Planned Giving

Sound Financial Planning will help both PIANO and you
The Piano International Association of Northern Ohio (PIANO), sponsor of the Cleveland International Piano Competition, continues on its course of growth and progress.  Our leadership is dedicated to working with all members and friends to realize the vision for the future of the Competition. 

The primary missions of the Cleveland International Piano Competition are to promote international good will and friendship through music and to provide a strong platform for fostering the careers of the world’s best young pianists. The Competition has undertaken major efforts to strengthen and enhance its quality by increasing the prizes and awards offered, and by providing more concert appearances for its winners.  Also, to provide the best possible orchestral support for its finalists, the Competition has engaged the world-renowned Cleveland Orchestra.  The vision of the Board of Directors is to produce an international competition of the highest quality attracting the finest young pianists of the world who will strengthen their artistry by competing in an atmosphere of utmost fairness and concern for the individual.

Please consider joining the Competition  in this endeavor.  To encourage the friends and supporters of the Competition to contribute generously toward this effort for future generations, this document has been prepared to discusses the most commonly used giving strategies and their associated tax benefits to you.   The Competition hopes that this guide will assist in your charitable gift planning and will encourage you to include substantial consideration for the Competition.  Your generosity will help ensure the attainment of long-term benefits for the competition in its role of service to the international music community, the City of Cleveland and the State of Ohio.

Each person’s circumstances are unique.  You may find that some of the ways of giving apply to your own investments and your own estate planning.  The goal of a sound charitable giving strategy is to help you strengthen the future of the Competition while also protecting your own financial future.  Your tax benefits will vary widely, depending on the type of gift you choose, the level of your taxable income, and the projected size of your estate. 

A planned gift can enable you to gain significant tax advantages and receive additional income while at the same time making a significant contribution to PIANO.   Planned gifts come in many forms and can be tailored to your financial circumstances.

The tax laws encourage charitable giving by providing considerable benefits to you, such as:

• current federal income tax charitable deductions
• avoidance or deferral of capital gains tax,
• avoidance or reduction of state and federal estate taxes.

In addition, a philanthropic gift can be structured to provide you, or another beneficiary, with a significant income stream for life or for a designated term of years.

The Competition’s officers will be pleased to discuss any of the following options with you.  We recommend that you also consult with your attorney, accountant, or financial adviser as you consider a gift to the Competition.

Bequest
Making a will, often in conjunction with a revocable trust, is the only way you can assure that your property is distributed according to your wishes.  By naming PIANO in your will or trust, you can ensure that your support for PIANO and its mission will be perpetuated after your death.  If you already have a will or trust, you can have your attorney draft a simple codicil to your will or a modification to your trust, to make a bequest to PIANO.

Your bequest may be a fixed dollar amount or a percentage of your assets:
Suggested wording:
I give the sum of _______Dollars ($_____) to Piano International Association of Northern Ohio.
  or
I give ___________percent (_______%) of my residuary estate to Piano International Association of Northern Ohio, Cleveland, Ohio.

Individual Retirement Accounts and other retirement and pension plans can also be made payable to PIANO, in whole or in part.
. 
Estate Tax Benefits:  The amount of your bequest is removed from your taxable estate.  Thus, your heirs’ inheritance may be reduced not by the full bequest but by only a fraction of the bequest amount, depending on your estate tax bracket.  For example, a gift of $100,000 to PIANO escapes the 50% estate tax in a large estate, thus reducing the heirs’ inheritance by $50,000.

Life Insurance
Significant value can be conferred upon PIANO as beneficiary or owner of a life insurance policy.  If the ownership of a policy is transferred to PIANO, future  premium payments by the donor are tax deductible.  This is an area which suggests consultation with a tax advisor for applicability to your own situation.

The Charitable Gift Annuity
A Charitable Gift Annuity is a contract between you and PIANO.  In exchange for your irrevocable gift of cash, securities, real estate or other assets, PIANO will pay you, your surviving spouse, or others, a fixed annuity for life.  The amount is determined by the age of the annuitant(s) and the size of the gift.

Tax Benefits:  A portion of your gift will be deductible from taxable income as a charitable contribution to PIANO.  If you fund your annuity with long-term appreciated assets, the payment of capital gains tax will be deferred over your remaining life expectancy.  Part of each annuity payment to you is then taxed as capital gains income, part as ordinary income, and part is tax-free reflecting the return of your cost.  If you exceed your life expectancy, the remaining payments are taxed as ordinary income.  Your taxable estate will be reduced by the full value of the gift.

Example:  Eleanor is 74.  She transfers stock to PIANO in July 2002 valued at $200,000 which has been yielding 1.5% in dividends.  The stock was purchased for $100,000.  Eleanor qualifies immediately for a federal income tax deduction of $84,657, which may be taken over one to five years, depending on the amount of her income.  Eleanor receives an annual annuity of $15,400 – 8.1% of the stock’s value, and more than five times larger than her original dividend yield.  Eleanor pays no capital gains tax at the time of her gift.  Instead, the capital gains are pro-rated over the next 13 years (her life expectancy).  Approximately $4,500 of the $15,400 annuity income is tax-free, $4,500 is taxed as capital gain income, and $6,400 is taxed as ordinary income.  In addition, the gift is removed from her estate and no estate tax is paid on this asset.  If Eleanor had decided to sell her stock and reinvest the proceeds in other stock, she would have owed capital gains taxes of $20,000, thus leaving her only $180,000 to reinvest.  No prudent alternative investment will guarantee a return of 7.7%.

The Charitable Remainder Trust
Like a Charitable Gift Annuity, a Charitable Remainder Trust (CRT) will pay you or you, your spouse, or others an annuity for life in return for an irrevocable gift of property, preferably long-term appreciated securities.  There are two forms of Charitable Remainder Trusts, the Charitable Remainder Annuity Trust (CRAT) and the Charitable Remainder Unitrust (CRUT).  In each, your assets are placed in an irrevocable trust where they are separately invested.  A CRAT pays a fixed annuity based on the value of the trust at the time it is established.  The payment from a CRUT is a variable annuity based on a fixed percentage of the trust’s annual value.   You can set the rate so long as it is at least 5% and the gift component to PIANO is at least 10% of the gift.

Tax Benefits:  A portion of your gift will be deductible from your taxable income as a charitable contribution to PIANO.  If you fund the trust with long-term appreciated assets, you will avoid immediate capital gains tax.  You will defer the payment of tax on capital gain income over time.  The taxation of the trust distributions to you will depend on the type of assets held in the trust.

Example:  Harry is 74 and transfers stock to PIANO in June 2002 valued at $500,000 to be invested in a Charitable Remainder Annuity Trust for his benefit.  The stock was purchased for $100,000.  Harry qualifies for a federal income tax deduction of approximately $310,000.  Each year, Harry will receive an annual income of $25,000 (5% of the trust’s initial value).  Harry pays no immediate tax on the $400,000 capital gain of his donated stock.  After Harry’s death, the principal will go to PIANO.

The Charitable Lead Trust
A Charitable Lead Trust is just the opposite of a Charitable Gift Annuity or a Charitable Remainder Trust.  Whereas the Gift Annuity and Remainder Trust enable you to retain income from assets given to PIANO during your lifetime, the Lead Trust enables you to direct income to PIANO for a specific period of years.  After that designated period, the assets are returned to you or passed on to your designated beneficiaries.

Tax Benefits:  The benefits will vary depending on the type of lead trust.  In general the principal benefit is a saving in gift and estate taxes, arising from the discounting of the deferred gift to the family.

Example:  Samuel is 72.  He irrevocably transfers stock valued at $1 million into a 20-year, 8.6% charitable lead trust.  For the next 20 years, the trust pays a fixed dollar amount of $86,000 per year to PIANO.  After 20 years, the then value of the trust (perhaps greatly appreciated) is distributed to his children.  At the time of the initial gift, nothing is subject to federal gift tax.  The entire gift receives a federal gift tax charitable deduction, but no income tax deduction.  So long as the trust’s income is less than $86,000 a year, the trust will pay no federal income tax.  After 20 years, the children will receive the trust assets, including all asset growth, free of income, gift or estate taxes.

Other possibilities include Family Foundations, Wealth Replacement Trusts, and Charitable Annuity Trusts.

The Cleveland International Piano Competition benefits greatly from your philanthropic decision. To discuss your interest in making a planned gift, please call Karen Knowlton at the Competition office at 216-707-5397.