f 2 CHARITABLE R EMEMBER ESTATE PLANNING & TAX TIPS

F ALL SS TTANFORDANFORD 2005

Creating a Legacy

Stanford women founded the first boating club at the university in 1896. A team paddles across Lake Lagunita, circa 1939.]

UNITRUSTS PROVIDE WIN-WINS FOR STANFORD AND DONORS “ think it’s one of the most satisfying choices I’ve ever tor-turned-actress, the income she receives allows her I made,” says Doreen Foo Croft, ’49, of her decision comfortably to pursue her new artistic passion without to create a Charitable Remainder Unitrust at Stanford. financial worry. Like other donors, Doreen wanted to help Stanford. A unitrust pays income at an agreed rate to a When she learned about unitrusts and how they work donor (or other designated beneficiary or beneficiaries) —providing regular income for her now and an eventual for life or a term of years, based on the growth of the to Stanford—she realized this was an ideal opportu- unitrust assets over time. Once a unitrust matures, nity to achieve her personal financial goals as well as Stanford uses the remaining assets to support any area her goal of supporting the university in a significant way. of the university that the donor designates. Unitrusts Doreen sees several advantages to creating a unitrust have been used to endow undergraduate scholarships, at Stanford. She received a charitable deduction on her provide unrestricted support to the university, fund income tax at the time she established her unitrust. She research and public service opportunities, and enhance was able to create her unitrust with a gift of rental many other programs at Stanford. property that she no longer wanted to manage, but on Doreen, who spent her career working with which she would have had to pay a hefty capital gains young children and training early childhood educa- tax had she sold it herself. And her unitrust, managed tors, used her unitrust to endow an undergraduate by the experts at the Stanford Management Company, scholarship for students who plan to work with young produces higher monthly payments than she received children. As an added benefit, the present value of when she was renting the property. As a retired educa- Doreen’s gift was matched by The Campaign for

❖ REMEMBER STANFORD CHARITABLE ESTATE PLANNING

Doreen and her two daughters, who are both MAXIMUM IMPACT In addition to his personal motivations, Bob values Stanford graduates, are proud of the scholarship. Cynthia Hockey, ’60, says “I would love for other the financial soundness of the unitrust. “It seemed like a “I’m so happy to know that the money will go on people to realize that unitrusts are a marvelous way to reasonable thing to do,” being used for a good purpose forever,” she adds. make a substantial gift when you can’t do more on a reflects Bob. “We wanted to yearly basis.” make a long term commit- SUPPORTING LOVED ONES She and her husband Bob were aware of unitrusts ment to Stanford. We enjoy Rachford Harris, ’35, is a veteran unitrust donor to for several years when they decided to create one at the income, and Stanford Stanford. He has created four unitrusts over the years, Stanford. They are both dedicated volunteers—Bob is will get the whole thing customizing each to support multiple interests at Stanford a member of the board of overseers of the Hoover eventually.” This is a par- while providing a secure income for his family. Institution and Cynthia participates on boards for the ticularly beneficial type of Doreen and her roommate, Mary Jan, Doreen today “I spent some of the circa 1946. Department of Athletics and the Haas Center for Public gift for a university, he adds, very happiest days of my I spent some of Service. In 1998 they established a unitrust to benefit because Stanford will still life at Stanford,” says Undergraduate Education (CUE). As a result, her the very happiest both Hoover and athletics. be around to make good use Rach, “and I wanted to endowed fund was created and the scholarship could be Bob, who did not attend Stanford, had an additional of their unitrust when it help the university as much days of my life awarded immediately. Each year she hears from a current motive for arranging their gift. Their unitrust was a special matures. “Universities have Cynthia and Bob Hockey as I could.” student who is benefiting from her gift and advancing the at Stanford, and way for him to honor Cynthia and Stanford’s importance a long view of the future,” he says. “You know that what Rach and his late work so dear to her. in her life. you do will mean something some day.” wife, Carlota, initially I wanted to help Looking back at the process of creating her unitrust, Cynthia says she was excited and touched when Today, the couple looks ahead to the impact their gift established two unitrusts Doreen says it was very simple. She worked closely with the university as Bob asked if she would like to benefit Stanford with a will have. “When you want to do something substantial to benefit the School of Steve Player, a member of Stanford’s planned giving unitrust. She had wanted to give a significant gift to the for an institution you believe in, and you know your gift Medicine—one to endow much as I could. staff, to design her unitrust. “We did it in a day,” she university, and creating a unitrust allowed the couple will be well taken care of after you’re gone, it’s a wonder- a professorship in the says, “and Stanford is doing better with the money than – Rachford Harris to do so in a way that fit best with their financial plans. ful feeling,” says Cynthia. v Department of if I had invested it.” Nephrology, and one to support medical research in kidney disorders. These recognize the expert medical care given to one of their daughters when she was treated at Stanford Hospital for kidney disease. RECENT ESTATE GIFTS CLYDE W. NIELSEN, a friend of the university, made a specific bequest of $10,000 to Stanford Rach has been impressed with Stanford’s manage- Stanford is grateful to the generous friends and University Medical Center for research on alumni who remembered the university in their ment of the unitrusts and began to think of them as a way leukemia and related cancers. estate plans. These gifts make a difference to provide for his daughters. “I think that the institution across the university. A sampling of recent gifts LAWRENCE G. OLINGER, A.M. ’56, education, invests its own funds wisely and has good guidance,” he received from estates is described below. willed Stanford a specific gift of two-thirds interest in real property to endow scholarships for under- says, “so I thought that would be good for my daughters.” REGINA BEAUMONT, a friend of the university, graduates majoring in humanities. The gift left the residue of her estate to the Stanford To that end, last year Rach worked with the Office totaled $850,000. Libraries. The gift provides $7,500 in expend- of Planned Giving to set up two additional unitrusts. able funds. PHOEBE SEAGRAVE, ’33, M.B.A. ’35, gave 90 percent of the residue of her estate, over Each names one of his daughters as the income beneficiary. TIMOTHY E. COLVIN, ’25, made a specific $375,000, to endow the Phoebe Seagrave When his daughters pass on, these unitrusts will provide bequest of $1,000 to the School of Engineering. Fellowship for students at the Graduate School MARY E. CRUMMEY, ’42, willed an unrestricted endowment for a University Fellow in Undergraduate of Business. gift of more than $60,000 to the university. Education and undergraduate scholarships. Rach has RICHARD S. J. TAM, ’38, designated a specific WILLIAM L. ENDERUD, a friend of the university, remained connected with undergraduate life on campus, bequest of $100,000 to Stanford for unrestricted left a residual gift totaling over $324,000 to the purposes. particularly now that his grandson, Tristan Harris, ’06, School of Earth Sciences through his charitable OSWALD G. VILLARD, PH.D. ’49, gifted a is a student. Today, he does what he can to ensure that remainder unitrust. His wife, VIVIAN ENDERUD, portion of the residue of his trust estate, more also left one-third of the residue of her estate, others are able to attend Stanford and benefit from the than $3,000,000, in unrestricted support for totaling approximately $107,000, to the School university as much as he has. the university. Stanford has used the bequest to of Earth Sciences. create the Oswald G. Villard University Fellow in The boathouse on Lake Lagunita as it appeared in April “I got a lot out of Stanford,” he says, “but it wasn’t JESSE FELDMAN, ’37, L.L.B. ’40, gave a Undergraduate Education in honor Professor 1944. These photos were taken by Ray Alden, ’44. Today, all from the books—it was from socializing with all kinds specific gift of $100,000 to the School of Stanford boaters launch their crafts at the Stanford Villard, a well-loved member of the Electrical University Rowing and Sailing Center on the shores of Law for general support. of people from all walks of life, and I think it placed me Engineering faculty for five decades. Redwood City, California.

Rach (center) with Jim Mullin (left) and Jim Wooley (right), all members of the Class of 35, in good stead.” on their way back to Stanford after Christmas break, January 3, 1932. Rach and Carlota.

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2 3 REMEMBER STANFORD CHARITABLE ESTATE PLANNING

GOOD COUNSEL low yielding securities and would like the full value matched in this way have the joy of seeing their gifts at of those securities available to generate an income. work during their lifetimes, enabling Stanford to establish BY KARA D. WERTHEIMER • Donors want to increase their future retirement income and award endowed professorships, scholarships and ASSOCIATE DIRECTOR OF and have “maxed out” the amount they can contribute other programmatic support in their names and for the PLANNED GIVING to an IRA and/or other tax-deferred retirement plans. purposes they have designated. or this third issue of Remember Kara D.Wertheimer • Donors wish to ensure that another individual (e.g., Stanford’s Planned Giving office is here to help by Stanford, we have chosen to focus on F a child, spouse, or friend) receives a steady income providing information about how charitable remainder a life income gift known as a charitable remainder unitrust. stream throughout his or her life, and upon death, that unitrusts work and how they compare to other planning Many of Stanford’s alumni and friends have found uni- the remaining assets benefit Stanford. Some choose to options. We recognize that these trusts are not for every- trusts to be beneficial for themselves and Stanford. This accomplish this goal by including a charitable one, but we hope that all our readers will benefit from a type of arrangement allows donors to provide for a future remainder unitrust in their wills or revocable trusts. better understanding of this option and an appreciation gift for Stanford while receiving a long-term income This way, the unitrust is created at the donor’s death. for when and why one might want to consider this type stream, and obtain some tax benefits at the same time. of arrangement. If you are interested in learning more, Choosing a trustee is an important decision in A charitable remainder unitrust is established when give us a call—we are waiting to hear from you! v arranging a charitable remainder unitrust. The trust a donor transfers an asset, often appreciated stock or real Students in step at the “Pajamarino” pajama party in the 1940s. creator can choose to be his or her own trustee, or he/she property, to a trustee. If the asset contributed is anything can select another person or entity, such as Stanford, to other than cash, the trustee usually sells it and reinvests the be trustee. Stanford is currently trustee of more than 400 proceeds. The reinvested proceeds and their investment unitrusts that make payments to over 470 beneficiaries returns produce an income stream, which is paid either each year. Stanford is generally happy to serve as trustee ASK THE STANFORD adopt the same philosophy, but adapt it for the RS: The IRS is considering allowing Stanford to the donor or to someone the donor designates as a MANAGEMENT COMPANY trust program. That means we invest, to the to invest its charitable trusts in its endow- so long as unitrusts meet certain requirements, including beneficiary. The annual payout varies based on the per- extent possible, in all the marketable securities ment. What would be the implications of a As managing director of the following: that are in the endowment: primarily public equity, positive ruling? formance of the trust’s assets from year to year. A donor Stanford Management 1. The trust must have an initial value of at least publicly traded real estate investment trusts TE: It would mean further diversification and is also entitled to a charitable income tax deduction for Company’s separate (REITs), and fixed income assets. We use the growth potential for the trusts, because about part of the value of the assets that fund the trust. $200,000. investments division, Tyler same investment managers, and if we are doing half of the endowment’s assets are invested in Edelstein oversees and Charitable remainder unitrusts are tax-exempt. 2. Most, and preferably all, of the trust remainder something strategic for the endowment, we try non-marketable securities, or what we call alter- designs investment strate- must be irrevocably designated for Stanford, either to adapt that for the trust program as well. native assets. This includes private equity like Thus, there is an added benefit to funding them with gies for Stanford’s charita- Tyler Edelstein leveraged buyouts or venture capital investments, appreciated assets. If a donor were to sell an appreciated unrestricted or for a particular purpose. ble trust program. She RS: What value does SMC bring to trust direct real estate investment development pro- asset, he or she will owe related capital gains tax and explains SMC’s role in helping to ensure that investing? If Stanford serves as trustee, the trust assets are jects, absolute return investments in arbitrage unitrusts achieve their maximum potential for TE: SMC provides access to top-tier investment only the after-tax amount is available for reinvestment invested by the Stanford Management Company, which hedge funds, and some direct natural resources donors and for Stanford. managers who take an active asset allocation and diversification. Instead, if the asset is used to create a manages all the financial assets of the University, including approach. For marketable securities portfolios investments. To date, we haven’t been able to RS: What is SMC’s overall investment charitable remainder unitrust, the trustee pays no capital its endowment. The trust assets are invested in a diversi- we have highly diversified investments across include those investments in the philosophy? gains tax upon sale, so the full amount is available to be emerging markets, REITs, and several different program due to tax issues. Should we get a go fied portfolio covering a number of different asset classes. TE: SMC manages all the financial assets for the kinds of fixed income assets on a global basis ahead from the IRS, it will mean that the whole reinvested by the trustee. The trustee makes payments to (Read more about the role of the Stanford Management university. This does not include the lands on as well as a range of domestic equity. We screen compliment of endowment investments could be the individual beneficiaries from the trust assets, and any campus, but it does include nearly every other Company and its investment philosophy for charitable our managers very carefully, and we have the available for the trusts. financial or investment asset. All together, that earnings that are not paid out remain in the trust, where remainder unitrusts on page 5.) ability to shift around on a tactical basis where is a total of about $13 billion. Our investment they grow tax-free. When creating a charitable remainder unitrust, we see less expensive valuations. For instance, 1 Payout represents the amount that is made available each philosophy is to think ahead for Stanford for the year for expenditure per a spending formula adopted by Stanford donors establish charitable remainder right now we think there is more value to be had donors are providing for the continued strength of next 100 years. It assumes the endowment is Stanford’s Board of Trustees. It is not equal to total investment in international developed stocks, especially in unitrusts for many strategic reasons. Here are a few that going to be here into perpetuity, so we take a return, which was 15.1% in the most recent fiscal year. Stanford. Although these are gifts that Stanford will not Europe and Canada, as opposed to the United very long-term view and are highly diversified the attorneys in Stanford’s Office of Planned Giving see receive for many years, they are recognized as current States. We like the long-term growth of the across a number of different asset classes. Our most frequently: gifts (based on a present value calculation) and are emerging markets, especially Southeast Asia. goal is to grow the real value of the endowment • Donors have rental property that they no longer acknowledged, for example, as part of reunion cam- and to enable a payout rate of about 5 percent STANDARD TRUST PORTFOLIOS (% PUBLIC EQUITY/% FIXED INCOME) want to manage, and they are concerned about the paigns. In recent years, a number of unitrusts have per year1. 15 YEARS 10 YEARS 5 YEARS 3 YEARS 1 YEARS capital gains taxes they would owe if they sold the earned matching funds through Stanford’s Campaign for RS: How is this philosophy implemented in the Capital Appreciation Objective (85/5) 10.6% 10.7% 7.5% 9.2% 7.5% property themselves. Undergraduate Education, which runs through December charitable trust program? Balanced Objective (65/35) 10.3% 10.3% 7.5% 8.6% 6.1% • Donors want to diversify their assets and reduce 2005. Thus, although gifts through unitrusts will not be TE: People should know that we put a lot of thought and energy into how we invest the trusts. Income Objective (45/55) 9.9% 9.8% 7.7% 8.5% 5.0% available to Stanford right away, matching funds are able their holdings in certain highly appreciated and/or We take the best ideas from the endowment and to benefit the university today. Donors whose trusts are

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4 5 REMEMBER STANFORD CHARITABLE ESTATE PLANNING

REMEMBERING STANFORD Don Winbigler devoted himself to Stanford for near- “It gave him a great deal of pleasure in his last years ly 60 years and helped nurture the university’s growth to to be able to make a substantial gift to support under- Donald Winbigler retired from Stanford in 1975. an internationally recognized institution. He served with graduate scholarships. He talked of it often to me, and I But somehow he never managed to leave the H notable figures in Stanford’s history, including Wallace know it made him happy,” says Myles. Farm. Fondly remembered by decades of undergraduates, Sterling, Richard Lyman, and Fred Glover, and was instru- Do you have a favorite memory, an amusing or Winbigler served for five years as university registrar then mental in increasing the undergraduate and graduate stu- touching story, or a photo of yourself from your Stanford as dean of students from 1950 to 1967. When he moved dent bodies, relocating the School of Medicine from San days? Remember Stanford would love to know about it on to become academic secretary at the university, he Francisco to Palo Alto, and establishing the Overseas and have the opportunity to share it with our readers. You sorely missed the students he spent so much time serving. Studies Program. are invited to send your stories and digital photos to us “He had a very optimistic view of people, which “He knew many young people passing through through e-mail to Trisha at [email protected]. kept his sense of humor going under most circumstances,” Stanford and watched them go on to great successes in You may also send them through regular mail to recalls his son Myles, ’63, M.S. ’65. Myles remembers life,” says Myles. Remember Stanford, Office of Planned Giving, Frances his father telling “all kinds of stories about students, Ever a supporter of Stanford students, Don C. Arrillaga Alumni Center, 326 Galvez Street, Stanford, their foibles, their strengths, and their triumphs. He was Winbigler’s dedication to undergraduates will continue in CA 94305. We will make every effort to return photos. v probably fondest of the times from the 1950’s. He had the form of a scholarship, which he endowed through a most of his interactions with students during that period.” H. Donald Winbigler circa 1949. charitable remainder unitrust.

The Stanford Charitable Remainder Unitrust

Here’s how it works: YEAR VALUE OF TRUST ASSETS PAYOUT ANNUAL DISTRIBUTION • Here are two good Web resources available AT BEGINNING OF YEAR from Stanford to aid in your charitable 1 You transfer cash, securities, real estate, or GIFT TO STANFORD other gift assets to Stanford. The university acts 1 $200,000 x 5% $10,000 gift planning: 1 as trustee of your tax-exempt unitrust. 2 $206,000 x 5%$10,300 For help calculating tax deductions for life income gifts, including charitable remainder 2 You receive an income tax deduction. If you 3 $220,000 x 5%$11,000 create your unitrust by transferring appreciated unitrusts, use Stanford’s planned giving 4 $210,000 x 5%$10,500 calculator, which may be found at CHARITABLE assets such as stock or real estate, you save REMAINDER 3 capital gains tax when the property is sold. and so on... http://givingtostanford.stanford.edu/opps/ UNITRUST EVENTUAL bequests. DONOR During its term, the trust pays income to you or REMAINDER TO STANFORD to anyone else you name as a beneficiary. Your Typically, part of your unitrust distribution is may be appropriate for a donor who wishes For help in deciding how much to give annual distribution will be a specified percentage taxed as ordinary income and part as capital to preserve the trust principal and/or who to , go to the “NewTitheCalc” link at (chosen by you at the time you establish the uni- gain income. Any portion of your distribution wishes to maximize current growth in trust http://givingtostanford.stanford.edu/opps/ 2 trust) of the value of the trust assets measured paid out of trust principal is tax-free. assets. By minimizing the initial payouts, the bequests/bequests and select the INCOME TAX DEDUCTION on the same date each year. Most unitrusts trust has the potential to generate greater PrudentPal Planner. This tool is provided by Chart Courtesy of PG Calc Inc. 3 When the last beneficiary dies, the unitrust AND VARIABLE ANNUAL INCOME administered by Stanford are valued annually on New Tithing Group, an organization that ends and its remaining assets are then available income at a later date. January 1. The percentage agreed upon must helps individuals incorporate in to Stanford to use in the manner you designate The “flip unitrust” initially utilizes the “net be at least 5 percent and usually does not their lives. The New Tithing Group offers a (e.g., student financial aid, a particular school or income” payout mechanism described above; exceed 7 percent. number of educational resources. field of interest, or unrestricted support for the upon the occurrence of a triggering event, it Your annual payout will vary based on the university’s most critical needs). converts to the standard unitrust percentage • Contact the Office of Planned Giving for fair market value of the assets revalued each amount. The “flip unitrust” is often employed more information: phone toll-free at year. The distribution is paid out of trust income Some additional points: when illiquid assets (such as real estate or (800) 227-8977, ext. 5-4358, or e-mail us STANFORD’S OFFICE OF JONRIE DÁVILA, ’81 and, to the extent necessary, from gain on the • There are two other variations on the standard Associate Director of Planned Giving at [email protected]. closely held stock) are used to fund the trust, PLANNED GIVING STAFF (650) 725-4363, [email protected] sale of trust assets or the trust principal itself. unitrust payout mechanism described above. or when a donor wishes to create a trust that CHRIS YATES, ’81 For example, if you transfer securities worth STEPHEN W. PLAYER, ’63 The “net income unitrust” pays beneficiaries will be invested for growth during its initial Director of Planned Giving Associate Director of Planned Giving $200,000 into a 5 percent unitrust, your income (650) 736-0409, [email protected] the lesser of the unitrust percentage amount, years, and then “flip” to produce the standard (650) 725-5509, [email protected] might look like this: as described above, or the unitrust’s net payout at a time when the beneficiary will CAROL KERSTEN, J.D. ’82 KARA D. WERTHEIMER income for the year. This type of unitrust Director of Planned Giving for Medical Development Associate Director of Planned Giving need more income, e.g., at retirement. (650) 725-5524, [email protected] (650) 725-5565, [email protected]

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6 7 REMEMBER STANFORD

TAX TIPS FOUNDING GRANT SOCIETY DESIGN: MADELEINE CORSON DESIGN, SAN FRANCISCO New in 2005— of motor vehicles, e know their university, but who were boats, and airplanes In general, if you donate to charity a motor vehicle, boat, or airplane that WLeland and Jane Stanford? Founding is valued at more than $500 and the charitable Grant Society members who attended the organization sells the item donated, your deduc- “Stanford Gatherings” on November 30, tion on Schedule A will be limited to the gross 2004, March 10, and March 11, 2005 learned proceeds from the sale. about the visionary family who founded IRA contribution limits The contribution Doug Brown and Burt McMurtry at the Founding Grant Society luncheon on May 3. limit to a traditional or Roth IRA for 2005 is Stanford as told by University Archivist increased to $4,000 ($4,500 if you are 50 or Maggie Kimball in her talk “The Life and Legacy of the Stanford Family.” older). However, if your employer provides a The events took place in Livermore, Pasadena, and Santa Barbara. retirement plan, the contribution amount can be Additional “Stanford Gatherings” in Sacramento and Fresno are planned further limited for higher income taxpayers. In for November, and in the Pacific Northwest in early 2006. that case, the contribution deduction phaseout has increased for 2005 so that your deduction FGS members again convened for the Society’s annual luncheon at for contributions to a traditional IRA will be Stanford’s Frances C. Arrillaga Alumni Center on May 3. One hundred reduced (or phased out) if your modified adjusted eighty-five heard remarks by Founding Grant Society Chair Doug Brown, gross income (AGI) is: ’59, M.B.A. ’61, Provost John Etchemendy, Ph.D. ’82, and Head Coach of • More than $70,000 but less than $80,000 Women’s Swimming, Richard Quick, who is retiring this year after 18 years for a married couple filing a joint return or a qualifying widow(er), of service to the university. Attendees were also treated to an a cappella per- • More than $50,000 but less than $60,000 formance by Talisman, Stanford’s renowned student vocal ensemble. for a single individual or head of household, or The Founding Grant Society recognizes and • Less than $10,000 for a married individual honors those individuals whose estate gifts will pro- filing a separate return. vide future support for Stanford University, includ- Reduced deductions for high income ing its medical center and the Hoover Institution. taxpayers—2005 level For 2005, your total For more information about the Founding Grant itemized deductions may be reduced if your AGI is more than $145,950 ($72,975 if married Society and its events, contact the Office of Planned filing separately). Giving by phone at (800) 227-8977, ext. 5-4358, or

Upper limit for Social Security Withholding by e-mail at [email protected]. If you for 2005 Employers must withhold social The Founding Grant Society seal think you qualify for membership and would like to is taken from the cover of the security tax at a rate of 6.2 percent on the first Founding Grant. The letters L, S, joining, please complete the attached application and $90,000 of each employee’s wages. There is J, and U are intertwined in an v no limit on the amount of wages subject to the elaborate monogram. return it to us. Medicare tax of 1.45 percent.

Office of Planned Giving NON-PROFIT ORG. Stanford University U.S. POSTAGE Frances C. Arrillaga Alumni Center P AID 326 Galvez Street PERMIT NO. 28 P ALO ALTO, CA Stanford, CA 94305-6105