- Consider engaging multiple generations of your family in philanthropic discussions.
- When working to create a legacy, know the difference between a pledge (where you can change your mind) and a grant (where you can't).
- Understand the role that qualified charitable distributions from an IRA might play in helping to reduce taxes, while fulfilling your charitable wishes.
There's something magical and motivating about school spirit—especially when it's a family affair.
For Marcia Farrar, pride for her alma mater, Wake Forest University in Winston-Salem, North Carolina, has produced a newfound philanthropic pathway.
The university's motto is Pro Humanitate (For Humanity), a calling to use knowledge, talents, and compassion to better the lives of others.
That's exactly what Farrar, 68, a 1974 graduate, who also earned her Physician Assistant (PA) certificate there the following year, is doing.
Last year, Farrar, who lives in the San Francisco Bay area, established the Marcia Pregnall Farrar, PA Family Scholarship Fund to support students enrolled in the 2-year Wake Forest School of Medicine's Physician Assistant Program. It's an endowed scholarship for PA master's degree students who establish financial need. She has named the scholarship as the sole beneficiary of her IRA in her estate plan.
A Wake Forest family affair
More than 4 decades ago, Farrar met her husband, David, now 72, while she was a student in the Physician Assistant program, and he was a post-doctoral fellow at the medical center there and an assistant professor in the department of physiology and pharmacology at the School of Medicine.
But the family relationship to Wake Forest doesn't stop there. "The ties are deep," said Farrar. Her sisters and her daughter, Katie, 35, now a physician assistant working at George Washington University Hospital in Washington, DC, are Wake Forest graduates.
"There are many scholarships at Wake Forest School of Medicine for medical students, but very few for PA students," Farrar said.
Farrar worked as a PA for 10 years in practices of general surgery and cardiothoracic surgery. She stopped working in 1985 for child-rearing, but she maintained The National Commission on Certification of Physician Assistants (NCCPA) for 42 years until becoming a PA-C emeritus in 2019, and she keeps her California PA license active through continuing medical education.
Setting things in motion with a family conversation about creating a legacy
The timing was right for her charitable gift to her alma mater. The Farrars created their estate plan in 2008 which included a revocable living trust and advanced health care directives. They continue to update their wills with a local attorney as tax laws change.
Three years ago, Christian Kimball, their Fidelity wealth manager, based in San Francisco, introduced them to Dr. Timothy Habbershon, managing director of Fidelity's Center for Family Engagement. Over dinner, they talked about the question, "What is your life's work that will transcend time and provide others with a connection beyond your life?" Farrar remembers. "The meeting got David and me truly thinking about our legacy," she said.
Kimball also set up a family meeting between the couple, their two adult children, Scott, 37, and Katie, and Scott's wife, Laurel. Kimball acted as the moderator and facilitator. The primary aim of the informal 2-hour conversation was to examine estate planning questions and discuss ideas on charitable giving and creating a family legacy. "It was sort of a "heads up" about our finances and estate planning," Farrar said.
The impetus for the scholarship fund, though, was sparked at a San Francisco luncheon hosted by the Wake Forest School of Medicine for alumni. A lightbulb went off for Farrar. "It was refreshing to be invited to such an event which previously would have included only physicians," she said. "The luncheon recognized physician assistants as part of a team of health care. That was a really nice compliment."
Farrar wasn't a newcomer to alumni giving. For years, she has regularly made year-end gifts to the university. As she began nearing the age when she would be required to take minimum distributions from her retirement account (then 70½, now 72), the suggestion began to appeal to her. Due to their other resources and investments, she and her husband knew that they were not in need of the funds accumulated in her retirement account.
"That day at the luncheon, I realized it was worthwhile doing something for my school and students coming along the same path as I had," Farrar said.
Using QCDs to help fulfill her legacy
After consulting with her husband and Kimball, she took action: Once Farrar reaches age 72, her scholarship pledge will be funded through the required minimum distributions (RMD) from her traditional IRA through a qualified charitable distribution (QCD). A QCD is a direct transfer of funds from an IRA custodian, payable to a qualified charity, so no personal income taxes are paid on the RMDs.
The QCD amount counts toward her RMD for the year, up to an annual maximum of $100,000. It's not included in gross income and does not count against the limits on deductions for charitable contributions.
She has also named the scholarship fund as the sole beneficiary of her IRA upon her death, which will permanently endow the scholarship. Because charities do not pay income tax, the full amount of her retirement account will directly benefit Wake Forest University Health Sciences.
"My gift reflects my family's values of educating PAs as health care professionals to extend and expand the availability and accessibility of health care to more people, with the goal of health care for all," Farrar said.
One caveat: The agreement is a pledge, not a legal document. "There can be no claims by Wake Forest on any of my assets," Farrar said. "I can change my mind at any time about the scholarship and my IRA beneficiary, but I don't plan to," she said.
In the meantime, she's funding the scholarship by making annual tax-deductible charitable gifts to the endowment with a portion of her donation being designated for an annual award to current PA students. "I feel I am really making a difference for the PA program, and that my contribution is greatly appreciated," Farrar said.
A big payback for Farrar—she has already reaped a benefit of her generosity. It wasn't, however, exactly as she expected. Due to COVID-19, she canceled her trip to campus this spring to meet the first 2 student recipients of her cash scholarship awards.
Fortunately, she found a solution. She greeted her recipients through virtual meetings via Zoom and FaceTime®. "It was really nice to talk with them," she said. "They are very gung-ho and enthusiastic. It was that human connection—putting a face to it." Next year, Winston-Salem.