Gift Annuities a Sound Vehicle for this Engineer

G.R. “Duke” Williams (’71 MS ENG) is a hands-on kind of guy, but he finds that it makes sense for the University of Wisconsin Foundation to handle an increasing percentage of his portfolio through gift annuities.

That way, he can enjoy a secure retirement with fewer worries and support the College of Engineering.

Williams earned his bachelor’s degree in mechanical engineering at the University of Washington before heading to UW-Madison to study at the Engine Research Center. “The top three engine research schools in the country at the time were Michigan, MIT and Wisconsin,” he said from his home in Redondo Beach, California. One of the deciding factors was the degree in mechanical engineering that his father earned in 1927 from UW-Madison.

Williams grew up in Seattle and was in the ROTC program as an undergraduate. Before heading to Madison, he took a job arranged by professors Phil Myers and Otto Uyehara, “my advisors at Wisconsin,” for the summer of 1968. He worked for Pontiac Motor Division as a production engineer, overseeing 1969 Firebird production startup at the now-closed Van Nuys assembly plant.

After earning his UW-Madison master’s degree, Williams went into the Air Force as a missile maintenance officer in Grand Forks, North Dakota. “Then I had an opportunity to transfer out to Los Angeles Air Force Station in El Segundo, California, where we manage all the military space programs,” he said. “So I transferred out here in 1974 and decided that in order to round out my education, I needed an MBA.”

He earned that degree at the University of California, Los Angeles in 1978 through a program geared to full time employed professionals. “I had no interest in going back to Detroit after I left the Air Force in 1979 and wanted to remain in California, so I got into the computer industry”.

“I was involved with sales and marketing of computer aided engineering systems to manufacturing companies,” he said. “I was exposed to a broad spectrum of manufacturing companies, with aerospace being a big part, and there was no limit to the number of new challenges. It’s interesting that all of the companies I worked for – including Digital Equipment Corporation, IBM, even ultimately GM – were dismembered, bought out, went bankrupt or almost did.”

Williams accepted a buyout from IBM in 1991, the year his father died. His mother fell ill in early 1993, and he went to Seattle to take care of her.

“When I returned to California in the summer of 1993 after my mom passed away, the economy was still very depressed,” he said. “So I took what I had saved over the years and the gift that I received from my parents and decided I could maybe make it as a private investor. The ‘90s were a bit touch and go, but I turned the corner in 2000 and never looked back. I haven’t worked for anyone since age 45. I effectively retired early, although that really wasn’t my plan.

“I never married, and I never had children,” he said. “So when I left IBM, I paid off the original mortgage on my house and got my expenses down to the bare minimum so I could basically maintain my lifestyle.”

No. 1, gift annuities would reduce my taxes significantly because of the charitable deduction. No. 2, I slowly yield management and risk of my portfolio to the UW Foundation and support UW-Madison.

G.R. “Duke” Williams

In short order, his portfolio grew by playing the interest rate cycles in the fixed income market. “I knew I had to prepare an estate plan, and in the back of my mind was setting up some sort of endowment funds in the name of my family at the three universities, which I finally got around to doing,” he said. “I actually wrote my own estate plan. I’m a do-it-yourself kind of guy.”

For UW-Madison, Williams consulted with professors Myers and Uyehara and established a bequest for fellowships to support graduate students at the ERC, “since I was supported through a fellowship it was a great way to give something back,” he said.

Over time, taxes were taking a bigger bite as his income grew. “Somewhere between 2003 and 2005, I got a newsletter from the UW Foundation. That was the first time that I ever read about charitable gift annuities. I learned about those from you guys,” he said.

“I’m not only a mechanical engineer. Having an MBA, I’m a financial engineer, too. I’m looking at my financial situation, and my income taxes are going up at an increasing rate because I don’t have enough deductions to itemize. I saw an annual gift annuity program as a way to accomplish several objectives simultaneously over a period of time,” he said.

“No. 1, gift annuities would reduce my taxes significantly because of the charitable deduction. No. 2, I slowly yield management and risk of my portfolio to the UW Foundation and support UW-Madison,” he said. “As I get older, that’s a good thing, because I might get to the point where I start making mistakes.

“I get the gift annuity income backed up by the assets of the Foundation, and the Foundation assumes all the portfolio management tasks and risk. My financial skills allow me to continuously monitor the financial position of the Foundation, and it is very secure – much more so than typical banks and insurance companies and especially Wall Street.”

Williams got out of Treasury Notes and stocks in 1999 and bought 5-year CDs in the summer of 2000 when interest rates peaked. When they matured in 2005, he waited until the summer of 2006 and bought a tiered portfolio of CDs that he converts as they mature, annually, to charitable gift annuities through the UW Foundation, which are an ever-increasing part of his financial mix.

As might be expected for someone who studied engines, Williams is an automotive enthusiast, and he still makes good use of his Wisconsin education. “I now do engine system engineering for vintage Corvette owners, including vintage racers,” and many members of the National Corvette Restorers’ Society have benefited from his knowledge.

He still owns the 1963 Corvette he bought new, while still in high school, with the money he earned beginning at age 11, and he has raced that car and his ‘76 Cosworth Vega, ’88 Mercedes 190E 2.6 and ’91 Toyota MR2. “Every car I have owned I raced, but not anymore,” he said. “I drive maybe 1,000 miles a year now because of traffic and the fact I can walk most places. My resource consumption is very low.”

As he likewise downshifts on managing his portfolio, Williams extols the charitable gift annuity as a worthy vehicle. “It works particularly well for me because I have no heirs, and I can’t take it with me,” he said. “Rather than having to deal with all the portfolio management issues and pay all the taxes, it makes a lot of sense to slowly turn my portfolio over in this way.

“It’s an excellent strategy for me or any single person. It’s also worthwhile for someone who wants to both leave something to their kids and still donate to a charitable organization like the UW Foundation,” he said. “Instead of making a one-time gift, they can do it in the form of gift annuities over their lifetime, take advantage of the annual charitable tax deduction and have the security of the lifetime income. In the long run it’s a win-win situation for both the donor and the University of Wisconsin.”