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Tell
Me About Charitable Remainder Trusts
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A
charitable remainder trust is: |
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an
irrevocable trust
that
will pay you income for your lifetime or for a term of
years
that you select (not to exceed 20 years).
the
payments can be made either to you, or to one or more
income
recipients that you select.
following
your lifetime, assets that remain in the trust will
come
to the Home of the Innocents endowment fund, to
further
our mission to provide the skills and opportunities
by which vulnerable children, youth and their families may
improve
their lives.
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Annuity
and Unitrusts are the two types of charitable remainder trusts.
These two types of trusts are very similar in many respects. The primary
difference is in the way the income payout is calculated. With both types
of trusts, the value of the charity’s remainder interest must be
at least 10% of the initial fair market value of all property placed in
the trust.
What
is An Annuity Trust?
A
charitable remainder annuity trust provides for a fixed annuity payment
of not less than 5% of the initial value of the trust assets to
one or more persons, with an irrevocable remainder interest contributed
to Home of the Innocents upon the termination of the trust. You will set
the percentage at the time the trust is established. What affects the
amount of the charitable contribution you can claim on your income tax
return, and other tax consequences concerning your gift is the percentage
you select when you set up the trust, and the age(s) of the income recipients.
You can choose whether to have your payments made on a monthly, quarterly,
semi-annual or annual basis. The annual payment never varies, regardless
of the income the trust assets earn, or appreciation or depreciation in
the value of the trust assets.
You
will not be allowed to make additional contributions to your annuity trust,
because your payments are fixed and are based upon the value of your initial
gift. You may, however, establish as many additional annuity trusts as
you want.
What
is A Unitrust?
A
charitable remainder unitrust is very similar to an annuity trust, except
that the annual payout generally is a fixed percentage of not less than
5% of the value of trust assets (which are valued annually). You
will set the percentage when you make your initial gift. In general, the
unitrust amount (your payment) rises and falls as does the value of the
trust assets. Because trust assets are re-valued every year, your payments
will change each year.With this trust option, you may enjoy an increase
in your trust payments over the years if the value of the trust assets
increases.
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There
are some different types of unitrusts: |
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The Net Income With Make Up
(NIMCRUT) charitable remainder
unitrust distributes the stated percentage each year, whether or
not the trust has actually generated enough income to
meet
that
amount. The deficit is made up from the trust principal in
those cases.
The
Flip or Type II
charitable remainder unitrust pays all of the
trust
income for the taxable year, in lieu of the specified unitrust
payment
amount, as long as such income is less than the stated
percentage.
Such a unitrust is most appropriate for a gift of real
property or
other non-liquid assets. The trust then "flips" to a
regular unitrust
when the asset is sold and there are more liquid
assets in the trust
to provide income.
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What
if I Have Some Questions?
 If
you have questions or would like more information, you may contact the
Development Office of the Home of the Innocents at 502.596.1025. We will
be happy to discuss with you the type of gift that you are considering,
and answer any questions that you may have.
PLEASE
BE AWARE . . .
The
Home of the Innocents does not render legal, tax or other professional
advice. We encourage you to seek advice from an attorney and/or other
professional advisors when you are considering making a charitable gift.
GIFT
ANNUITIES
Tell
Me About Charitable Gift Annuities
What
Will My Payment Be?
The
Uniform Gift Annuity Rates, which are recommended by the American Council
on Gift Annuities (a voluntary association of 25 members representing
over 700 Gift-Annuity-issuing agencies), have been computed with the intention
of producing, if possible, a remainder interest to the charity of approximately
50% of the original gift amount. For this reason, the rates are generally
lower than what you might find offered by an insurance company (where
there is no gift involved). The rates are based on actuarial studies of
the life expectancy of gift annuitants and on the expected rate of income
to be earned on invested reserve funds.
The
annuity payment is based on your age (and the age of any other annuitant
you might name), the day you make the gift, and on the amount of your
gift. You may choose whether to receive your payments on a monthly, quarterly,
semi-annual or annual basis. You may choose to delay your first payment
for a period of time. Rates on a gift annuity are very favorable when
compared to certificates of deposit or savings bonds.
CLICK
HERE FOR SAMPLE GIFT ANNUITY RATES
Why
Would I Want A Gift Annuity?
There
are many benefits to entering into a gift annuity contract with the Home
of the Innocents, not the least of which is potential favorable tax benefits
and the joy of making a gift that you know will provide support to the
mission of the Home following your lifetime. Charitable gift annuities
make it easier to make a substantial gift during your lifetime, because
you will be receiving a fixed income stream for life. Typically, part
of each payment that you receive will be tax-free, will likely receive
an immediate current income tax deduction for the fair market value of
your gift, minus the present value of the annuity payments that you are
estimated to receive over your lifetime.
Long-term
(held for more than a year) appreciated assets, such as stock, that are
not currently paying a dividend are an excellent choice for using to acquire
a gift annuity. You will avoid paying the capital gains tax on the transfer
of those assets, as they are being irrevocably gifted to charity, and
you will begin to receive an income stream in the form of annuity payments.
What
Else Should I Know?
You
must understand that your gift to the Home of the Innocents through a
charitable gift annuity is irrevocable - that is, you can't change your
mind once the gift is made.
Once you have entered into the gift annuity contract with the Home, the
amount of your payments will always remain the same. You
can’t add to your gift annuity, but you
can set up new gift annuities at any time.
Gift
annuities can be used to provide income to you, or to another person that
you designate, or to you both. This can be a useful way to provide additional
income for an aging parent, for example.
A gift annuity contract
can be written to pay you alone, or to pay you first, and then your spouse,
or it may pay any two persons you select. Payments can be made either
to one annuitant for their lifetime and then to a second annuitant for
their lifetime, or they can be made jointly to both annuitants and then
to the survivor. Due to the longer payment period, two-life annuity rates
are slightly lower than those for a single life.
PLEASE
BE AWARE . . .
This
information has not addressed all of the details you
may wish to know about
charitable gift annuities. Any time that you are considering making a
charitable gift, you should talk with your professional advisor, attorney,
financial planner, or accountant to learn the specific issues about the
gift you are considering and the consequences to your particular financial
situation. Remember that, as a charitable giving vehicle, a charitable
gift annuity is not intended to achieve the same results your private
investments.
The
Home can provide you with an illustration of a gift annuity based upon
your age and the amount of the gift. The illustration will provide the
amount of the annuity payment you will receive with the tax-free portion
indicated, as well as the potential charitable tax deduction.
You
may contact us for this information at 502.596.1025, or via email at mshumway@homeoftheinnocents.org
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