Financial Planner. Planning Tips for 2013 LOOK INSIDE. for Year-End Tax-Saving Strategies! Gift planning newsletter from Cornell University Fall 2013

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1 Financial Planner Gift planning newsletter from Cornell University Fall 2013 Planning Tips for 2013 The season of giving is approaching, and with it the joy of giving back. As you will read in this issue, Bob Brunet 41 spent a lifetime giving back. Giving wisely also involves careful tax planning, and this issue of Financial Planner also contains a valuable offer for how you can chart your course to year-end tax savings. Please request our complimentary guide, the 2013 Year-End Giving Kit What You Need to Know and Do to Reduce Taxes, which provides comprehensive information and worksheets for you to complete the task. Your support of Cornell has always been an inspiration to us. We welcome the opportunity to assist in your planning. Sincerely, Chip, Ian, Justine, Jason, Carrie, Julie LOOK INSIDE for Year-End Tax-Saving Strategies! alumni.cornell.giftplans.org

2 Taxes: You Can Plan or You Can Pay Year-end tax planning is a lot like planning a trip: The first step in determining where you want to go is to determine where you are. Once you get your bearings on several key factors, you then can act to take advantage of opportunities your position presents. Those of you with philanthropic goals are likely to find that charitable planning offers some of the most flexible and creative ways to optimize your tax pictures. PROBLEM I can t plan properly if I don t know my tax bracket for the year. Many of the benefits you can experience from good year-end planning flow from your marginal federal income-tax bracket and knowing which one is yours may not be as simple as it seems because it is keyed to your taxable income, not just your salary. Your bracket determines how much tax you will pay on your next dollar earned and also determines how much you will save on the first dollar of the charitable income-tax deduction generated by your gift. Tax Brackets for 2013 This year, identifying your bracket is even more important for charitable planning purposes because the new tax law, the American Taxpayer Relief Act of 2012 (ATRA), has added a new, higher bracket to the six existing under the prior law. Married Filing Jointly 10%... $0-$17,850 15%... $17,851-$72,500 25%... $72,501-$146,400 28%... $146,401-$223,050 33%... $223,051-$398,350 35%... $398,351-$450, %... >$450,000 Gregory finds himself in the highest federal income-tax bracket this year, GIFT SPOTLIGHT: 39.6%. He is looking for ways to reduce his taxes. Each year Gregory typically gives $10,000 to Cornell and other charities. He is glad to see one advantage of being in a higher tax bracket: This year his gifts will save him $3,960 in federal income tax, whereas the same gift amount saved him $3,500 last year. The cost of his gift this year is $6,040: last year it was $6,500. SOLUTION Finding where you fall on the tax scale will enable you to assess the costs and benefits of charitable-planning strategies. Our complimentary followup guide, the 2013 Year-End Giving Kit What You Need to Know and Do to Reduce Taxes, helps you pin down these crucial numbers with a four-step worksheet: 1. Figuring your adjusted gross income (based on eight different elements). 2. Estimating your itemized deductions or standard deduction. 3. Estimating your personal exemptions. 4. Estimating your taxable income. This planning kit also presents a number of attractive opportunities you will want to consider for your situation. Be sure to return the attached reply card to receive your copy. 2

3 PROBLEM I would like to make a substantial gift this year, but I m concerned about my annual income. While every person s definition of substantial is different, often the decision of whether to make a substantial gift involves the ability to give up an asset to fund the gift. SOLUTION Creative year-end gift planning will allow you to make a gift of one of your assets and at the same time create a new source of annual income a "life income" gift. One of the oldest and most popular of these life-income gifts is the charitable gift annuity. In return for your contribution to Cornell, we commit to pay you or the one or two persons you designate a specified amount annually for as long as you or those you designate live. A well-planned and strategically funded charitable gift annuity can offer a tax-advantaged way to transform highly appreciated but low-yielding stock into an important source of current income without the full brunt of capital-gain taxation. Jane and Tom, both 75, have long been interested in making a GIFT SPOTLIGHT: significant gift to Cornell but have needed as much income as possible from their assets. After discussing their goals with their advisors and a member of our staff, Jane and Tom decided to contribute stock they bought years ago for $40,000 now worth $100,000 for a charitable gift annuity that will pay them $5,000 each year as long as either of them lives. Because the stock pays no dividends, the entire annuity payment is net additional cash flow. Even though they have $60,000 of gain in their stock, they will avoid tax on more than $22,000 and will recognize only about $38,000 of that gain and they can spread that over Income from a $100,000 gift annuity One Life Two Lives Age Rate Income Ages Rate Income % $4, % $4, % $5, % $4, % $5, % $5, % $6, % $5,700 *Acceptance of gift annuity contract dependent on the age(s) of annuitant(s) and the applicable IRS discount rate. the balance of their life expectancies at approximately $2,300 per year. Even better, more than $1,500 of this annual income will be tax-free over their life expectancies and they can take a deduction this year for $36,900. 3

4 PROBLEM I want to benefit from appreciation but not pay high taxes. The stock market has hit record levels in 2013, and you may find yourself in the happy position of holding stock that has gone up significantly. But investment gain can be a two-edged sword: If you sell at a profit, your gain is realized and taxable. Depending on your overall income, you could find yourself subject to higher tax on gain in 2013 due to new provisions in the law. One of the most important things you can do in your year-end tax-planning review is to determine exactly where you stand with investments such as stocks, bonds, and real estate. You need to know how much these investments have gone up or down from the purchase price. In 2013, Marie gives stock worth $10,000 to Cornell. GIFT SPOTLIGHT: She bought it three years ago for $4,000. Marie is able to claim a charitable income-tax deduction of $10,000 and she will not have to pay the capital-gain tax on her $6,000 of gain that would have been due had she sold the stock. SOLUTION Our planning kit will lead you through the process of determining the gain and loss on your investments and the impact of tax changes. It will also show you how to choose the best plan for funding your charitable giving and possibly avoid some or all of that capitalgain tax. If you choose to use long-term appreciated investments to make your gift to Cornell, not only will you receive an income-tax deduction but you will also avoid paying significant tax on your gain. Control Your 2013 Tax Outcome Request our free planning guide, the 2013 Year-End Giving Kit What You Need to Know and Do to Reduce Taxes. 1. Get a copy in the mail by returning the attached reply card. 2. Call us to request it at (800) us to request it at gift_planning@cornell.edu. 4. Request it online at alumni.cornell.giftplans.org/freebooklet YEAR-END GIVING KIT What You Need to Know and Do to Reduce Taxes The information contained herein is offered for general informational and educational purposes. The figures cited in the examples and illustrations are accurate at the time of writing and are based on federal law as well as IRS discount rates that change monthly. State law may affect the results illustrated. You should seek the advice of an attorney for applicability to your own situation. Copyright by Pentera, Inc. All rights reserved. 4

5 Robert Bob Brunet 41: A Wealth of Spirit Through a lifetime of gifts and warm words of encouragement, Robert Bob Brunet 41 stood as an uplifting champion for Cornell. On March 16, 2012, the 93-year-old passed away quietly, but his devotion for Cornell resounded in one final hurrah: a bequest benefiting athletics, the College of Engineering, and other areas of the university he most cared about. In 2005, for his exceptional devotion and generosity to Cornell, Bob Brunet 41 was recognized as a Foremost Benefactor, the highest honor bestowed by the university upon its supporters. Brunet, right, receives a statue of Ezra Cornell from Track and Field Coach Lou Duesing. Year after year, Brunet had helped to meet the fundraising goals of several teams, including women s teams in track and field, ice hockey, and softball. Brunet s prior charitable gift annuity funded the Robert D. Bob Brunet McMullen Scholarship, and his bequest has helped fund the ongoing softball field renovation. [Brunet s gifts] always raised my spirits and the spirits of the coaching staff and their students, says Andy Noel, the Meakem*Smith Director of Athletics and Physical Education. Apart from Brunet s tremendous financial support, his ever-enthusiastic correspondences on Class of 1941 letterhead included praise such as Keep up your good work! and Full speed ahead! To his Cornell family, Brunet imparted a lasting legacy of spirited generosity that will impact generations to come. } Read Bob s full story at alumni.cornell.giftplans.org/brunet. 5

6 Financial Planner Gift planning newsletter from Cornell University Fall 2013 REQUEST YOUR FREE 2013 YEAR-END GIVING KIT GET THE WORKSHEETS YOU NEED TO FIND OUT YOUR: 2013 YEAR-END GIVING KIT What You Need to Know and Do to Reduce Taxes Federal income-tax bracket. Unrealized capital gain. Required minimum distribution from your retirement plan(s). Estate- and gift-tax liability. The 2013 Year-End Giving Kit What You Need to Know and Do to Reduce Taxes also explains how charitable planning can help reduce your taxes while fulfilling your philanthropic goals. To order the kit, simply: Return the attached reply card. Call (800) Request it online at alumni.cornell.giftplans.org/freebooklet. INSIDE THIS ISSUE FALL 2013 Taxes: You Can Plan or You Can Pay... 2 I can t plan properly if I don t know my tax bracket for the year I would like to make a substantial gift this year, but I m concerned about my annual income I want to benefit from appreciation but not pay high taxes Robert Bob Brunet 41: A Wealth of Spirit... 5 Office of Trusts, Estates, and Gift Planning 130 East Seneca Street, Suite 400 Ithaca, NY Nonprofit Org. U.S. Postage PAID Cornell University