unitrust)
The trustee is to pay the beneficiary (“recipient”) an annual payment based on a fixed percentage (which cannot be less than five percent) of the net fair market value of the trust assets, as determined each year.
Example. The donor’s Unitrust provides that he/she is to receive five percent of the net fair market value of the Unitrust assets each year. The donor funds the Unitrust with $100,000, so he/she receives $5,000 the first year. One year later, the Unitrust assets are worth $110,000. The donor receives $5,500 for that year ($110,000 x 5%). If the assets are worth $120,000 at the beginning of the next year, the donor will receive $6,000 for that year ($120,000 x 5%). This process continues for future years. Conversely, should the market value of the unitrust drop to $95,000 the payout would be $4,750. ($95,000 X 5%)
(2) Plan 2 (“Net Income with Makeup”)
The trustee is to pay the beneficiary (“recipient”) only the trust income if the actual income is less than the stated percentage. Deficiencies in distributions (i.e., where income is less than the stated percentage) are made up in later years if the trust income in those years exceeds the stated percentage. Example. The donor’s Unitrust provides that he/she is to receive 5% of the net fair market value of the Unitrust assets each year or the actual trust income, whichever is lower. In any later year(s) in which the trust income exceeds 5%, the trustee is to pay the donor the excess to the extent needed to make up deficiencies (i.e., if actual income was less than 5% of net fair market value of the trust) from prior years. The Donor funds his/her Unitrust with $100,000.
|Year||Assets||5% of Assets||Trust Income||Distribution|
Note: Although the trust income in Year 3 exceeded the required payment for the year by $500, the excess isn’t available to make up the deficiency in Year 4. A deficiency in any year can only be made up from the excess income in later years (not earlier years).
A “Plan 2” Unitrust can be an attractive retirement plan supplement when the trust is funded with zero coupon bonds. Rather than pay interest, those bonds are sold at a price that is steeply discounted from the face value. When the bondholder redeems the bonds, the profit is the discount from the face value. An individual bondholder has taxable income imputed each year, based on the bond’s increment.
But several recent letter rulings say that a charitable remainder trust would not have to include the bond’s increment in trust income and thus wouldn’t have to make Unitrust payments based on the increment until the trust redeems the bonds and reinvests the proceeds in income-producing assets. Then the beneficiary would receive net income plus makeup payments for past years.
Defining the bond’s appreciation as principal (for purposes of the income distribution requirements) makes it possible each year to retain as principal (and not distribute as income) their increment in value.
Caution: The trustee should not be required to invest in or keep zero coupon bonds. That must be left to the trustee’s discretion. Requiring the trustee of a unitrust to make or keep investments-no matter how good, will result in IRS’s disallowing the charitable deduction. Of course, in most cases a donor can be his own trustee. So a donor who doesn’t need the income now could, in effect, defer trust income until later years, when he or she may be in a lower tax bracket.
The IRS’s favorable rulings on this point have been contingent on the local law where the trust is administered, so we need to check state law before submitting a trust instrument for IRS approval. The trust instrument must provide that “trust income” does not include the unrealized appreciation; as long as that doesn’t conflict with local law’s definition of “trust income,” IRS may agree.
Note that to really maximize utility, the proceeds of that redemption (representing the discount element) should be allocable to trust income. Then that part of the proceeds can be paid to the beneficiary to make up for deficiencies from past years. If the proceeds were allocable to trust principal, the beneficiary wouldn’t receive anything until the proceeds were reinvested in income-producing assets.
(3) Plan 3 (“Net Income With No Makeup”)
The trustee is to pay the beneficiary (“recipient”) only the trust income if the actual income is less than the stated percentage. Any deficiencies in distributions are not made up in later years even if the trust income exceeds the stated percentage.
Example: The donor’s unitrust provides that he will receive 5% of the net fair market value of the trust assets each year or the actual trust income, whichever is lower. Any deficiencies in distributions won’t be made up in later years if the trust income exceeds the stated percentage. A donor funds a Plan 3 unitrust with $100,000.
|Year||Trust Assets||5% of Assets||Trust Income||Distribution|
(4) Tax Free Unitrust
While one of the main advantages of a charitable remainder is the avoidance of capital gain taxes on the transfer of appreciated assets, donors can also transfer tax free bonds to fund a Unitrust. As long as the assets in the trust remain in tax free investments, all of the income to the beneficiaries remains tax free.
The best plan depends on your point of view and your needs. Most beneficiaries prefer Plan 1 because payments are assured and the payments can be taxed more favorably than under Plans 2 and 3. Plan 2 or 3 may be called for if non-income producing assets are transferred to the trust and those cannot be quickly sold. Plan 4 may be appropriate for donors seeking tax free income who possess tax free assets.
Mrs. Brown, 82, has $50,000 in current market value of Proctor and Gamble common stock which had a cost basis of $2,000. The annual income was less than $1,000. Mrs. Brown wanted to increase her annual income. If she sold the stock, she must declare capital gains of $48,000 which at 15% would trigger taxes of $7,200 shrinking her assets to $40,800. (Note: Stock in qualified small businesses may be taxed at a rate of 28%). Income at 6% would produce $2,448 annually. Mrs. Brown decides to transfer the Proctor and Gamble stock to the Beaver County Foundation in exchange for a 6% Charitable Remainder Unitrust. Because of her age, Mrs. Brown would receive a contribution deduction of $33,000 with carryover privileges, and retain income of 6% on the $50,000 or $3,000 per year. Further, the nature of the charitable deduction could well enable Mrs. Brown to have more available dollars by reducing her federal tax liability during the time of the deduction and any carry-over. Mrs. Brown has significantly improved her income, lowered her taxes, avoided capital gain taxes on highly appreciated assets and provided an endowed fund with the Beaver County Foundation.
Pooled Income Trusts
Planned Giving…A Sound Investment…
Pooled Income Funds are attractive to younger donors, aged 55 to 70. A “pooled fund” is similar to a bank’s common trust fund. A “pooled fund” has also been described as a charitable mutual fund.
An organization, such as the Beaver County Foundation, establishes a “pooled income fund trust” requiring more than one donor to participate. As each donor contributes to the fund she/he receives units in the fund based on the dollar amount of each unit, usually in values of $1,000. If donor one contributed $10,000, they would have 10 units in the fund. When donor two contributes $5,000 that donor would have 5 units. As income is received each donor would receive a proportionate income based on the number of units it “owned” in the fund.
There is also a charitable contribution deduction allowed. If Jane and John Doe ages 65 and 63 contributed $25,000 to the XYZ “pooled fund” they would receive a charitable contribution deduction of $10,298. Their income would vary depending on the earnings of the fund, thus providing an opportunity to increased income for an extended period.
Many organizations have several “pooled funds.” Fund A may be invested with an emphasis on growth, fund B may be more balanced and fund C may be invested in fixed income securities.
FLEXIBLE VEHICLE OF CHARITABLE GIVING
Donors to the Beaver County Foundation have two basic ways to use a Life Insurance policy to benefit “the Foundation” directly: (1) name “the Foundation” as a beneficiary of the policy or (2) assign (give) all ownership rights in the policy outright to “the Foundation.”
A gift of almost any kind of property can enable an individual to achieve his or her philanthropic objectives. But the nature of life insurance enables donors to make gifts of “startling significance,” and with a remarkable degree of flexibility.
ADVANTAGES OF LIFE INSURANCE GIFTS
Why should donors consider life insurance as a method of making a major gift to the Beaver County Foundation? Here are some reasons.
• For the same out of pocket cost, many individuals can make a larger gift through life insurance than through a bequest of lifetime gift, especially individuals of modest means who otherwise could not afford to make a substantial charitable contribution. Further, this charitable contribution can be made on an “installment plan” through life insurance premium payments. With the remarkable returns now illustrated for many universal life, variable life, and other products, the typical “middle American” can become a true philanthropist via life insurance gifts.
• A life insurance contribution can enable an individual to benefit the Beaver County Foundation without invading capital and depriving his or her family members of estate assets. The gift is created by regular premium installments and can be financed out of current income.
• A life insurance gift is self-executing, simple to arrange, and assures that the donor’s wishes will be carried out.
• Because life insurance proceeds payable to the Beaver County Foundation are not subject to probate, they avoid (1) the delays and costs of estate settlement, (2) creditor’s claims, (3) will contests by disgruntled heirs, and (4) public scrutiny through probate records. Of course, publicity can attend the gift if the donor wishes.
• Life insurance assures the size of the gift in advance. The Beaver County Foundation will receive a guaranteed sum, promptly and in cash, regardless of when the insured dies. Or, if the Beaver County Foundation owns the policy, it may surrender the policy for its guaranteed cash value or borrow on the cash value at an attractive interest rate during the insured’s lifetime.
• The Beaver County Foundation immediately receives dividends that will probably increase annually, access to the policy cash values, and guaranteed growth. Upon the insured’s death, the Beaver County Foundation may, if it wishes, take advantage of the insurance company’s investment facilities by leaving the proceeds on deposit with the company under a settlement option.
• In all of these matters interested individuals will want to consult with their life agent for specific information as it may relate to their circumstances, current company policy and governing laws.
DESIGNATING THE BEAVER COUNTY FOUNDATION AS BENEFICIARY
The Beaver County Foundation may be designated as the revocable, irrevocable, or contingent beneficiary of a life insurance policy that an individual continues to own. The donor generally will not be allowed an income tax charitable deduction for designating the Beaver County Foundation as beneficiary, but such designation may have desirable estate tax consequences. From “the Foundation’s” standpoint, it has nothing more than the expectancy of receiving a death benefit at the insured’s passing.
OUTRIGHT GIFT OF A POLICY
When an individual gives an insurance policy to the Beaver County Foundation, the amount of the donor’s contribution is generally the lesser of (1) the cash value of the policy or (2) the donor’s basis in the policy. Such amount will be deductible for income tax purposes, subject to the 50 percent of the adjusted gross income limitation and the five year carryover of excess contributions. From the Beaver County Foundation’s standpoint, the outright gift is highly desirable: It is assured of receiving the proceeds eventually, and is has access to the policy’s cash value and dividends while the insured is alive.
FORM OF ASSIGNMENT
A gift of an insurance policy to the Beaver County Foundation must be effective to transfer ownership under State Law requirements. Generally, this means that the donor must have intended to make a gift, must have relinquished control and possession of the policy, and must have delivered the policy the Beaver County Foundation The surest method of accomplishing this is by an absolute assignment of the policy to the Beaver County Foundation, which is a simple matter that does not require any legal documents. It also is important that the ownership of the policy be transferred on the company’s books and an endorsement to that effect be sent to the Beaver County Foundation.. The issuing company, of course, can provide the appropriate forms.
Language similar to the following may be used to assign a life insurance policy outright to the Beaver County Foundation.
I, Ralph Winkle, of 123 West View, Eastvale, Pennsylvania, hereby assign to the Beaver County Foundation all of my rights, interest and title in and to an insurance policy on my life, numbered H1234567, and issued by the First Life of Fallston Insurance Company.
In witness whereof, I have executed this assignment the __________ day of __________2016.
S/ Ralph Winkle
PREMIUM FINANCED INSURANCE
Certain high net worth individuals may qualify for premium financing of their life insurance policy. For example, an individual aged 64 with a net worth of $10 million may qualify for such a policy with as much as a $25 million death benefit. Often the earnings of a policy in that amount would produce sufficient income to pay for the premium. The insured however, must be able to post collateral for a short period of years in case the earnings of the policy fall short of the required premium amount.
PREMIUM FINANCED INSURANCE FOR NON-PROFITS ORGANIZATIONS
Colleges, universities, healthcare organizations and many other agencies may qualify for a premium financed group policy plan. Please note that this is a proprietary plan that only a few qualified representatives may offer.
Here are the qualifications and benefits:
• The Multi-Life Benefit Plan, for at least 10 participants, is a variation on a strategy that has existed for over 50 years.
• This is a multi-life insurance program that is completely financed through a bond offering at the 7 day floating market rates. The only financial responsibility of the organization is to post short-term collateral for a period of time.
• The plan provides a benefit to both the organization and whoever it chooses from a pool of staff with no or very little costs to the organization, its endowment of its employees.
• The benefits to the organization are no-taxable funds at a future time for operating obligations and millions of dollars to the organization’s endowment.
• The plan is not a short-term strategy, but a method of building sufficient funds for the future for both operating and endowment purposes.
• The death benefits and the cash values from the policies can be used by the organization for any purpose.
• The policies are for employees earning $75,000 or more and are under the age of 70. The policies are guaranteed issue. All who apply are accepted, No medical exam is needed.
• The death benefit of an individual’s policy can be up to 10 times the individual’s total compensation.
• The multi-Life Benefit Plan can serve as an attractive benefit when recruiting key employees. It can also be a form of “Golden Handcuffs” to retain key employees. It amounts to a tax-free bonus or raise to the employee, as well as a crucial layer of protection for the employee’s family.
• The death benefit is split between the individual and the organization at whatever level the organization chooses. The general split is 50-50.
REPLACING CAPITAL DONATED TO THE FOUNDATION
A deterrent for some individuals in carrying out their philanthropic desires is fear of depriving their family of assets that they might need — or at least resent not receiving, even if they don’t need them! Such individuals pay a price in loss of personal satisfaction and self-esteem, not to mention income tax and estate tax savings.
A planning technique has evolved to address both priorities: family financial security and philanthropic commitment. It’s often called “wealth replacement.” The idea is to find a way to avoid jeopardizing your family’s security while still providing major support to a worthwhile institution such as ours.
Wealth replacement involves the combined use of a charitable remainder unitrust and a life insurance policy. Although it may sound rather complex, wealth replacement is actually a very effective way to attain family and philanthropic goals, while minimizing income and estate taxes, and — in some cases — capital gains taxes.
HERE’S HOW THE WEALTH REPLACEMENT TECHNIQUE WORKS
The Case of the “Good Hearted” Lyons…True Story
Mr. and Mrs. Bob Lyon had a combined estate of $2,800,000. One of their major assets was stock in Food Lion Corporation worth $570,000 that provided very little income but is highly appreciated. Actually the income was $4,275. By transferring this property to a charitable remainder unitrust, the couple can generate a sizeable current income (say 6% or $34,200 a year), avoid an immediate capital gains tax on the appreciation, and receive a large income tax deduction in the year of their gift, $214,399. Because the property placed in the trust will be free of the federal estate tax, they also will reduce their potential federal estate tax.
They can use the tax savings from the charitable deduction and/or part of their increased income to buy $600,000 low-cost survivor life insurance, with a premium of $26,000, that will be paid to their children (or to a trust for their benefit) at the death of the surviving spouse. This two-step arrangement replaces the asset that is donated to charity, gives the couple a lifetime income, reduces their taxes, and provides a major gift to support the Foundation.
Note: With the extra income and tax savings, the Lyon’s took their children and grandchildren to Hawaii.
Donors are advised, here again, to consult with their legal counsel and life agent for compliance with applicable State Law regarding assignments.
With the development of natural gas reserves in Southwestern Pennsylvania, mineral rights have become a frequent conversation. Like any other form of planned giving donors should consult their legal or financial advisors. The following is an example of what may need to be considered when gifting mineral rights. These policies demonstrate the need for professional counsel. The Beaver County Foundation has access to such counsel.
One of the unusual aspects of raising funds for the Foundation is the opportunity to explore gifts of mineral rights. A number of significant charitable gifts had their genesis from assets derived from inherited mineral rights. Therefore, it is suggested that first, the foundation establish policies for acceptance of such gifts and, second, that these policies be communicated to professional advisers as a means to develop a professional partnership.
These guidelines apply to all gifts of real property regardless of type, location, or designated use of the funds to be derived from such gifts.
1. A “gift” includes conveyances and testamentary transfers, as well as trust distributions to the Beaver County Foundation.
2. “Real property” means, individually and collectively, the surface estate and the mineral estate.
3. “Surface estate” means any interest in the surface of real property including fee and leased fee interests, together with all appurtenances and improvements attached thereto’ and all property interests that do not constitute the mineral estate.
4. “Mineral estate” means mineral rights of gas, oil, coal and other minerals, whether joined to or severed from the surface estate and the associated rights as properly conveyed to the Beaver County Foundation. An overriding royalty interest that is not subject to any costs shall also be a “mineral estate.”
5. The “Responsible Officer” shall be the President of the Foundation or his/her designee, shall be responsible, based on the approval of the Executive Committee, for the initiation and completion of the formal acceptance of the gift as appropriate.
6. A “qualified gift of a surface estate” is –
a. any interest that will net more than $25,000 upon sale; or
b. a property for which there is an effective direct use by the Foundation.
C. Procedures for Acceptance of Gifts of Surface Estates:
1. Information to be reviewed.
What is needed when a potential gift of a surface estate is involved? The Foundation will request that the donor provide as much of the following information as possible to allow the Foundation to evaluate the proposed gift. If not paid by the donor, the Foundation shall pay all the costs incurred to evaluate the gift and/or to protect the Foundation’s interests to the gift, including title policy premiums. The Foundation board of directors shall require the acquisition of a title policy at the time the property is acquired, whether the policy premium is paid with funds from the donor or the Foundation.
a. Fee interests in Surface Estates:
i) Map showing location of the property
ii) Legal description of the property
iii) Proof of ownership (deed)
iv) Survey of subject property and improvements (Category 1A survey preferred)
v) List of improvements
vi) Copies of current leases, if any
vii) Current title commitment and copies of all title exceptions, including deed restrictions or covenants and liens
viii) Copy of the donor’s title policy, if any
ix) List of current expenses required to maintain/operate the property
x) Proof of payment of taxes and association fees, if any
xi) Recent appraisal or other acceptable valuation
xii) Copies of documents relating to past or current litigation directly affecting the real estate
xiii) A written document from the donor identifying any known waste disposal sites or contamination or hazardous or other regulated materials on the property, or a statement to the contrary, and assuring compliance with environmental issues
xiv) Written statement from the donor outlining the purpose of the gift
xv) Permission for access to the property to conduct on-site inspections
xvi) Such other information as may be requested by the Foundation.
b. Leased Fee Interests in Surface Estates
i) Copies of fully executed leases and lease amendments
ii) Items listed in a. above
iii) History of all lease payments
iv) Estoppel certificates
v) Insurance policy and certificates.
2. Sale of a Surface Estate by Executor or Trustee.
The Foundation will generally request that the surface estate received from an estate or trust be sold rather than be managed. The sale price shall be based upon the fair market value appraisal or other generally accepted industry standard for valuing such property. Beaver County shall provide assistance to facilitate the sale of the surface estate, when appropriate.
3. Evaluation of Qualified Gifts of Surface Estate.
The Beaver County Foundation will evaluate and inspect a proposed gift of a surface estate. Only qualified gifts of surface estates will be recommended for further review and approval by the executive committee of the Foundation board of trustees.
4. Special Conditions.
a. Unencumbered Surface Estate. The Beaver County Foundation will not recommend acceptance of a qualified gift of an unencumbered surface estate unless there is a clear benefit to the Foundation and the following conditions are met:
i) Adequate provisions are made by the donor or the Foundation for the expense of management until disposition. The donor should be encouraged to contribute funds for the management of the property until disposition occurs. Any unreimbursed costs of the management or sale of the property will be charged against the income from the property or proceeds from the sale of the property.
ii) The gift is of a 100% interest in the property; and
iii) There are no undue limitations on the Foundation’s ability to own, manage, and dispose of the property.
b. Encumbered Surface Estate. The Foundation generally will not recommend acceptance of a qualified gift of a surface estate
that is mortgaged or encumbered unless there is a clear benefit to the Foundation and the following conditions are met:
i) The donor donates funds or makes other appropriate arrangements to meet all debt requirements;
ii) Adequate provisions are made by the donor or the component institution for the expense of management until disposition. The donor should be encouraged to contribute funds for the management of the property until
iii) disposition occurs. Any un-reimbursed costs of management or sale of the property will be charged either against income from the property or proceeds from the sale of the property.
iv) The gift is of a 100% interest in the property; and
v) There are no undue limitations on the Foundation’s ability to own, manage, and dispose of the property.
5. Environmental Assessment. An environmental assessment of the gift must be completed and comply with state and federal environments provisions for such property.
6. Evaluation Criteria. The Beaver County Foundation will consider all criteria for acceptance outlined in this policy and information gathered with respect to the property in determining whether to recommend acceptance of a gift of real property. To demonstrate a clear benefit to the Beaver County Foundation, the Foundation will evaluate the return expected from a qualified gift of a surface estate based on, but not limited to, such factors as income potential, development characteristics, type of property interest, holding costs, management requirements, holding period, location, potential environmental liabilities, encumbrances, and any other potential liabilities or risks associated with the asset.
7. Gift Acceptance. The President of the Foundation shall make a recommendation to the Executive Committee who will accept or reject the gift.
8. Title. The Title to each property shall be held in the name of the Beaver County Foundation. The President will ensure that all deeds for gifts of surface estates are recorded in the county where the property is located, and the Beaver County Foundation will retain the original deed in its permanent records.
9. Valuation of a Surface Estate.
a. Appraisal Preferred. The preferred method of valuation for the purpose of determining gift value, sale price, or lease rates for a surface estate shall be an appraisal prepared by an independent State-certified or other licensed appraiser.
b. Small gifts. The value of a surface estate less than $50,000 may be determined by solicitation of offers or by any other generally accepted industry standards including tax assessments.
c. Public Auctions of Bids. An appraisal is not required when a surface estate is sold at public auction or by use of sealed bids.
D. Procedures for Acceptance of Gifts of Mineral Estates.
1. Notification. The Beaver County Foundation shall evaluate the mineral estate and determine whether the asset should be accepted or rejected by the Foundation. In the case of a testamentary transfer or trust, the Foundation Executive Committee shall determine whether the gift shall be sold. The Foundation shall pursue professional assistance to facilitate the conveyance or sale of the mineral assets.
2. Information to be submitted. The Foundation shall request the donor or the donor’s representative to provide as much of the following information as possible to allow the Foundation to evaluate the proposed gift. If not paid by the donor, the Foundation shall pay all costs incurred by the Foundation to evaluate the gift or to protect the Foundation’s interest with respect to the gift.
a. Map, plat, survey of the property
b. Legal description of the property
c. Proof of ownership (deed or assignment)
d. Copies of current coal, oil, and gas leases, if any
e. Copies of division requirement, if any
f. Copies of other relevant documents, such as unit agreements and operating agreements
g. List of encumbrances including any liens and copies of the corresponding documentation
h. Abstracts of title or title opinions
i. Geological and geophysical records
j. Lease ratifications and lease assignments
k. Copies of appraisals or reserve studies
l. Copies of documents relating to past or present litigation directly
affecting the property
m. Copies of insurance coverage carried by the well operator or mining operator relative to environmental damage
n. Copies of any citations relative to mine safety and documentation to compliance of mine safety issues
o. Copies of contracts and covenants for any and all mineral rights.
3. Sale of Mineral Estate by Executor or Trustee.
The Beaver County Foundation will generally request that the mineral estate received from an estate or trust be conveyed. Such conveyance shall constitute a gift which will be added to an existing fund of the Foundation or to establish a new fund with the Foundation. Any income from the mineral rights shall be added to the fund of the donor. When the sale of minerals is appropriate, the sale price shall be based upon the fair market value appraisal or other generally accepted industry standard for valuing mineral property. The Beaver County Foundation shall provide assistance to facilitate the sale of the mineral estate, when appropriate. If the mineral estate is not sold within a reasonable period of time, the Foundation will evaluate the mineral estate to determine whether the gift will be accepted or disclaimed.
4. Evaluation of Qualified Gifts of Mineral Estates.
The Beaver County Foundation shall evaluate a proposed gift of a mineral estate. Only qualified gifts of mineral estates will be recommended for further review and evaluation.
5. Evaluation Criteria.
The Beaver County Foundation will consider all of the criteria for acceptance outlined in this policy and the information gathered with respect to the minerals in determining whether to recommend acceptance of a qualified gift of a mineral estate.
6. Gift Acceptance.
The President will make a recommendation to the Executive Committee to accept or reject the gift.
Title to each mineral estate shall be held in the name of the Beaver County Foundation. The Foundation will ensure that all deeds for gifts of mineral estates are recorded in the county where the mineral estate is located and will retain the original deed in its permanent records.
8. Valuation of a Mineral Estate.
The preferred method of valuation for the purpose of determining value for a mineral estate shall be at the discretion of the Foundation, but it shall always be by generally accepted industry standards. The Foundation will engage knowledgeable professional consultants to perform the evaluation.