Donors will receive a more attractive gift annuity rate by making the gift today, and deferring the annuity payments to some date in the future ~ perhaps the date of retirement. The longer the deferred period, the greater the annuity rate. As in the case of the gift annuity noted earlier, the donor receives an immediate charitable income tax deduction.
Charitable Remainder Trust
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The charitable remainder trust (CRT) is a trust which pays out income to named beneficiaries ~ usually the donor and his/her family. This income stream usually runs for the life of the named beneficiaries; however, a term of years (not to exceed 20) can be designated as the payout period. A "term of years" CRT is an excellent tool for assisting with college costs.
After the income payments have been completed, the "remainder" is distributed to the AAHF. Charitable remainder trusts (CRTs) are usually funded with highly appreciated, low yield assets. This typically includes stocks and real estate, but may include other types of assets.
The major benefits of CRTs include:
- a deferred gift to the AAHF;
- bypass of capital gains tax;
- increased income;
- a current charitable income tax deduction;
- an estate tax deduction.
Charitable remainder trusts benefiting the AAHF fall into two main categories ~ charitable remainder unitrusts (unitrust) and charitable remainder annuity trusts (annuity trust).
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Annuity Trust
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The annuity trust pays a fixed percentage (at least 5%) of the initial fair market value of the trust assets. These income payments are made to the designated income beneficiaries. The annuity payment is fixed, and will not increase or decrease ~ regardless of the value of the trust principal.
Income payments may be made quarterly, semi-annually or annually, and an immediate charitable income tax deduction is given upon the establishment of an annuity trust.
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Unitrusts
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The unitrust is similar to the annuity trust, but much more flexible. The unitrust pays a fixed percentage (at least 5%) of the trust's corpus, based on it's value determined annually. Therefore, growth in the trust corpus results in an increase in the income payments made to the donor (or other income beneficiaries). This payment, based on an annual evaluation, allows the opportunity to protect income payments from the erosion of inflation. As in the case of an annuity trust, a charitable income tax deduction is available.
Once established, a donor may choose to make future gifts by adding assets to an existing unitrust. A charitable income tax deduction is allowed with each additional gift. |
