A Way to Do Something More
By Bill Sloan
Creative methods of givingcharitable annuities, remainder trusts, and endowment giftsnot only help underwrite a Scout council's financial future but can also provide financial benefits for donors.
Over the past 56 years, Bruce Abernethy and the Boy Scouts of America have been in an inseparable partnership.
As a youngster, Abernethy thrived on Scouting, advancing from Cub Scout to Eagle and earning a Silver Award and three Wood Badge beads. As an adult, he served tirelessly in every type of volunteer postassistant Scoutmaster, Scoutmaster, camp aquatics director, Order of the Arrow adviser for 20 years, and 30-year member of his council's executive committee.
Even after retiring in 2002 from his job as an electrical engineer, the Lincoln, Neb., native stayed active in Scouting, working with the Central Region's camp inspection team and taking on a new job as climbing director for the Cornhusker Council.
But Abernethy eventually realized that even all this wasn't enough. He wanted to do something moresomething to support Scouting and keep spreading its values long after his own lifetime. The answer seemed to be some sort of money gift. The question was what kind and how to structure it.
"Like most people, I didn't know much about charitable gift annuities at the time," Abernethy recalls. "Then, a couple of years ago, I went to a meeting on donating in St. Joseph, Mo., and it really opened my eyes to the advantages that these annuities offer."
Abernethy learned, for example, that he could receive substantial annual income for life by creating a charitable gift annuity. He also learned that, in his case, 60 percent of this income would be tax-free for the first 20 years.
"I found out that if you want to give a substantial amount of money to a charitable group, waiting until you die can greatly reduce the value of the gift through taxes, medical expenses, and other factors," Abernethy says.
"But with an annuity, you can give funds while you're alive, avoid most of the tax bite, and draw a very comfortable living out of it to boot."
Today, the Cornhusker Council is the beneficiary of a charitable gift annuity established by Abernethy with a principal of well over $1 million. After his death, the funds in the annuity, less a 15 percent administration fee, will be transferred to the council endowment trust, where they will generate a perpetual income stream for Scouting.
"Once the annuity is set up, these funds are no longer part of your estate, so nobody else can touch them," Abernethy explains.
"And after you're gone, the BSA will never diminish the principal but only draw and use the interest, so your gift will last from now on."
Knowing this, Abernethy can rest assured that his long and cherished partnership with Scouting has only just begun.
T.O. Collier, who died in April 2005, had a lot in common with Bruce Abernethyincluding more than a half-century of devoted service to Scouting.
Before retiring to his native Georgia in 1995, Collier worked in eight councils across the nation during a 40-year career in human resources, including three decades with the Amoco Corporation. He was a past president of the Northeast Georgia Council, a former Scoutmaster, and a member of the Southern Region executive board.
Despite his record of service, Collier began looking in the late 1990's for an additional way "to express my gratitude" to Scouting. "I've been associated with the BSA since I was 10 years old," he said. "I credit Scouting with helping me grow up and learn basic values, and I've gotten so much more out of it than I put into it. I wanted to do something, but I wasn't sure what."
Collier's search ended when a lawyer friend told him about charitable remainder trusts (CRT), another method of investing in the future of Scouting and realizing substantial tax savings in the process. Unlike a gift annuity, however, the funds placed in such a trust can grow or shrink based on stock prices and other economic factors.
"I had an old will that I wasn't happy with," Collier recalled, "and when my friend explained charitable remainder trusts to me, I liked the concept. My three grown children were all very successful and doing well financially, and they were very supportive when I told them what I was planning."
Collier set up his charitable remainder trust in 1998 and had his will redrawn to designate the BSA as its administrator and separate a portion of his estate for his heirs.
"I like the CRT because it seemed best fitted to what I wanted to do," he said. "There were risks involved, but there was also an opportunity for the dollars to multiply, and it saved me a significant amount of tax dollars. My hope was that the money will grow enough in years to come to ensure that many coming generations of boys and young men will have access to the same Scouting experiences I'd enjoyed."
It surprised almost no one in the BSA's Western Region when officials named the region's top award for financial supporters of Scouting in honor of longtime volunteer leader Glen McLaughlin.
Over the past dozen years, McLaughlin has played a key role in obtaining more than $1 billion in endowments for the regionwhile simultaneously contributing personal gifts of his own in excess of $1.1 million.
When McLaughlin became chairman of a newly launched regionwide endowment-building campaign in 1993, the Western Region simply had no existing program for attracting large contributors.
"At a time when other charitable institutions were getting heavily into endowments, we had only the James E. West Award, which recognizes individuals who give $1,000," he recalls. "It seemed to me that we were missing a big opportunity with larger potential donors."
A past president of California's Santa Clara County Council, current member of the National Executive Board, and veteran of six decades in Scouting, McLaughlin became an Eagle Scout in 1949 and later earned an MBA from Harvard.
As regional chairman, he spearheaded a drive to form council-level endowment committees throughout the Western Region, then took the lead in creating prospect lists and organizing heritage events to cultivate donors.
McLaughlin's appeal among other donors stemmed partly from his impressive track record in business and partly from his own gift-giving history with the BSA.
"The Glen McLaughlin Award is very appropriately named," says Ben Stahmann, associate director of the Finance Support Division in BSA's national office.
Bruce Abernethy, T.O. Collier, and Glen McLaughlin are among a growing legion of veteran volunteer Scouters utilizing creative methods of giving that not only help underwrite their councils' future but also save the donors vast sums in taxes and, in some cases, provide them with a steady source of income for life.
Despite the considerable advantages that these plans offer donorsincluding ease of giving, potentially generous tax benefits, and permanencemany Scouters never think about them as a vehicle for their own charitable contributions, Stahmann says.
"An endowment gift to your council is far more lasting than a one-shot annual gift," he emphasizes, "and it need not be huge. A $1,000 endowment, for example, will likely earn the local council about $50 per year, forever."
Charitable gift annuities, which can begin at $2,500, have become popular among donors, Stahmann says. The amount of lifetime income generated for the donor depends on the annuity size and the donor's age when interest payments begin.
A donor can draw 5.3 percent interest on an annuity at age 50, the minimum age for creating a gift annuity. The annuity rate rises to 6 percent at age 65, to 6.5 percent at age 70 and to 9.5 percent at age 85. And if donors don't need the income right away, it can be deferreduntil retirement, for example.
Donors may specify that annuity payments go to other persons besides themselves, such as a spouse, a parent, a child, or even someone who is not a relative.
An immediate income tax charitable deduction is one of the tax benefits. In addition, a large part of payments on gifts made in cash is usually tax-free. Other portions of the payments are subject only to capital gains taxes, which are lower than those on ordinary income.
The program is offered through the BSA National Council, but most gifts are used to benefit local councils of the donor's choice, Stahmann says.
"When your gift annuity payments end, the remaining value of your gift is distributed to the local council or councils you select to benefit their Scouting programs," he explains, "except for a small percentage used to cover part of the administrative costs involved."
As Bruce Abernethy notes: "With my annuity, my Social Security, and my company retirement benefits, my income stream is actually more now than when I was working."
For information on charitable gift annuities, charitable remainder trusts, or outright endowment gifts, contact your council service center or call 800-BSA-INFO (272-4636).
Additional information, including a planned gift calculator, is available at www.bsagiftplan.org.
Contributing editor Bill Sloan's latest book is Brotherhood of Heroes: The Marines at Peleliu, 1944The Bloodiest Battle of the Pacific War, published by Simon & Schuster.
Copyright © 2005 by the Boy Scouts of America. All rights thereunder reserved; anything appearing in Scouting magazine or on its Web site may not be reprinted either wholly or in part without written permission. Because of freedom given authors, opinions may not reflect official concurrence.