Life Income Gifts
Life income gifts such as a charitable gift annuity and a charitable
remainder trust provide a donor with income for life, while allowing the
donor to make a significant gift to the Foundation after their death or
the death of their spouse. Depending on the donor's investments, these
gift methods may provide a higher rate of return than the donor is
currently receiving. Life income gifts may also provide income, capital
gains and estate tax benefits to the donor as specified by law.
Charitable Gift Annuities
Charitable gift annuities provide a guaranteed income to the donor
for life, based on the donor's age at the time of the gift. For
instance, the current payout for a donor, age 75, creating a gift
annuity would be 7.9 percent, a much higher rate than provided by many
other sources of income.
Charitable gift annuities have several appealing benefits. The donor
receives a guaranteed income for life, with a portion of that income
non-taxable; a significant portion of the gift is a charitable gift tax
deduction; and, if the gift is made with appreciated securities, the
donor avoids capital gains taxes.
Charitable Remainder Trusts
Charitable remainder trusts also provide lifetime income and
charitable tax deductions to the donor. However, using this method, the
donor, in consultation with the college, chooses the rate of income,
usually between five and seven percent. The amount of the charitable
income tax deduction is inversely proportional to the amount of income
calculated to be paid to the donor over their lifetime. There are two
types of charitable remainder trusts:
- Charitable Remainder Annuity Trust pays a fixed dollar amount annually. This works well if you want reliable income.
- Charitable Remainder Unitrust pays you a variable amount equal to a
stated percentage of the net fair market value of the trust assets as
recalculated yearly. Depending on the investment performance of the
unitrust, this option may provide a possible hedge against inflation.