Yesterday
Since 1881 when Clara Barton founded the American Red Cross, people with a desire to alleviate human suffering and save lives have been at the organization’s core. Ordinary people with a vision of a better tomorrow helped the Red Cross steadfastly provide vital assistance to those most in need, in communities across the country and around the world. With a proud tradition of service in times of war, natural disasters and individual crisis, the Red Cross has been present for more than a century helping to save lives every day.

Today
With the help of generous contributions of time, blood and money from the American people, the Red Cross touches the lives of millions of people every year. Whether it is providing disaster relief and almost half of the nation’s blood supply or teaching health and safety courses to prepare you and your neighbors for life’s everyday emergencies, people depend on the immediate action of the Red Cross.

Tomorrow
Regardless of the challenges to be faced tomorrow, you can help the Red Cross provide essential services to those who need them most. With your support, the Red Cross can help reduce the tragic incidence of accidental deaths in our communities, participate in revolutionary Biomedical research and be ready to respond appropriately to small-and large-scale disasters, including possible tragedies involving weapons of mass destruction or violence in our schools. Together, we can save a life.

Our Mission
The Red Cross has a long history of assisting those in need during times of disaster, collecting blood donations, teaching first aid and lifesaving, and keeping American troops in touch with loved ones at home. Whether supported through an outright gift or a life-income gift, all Red Cross programs and services are made possible through the generosity and commitment of people like you. A gift to the Red Cross helps to ensure the future of the services and programs we provide and may further your financial and estate planning goals.

The Tax Laws Encourage Charitable Contributions
Our friends contribute to the American Red Cross to further this important work, but having decided to make a gift, it’s wise to plan for maximum tax benefits. Frequently, you’ll be able to make a larger gift than you originally imagined.

Tax Savings: If you itemize, you may claim a charitable contribution deduction on your federal income tax return for donations to the American Red Cross. That reduces the actual cost of your gift.

For example: Miss. Lee, in the 27% income tax bracket, contributes $1,000 to the Red Cross and deducts the gift on her federal income tax return. She saves $270 in taxes ($1,000 deduction x 27%). Miss. Lee’s out-of-pocket cost is $730 ($1,000 gift minus $270 tax savings).

Gift and Estate Taxes: Lifetime gifts and bequests to family members may be subject to federal gift and estate taxes.* But charitable gifts, large or small, are completely exempt from federal taxation. Most states give similar benefits.

Gifts by Will
Many of our supporters make charitable gifts by bequests in their wills so that the work of the American Red Cross can continue. The federal government encourages those gifts by allowing an unlimited estate tax charitable deduction.*

To make a bequest to the Red Cross, the following language will help your lawyer:

A local chapter gift: I give, devise, and bequeath to the American Red Cross for the benefit of the American red Cross, Lee County Alabama Chapter, the sum of _____ (or otherwise describe the gift or specify a percentage of the estate).

A national sector gift: I give, devise, and bequeath to the American National Red Cross the sum of _____ (or otherwise describe the gift or specify a percentage of the estate).

You can also make a gift to benefit both your local chapter and the national sector.

Contingent Gift by Will: If you’re concerned about providing for family members, consider naming the American Red Cross as a contingent beneficiary to benefit only if there are no surviving close family members. Childless couples sometimes provide for the entire estate to go to the surviving spouse, but if the spouse doesn’t survive, to the Red Cross.

Life-Income Gifts
Family obligations and the need to provide for retirement, coupled with the high cost of living, make it difficult for many people to consider substantial charitable gifts now, so they wait to make gifts by will. But there is a way to have the satisfaction of making a meaningful lifetime gift without sacrifice. In fact, you get current tax and financial benefits. It’s called a life-income gift. You irrevocably transfer some assets to the Red Cross now; and, in return, you (and a survivor, if you wish) receive income for life. Then the assets are used to carry out our mission.

The Advantages: In addition to the pleasure of knowing the good work your gift will do, there are other benefits:

• A charitable deduction in the year you make the gift for the present value of our right to eventually receive the trust assets.
• Free up appreciated investments to maximize yield, diversify, or both—often without paying tax on the capital gain.
• Your effective yield is increased by substantial income tax savings.
• Income can be taxed more favorable with some plans.
• You unburden yourself of investment concerns.
• You’ll have the same estate tax benefits as charitable gifts by will—and save probate costs too.

A variety of Red Cross life-income plans enable you to be a philanthropist and still provide for yourself and others. These plans are explained below:

The Charitable Gift Annuity
In exchange for your gift of money or marketable securities to the American Red Cross, we pay you (and a survivor or other beneficiary, if desired) a fixed amount annually for life. The transfer is part gift and part purchase of an annuity. The rate of return is attractive and the payments are guaranteed for life—without investment responsibilities.

For example: Mr. Carter is 75 and his wife is 70. They transfer $20,000 to the Red Cross for a gift annuity and receive $1,360 annually for life ($20,000 x 6.8%--the annuity rate for their ages). The full guaranteed payments continue for the survivor’s life.

Income tax benefits: You may claim an income tax charitable deduction in the year you make the gift. Let us know your date of birth (and that of any other beneficiary) and the amount you’re considering,** and we’ll tell you what your deduction and payments would be.

How payments are taxed: A large part of each annuity payment is tax free. The tax-free amount is fixed at the outset and remains constant for your life expectancy. ***

The Deferred Payment Gift Annuity
Some of our friends have sufficient income now, but are concerned about retirement income. They would also like to reduce their current income taxes. A deferred gift annuity is often the answer. You make a gift now, and we pay you (and another beneficiary, if you wish) life income starting at retirement or any other date you specify.

Fixed income: The amount you receive each year depends on the amount transferred, your age now, and your age when the payments are to start.

For example: Miss. Baker, age 50, transfers $10,000 to the Red Cross for a deferred payment gift annuity with payments to start at age 65. Her rate of return will be 15.1%, and she will receive $1,510 per year of her life ($10,000 x 15.1%).

Tax savings: There’s a charitable deduction now when you may be in a higher tax bracket than you will be after retirement. And part of each payment you receive will be tax free for the period of your life expectancy. As with the “immediate” gift annuity, there are favorable capital gain implications when you fund your deferred payment gift annuity with appreciated assets. We’d be glad to provide an example of the tax benefits of your contemplated gifts.

The Pooled-Income Fund
Your gift of money, marketable securities, or both to the American Red Cross’s pooled-income fund is invested together with similar gifts from other supporters. Each year you receive your share (taxable as ordinary income) of the fund’s earnings.

For example: Mr. Simon’s $10,000 life-income gift is invested in our pooled income fund. The fund’s net income is 6% this year, so he receives $600—his share of the annual earnings. Each year, Mr. Simon’s payment will reflect any increase or decrease in the fund’s net income.

Income tax benefits: A sizable charitable deduction may be claimed on this year’s federal income tax return. Tell us your birth date and the amount of your contemplated gift, and we will tell you the exact amount of the charitable deduction.

A pooled income fund gift also allows you to shift appreciated investments without paying tax on the gain. And the fund pays no tax if it sells securities held more than one year.

Income for another: Your gift can provide life income for a survivor or another beneficiary, such as a spouse or parent.

The Charitable Remainder Unitrust
This life-income plan is created by transferring assets to a trust that pays you (and another beneficiary, if you wish) income for life. A bank or trusted adviser can serve as trustee or, in some cases, you can be the trustee.

Your income: Your annual payments are determined by multiplying a fixed percentage (that you select at the outset) by the fair market value of the trust assets, as revalued each year.

For example: Mrs. Davidson’s unitrust provides that she is to receive 6% of the fair market value of the trust assets each year. She funds her trust with $100,000 so she receives $6,000 the first year. One year later, the trust assets are worth $120,000 so she is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, she will receive $6,600 ($110,000 x 6%). And so on each year. Capital gains or principal can make up any shortfall. If trust income exceeds the stated percentage, the excess is added to the unitrust assets and invested for her benefit.

Tax savings: You may claim a sizable income tax charitable deduction in the year you create the unitrust. Your deduction depends on your age (and that of any other beneficiary), the percentage to be paid, and the amount placed on the trust.

Taxation of unitrust payments: Depending on investments, part of each payment may be treated as capital gain; part may even be treated as a tax-free return of principal.

Additional advantages: No capital gains are incurred when you transfer appreciated property to fund a unitrust. And the gain isn’t taxed if the appreciated property is sold for reinvestment (except in tax exempts). You get the same estate tax savings**** as for charitable gifts by will while reducing probate costs.

The Charitable Remainder Annuity Trust
This plan is similar to the unitrust, but it pays you a fixed-dollar amount annually for life. You can also provide income for another and then to a survivor.

For example: Miss Andrews transfers $100,000 to a separately invested annuity trust that will provide her with life-income payments. She elects to receive $7,000 annually (quarterly payments of $1,750). If trust income isn’t sufficient to make the payments in any year, the trustee will use capital gains or principal to make the payments. If income exceeds $7,000, the excess is reinvested in the trust.

Income tax savings: You may claim a sizable charitable deduction in the year you create the trust.

How your income is taxed: As with the unitrust, part of each payment can be treated as capital gain, depending on investments; part can even be treated as a tax-free return of principal.

Additional advantages: No capital gains are incurred when you transfer appreciated property to fund an annuity trust. And the gain isn’t taxed if the appreciated property is sold for reinvestment (except in tax exempts). The estate tax savings (see footnote *) are the same as for charitable gifts by will and reduce probate costs.

The Charitable Lead Trust
Individuals with very large estates can use a charitable lead trust to benefit the American Red cross and pass principal to family members with little or no tax penalty. It works like this: You transfer assets to a trust that provides payments to the Red Cross for a term of years. Then the trust principal goes to your children, grandchildren, or others free of—or at greatly reduced—federal gift and estate taxes. *****

Gifts of Life Insurance
Some of our supporters no longer need life insurance purchased years ago to provide for children or other family members. If that’s your situation, please consider donating the policy to the American Red Cross. You may claim a charitable deduction for approximately the policy’s cash surrender value, and the proceeds are completely removed from your estate.

Appreciated Securities and Real Estate
Donors who contribute appreciated securities or un-mortgaged real property held for more than one year (long term) get a double income tax benefit:

• A deduction for the asset’s full fair market value instead of the lower cost basis.
• Complete avoidance of capital gains tax on the asset’s appreciation.

For example: Mrs. Emmet contributes stock to the Red Cross that cost her $5,000 several years ago but is now worth $15,000. She gets a $15,000 charitable deduction and completely avoids tax on the $10,000 appreciation.

For gifts of appreciated securities or un-mortgaged real estate held for one year or less (short term), the charitable deduction is limited to the property’s cost basis. There is no tax on the appreciation.

*A 2001 tax law increases the estate tax exemption and slightly reduces the rates—phased in between 2002 and 2009. The estate tax is repealed for the year 2010. Then in 2011 the estate tax reverts to the law that existed before the 2001 tax act unless a future Congress makes the one-year repeal permanent.

**If you fund a charitable gift annuity with appreciated securities there is capital gain tax on a portion of the value of the securities. The gain is smaller than it would be if you sold the securities, and it can be spread over your life expectancy instead of reported in one year.

***The entire annuity payment becomes taxable if the annuitant outlives his/her life expectancy. If the annuitant dies before than, any un-recovered investment in the annuity is deductible on the annuitant’s last income tax return.

****A 2001 tax law increases the estate tax exemption and slightly reduces the rates—phased in between 2002 and 2009. The estate tax is repealed for the year 2010. Then in 2011 the estate tax reverts to the law that existed before the 2001 tax act unless a future Congress makes the one-year repeal permanent.

*****A generation-skipping tax (GST) is imposed on large transfers to grandchildren and others who are more than one generation younger than you. We’ll be happy to discuss the GST rules with you and your adviser. The generation-skipping tax is repealed for the year 2010 but is reinstated starting 2011 unless a future Congress makes the repeal permanent.