Gifts that plan for the future

Gifts that Return an Income for Life: Charitable Gift Annuities and Trusts

There are several types of life income gifts that will provide you, your spouse or another person, with an income for life.  There are many factors to consider, including the size of gift and type of asset you might want to use.  Your age and the purpose of the gift are also relevant. There are several tax advantages as well.

Charitable Gift Annuities are one of the simplest ways to make a life income gift.  For a gift of $10,000 or more, you enter into a simple contract with Child and Family Services of NH.  CFS guarantees you a rate of return that is based on your age (or the age of one or two recipients or annuitants) and will pay you that annuity amount every year, usually on a quarterly basis.  Gift annuities are funded with either cash or appreciated securities.  If you fund your charitable gift annuity with appreciated securities, then some of the income returned to you will be in the form of capital gain income, with a lower tax rate.

Click here to enlarge the Charitable Gift Annuity Ad

 

Charitable Remainder Trusts are most useful to donors considering larger gifts because they are more flexible but there are also legal and administrative costs and fees associated with creating and maintaining a trust.  A remainder trust may be created for a specific time period up to 20 years or for life (for one of two people). Because a trust is a separate tax entity, you (or the trust beneficiaries) will only pay income tax on the income that is distributed to you from the trust. There are even ways to fund remainder trusts will assets that are difficult to sell, for example, real estate.

There are two types of charitable remainder trusts.

The Charitable Unitrust pays a fixed percentage, computed annually, of 5% or more.  Thus your annual income will increase (or decrease) depending on the investment decisions of the trustee.

 

The Charitable Annuity Trust pays a fixed annuity amount, computed the first year of the trust.  The annuity trust provides certainty as your annual payments will remain the same for the duration of trust, regardless of investment decisions of the trustee.

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Benefits may include some or all of the following:

• Gift to charity without loss of income
• Increased income
• Current charitable income tax deduction
• Avoidance of Capital Gains Tax
• Estate tax savings
• Attainment of personal and charitable goals

 

Charitable Lead Trusts are the reverse of a life income gift.  The income from the trust is paid to the charity and the remainder is paid to the beneficiaries.  Lead trusts are commonly used for large estates subject to federal estate taxes and can be used strategically to transfer a very substantial asset, most usually to grandchildren. Lead trusts are not for everyone, but they are most advantageous in the right circumstance.

Please contact us for additional information, in complete confidence, on how any of these gift plans may be tailored to benefit you in your specific situation.