The holidays may be over, but your spirit of generosity is
probably still intact. If you want to support your favorite
charitable organizations, and you’d like to do more than just send
the occasional check, you’ve got some attractive options. Let’s
look at two of them: charitable gift annuities and charitable
remainder trusts.
The holidays may be over, but your spirit of generosity is probably still intact. If you want to support your favorite charitable organizations, and you’d like to do more than just send the occasional check, you’ve got some attractive options. Let’s look at two of them: charitable gift annuities and charitable remainder trusts.
Charitable gift annuity
If you would like to donate cash, stocks, property or other types of assets to a charity but would like to receive an income stream in return, you may want to consider creating a charitable gift annuity.
Once you’ve set up this type of annuity, and have gifted the assets to your selected charitable organization, the organization will pay you – or a beneficiary that you name -a lifetime income stream in the form of regular, fixed payments. The income received is equal to a fixed percentage of your original gift, based on your age, or the beneficiary’s age, at the time you make your gift.
Besides offering you a lifetime income source, your charitable gift annuity can provide you with some tax benefits. You can claim an income tax deduction for the portion of the annuity that represents the charitable gift. Also, part of the payments you receive each year may be exempt from certain income taxes. And, if you’ve given appreciated securities to the charitable group, you may be able to delay capital gains taxes.
Charitable remainder trust
If you want to give to a charitable organization, and you like the idea of receiving an income payment for life, but wish to retain lifetime control over the assets you donate, you may want to consider a charitable remainder trust.
Here’s how it works: Typically, you donate an appreciated asset, such as a stock or piece of real estate, to the trust, which then sells the asset and uses the proceeds to purchase a portfolio of securities. From these investments, you receive an income stream for life; upon your death, the charitable organization receives the remainder of the principal.
By setting up such a trust, you delay capital gains tax, and you can claim a deduction on your current-year taxes. And because you’re moving assets from your estate, your beneficiaries will have fewer estate taxes to pay.
Since the assets in the charitable remainder are going to charity you may want to replace these assets by purchasing a life insurance policy on yourself, using some of the income from the trust, and naming your heirs as beneficiaries. You may want to put the policy in an irrevocable life insurance trust. Because the trust actually owns the insurance policy, the proceeds are kept out of your taxable estate – and your heirs will owe less in estate taxes. You can also direct the trust to provide your heirs with regular income.
Don’t try this at home
You will need professional help in setting up a charitable gift annuity, a charitable remainder trust and an irrevocable life insurance trust. So, consult with your tax, legal and investment advisers before taking any steps. By making the right moves, right from the start, you’ll have a good chance of seeing the results you want.
Mark Vivian is a representative of Edward Jones Financial Services. His office is at 615 San Benito St., Suite 105. Phone: 634-0694.
