Do you want to make a gift right now, but worry about having enough income to support your lifestyle? Life-income gifts provide donors with an income stream and significant tax-savings, while also providing Tyler’s Hope with substantial long-term resources. The following are popular tools for life-income gifts:
One of the major benefits of the CRAT is an immediate potential income and gift tax deduction for a charitable contribution for the present value of the ending balance of the trust's assets designated for the charity.
Second, a CRAT is exempt from tax on its investment income. Thus, a trustee of the CRAT can sell the appreciated assets and reinvest the full proceeds. The donor is able to diversify from a concentrated position in a tax-efficient manner. When distributions are made to the donor or beneficiary pursuant to the terms of the trust, the donor or beneficiary must report a portion of the income and gains in respect to the property distributed. However, as the tax burden is spread out over time, more money is available for reinvestment within the CRAT, benefiting both the lifetime beneficiary and charitable remainder beneficiary.
Third, a contribution to a CRAT made at death under a Will can produce an estate tax deduction, not subject to any percentage limitations, with the value of the remainder interest passing to the private foundation.
Finally, a CRAT can be an effective strategy for planning for retirement as the trust can provide that income distributions do not commence immediately. For example, the trustee can sell the appreciated assets, reinvest the proceeds, defer payment of tax and delay distribution (and income recognition) to the donor until he or she reaches age 65 and is in a lower tax bracket.
The benefits of the Charitable Remainder Unitrust are the same as those of the Charitable Remainder Annuity Trust.
Pooled income funds offer professional investment management — and a way to convert appreciated assets into income without incurring capital gains tax.
Donors recommend charitable beneficiaries to receive the balance in the fund after the death of the last beneficiary.
- Charitable Remainder Annuity Trust: An irrevocable trust that generates a fixed income stream for you or your beneficiaries, with the remainder of the donated assets eventually going to one or more nonprofit organizations you select.
- Details: A Charitable Remainder Annuity Trust (CRAT) is an irrevocable trust typically funded with highly appreciated property. The CRAT provides that the named beneficiary receive a fixed amount each year for a period of years that can be for the individual's life or for a period not to exceed 20 years.
One of the major benefits of the CRAT is an immediate potential income and gift tax deduction for a charitable contribution for the present value of the ending balance of the trust's assets designated for the charity.
Second, a CRAT is exempt from tax on its investment income. Thus, a trustee of the CRAT can sell the appreciated assets and reinvest the full proceeds. The donor is able to diversify from a concentrated position in a tax-efficient manner. When distributions are made to the donor or beneficiary pursuant to the terms of the trust, the donor or beneficiary must report a portion of the income and gains in respect to the property distributed. However, as the tax burden is spread out over time, more money is available for reinvestment within the CRAT, benefiting both the lifetime beneficiary and charitable remainder beneficiary.
Third, a contribution to a CRAT made at death under a Will can produce an estate tax deduction, not subject to any percentage limitations, with the value of the remainder interest passing to the private foundation.
Finally, a CRAT can be an effective strategy for planning for retirement as the trust can provide that income distributions do not commence immediately. For example, the trustee can sell the appreciated assets, reinvest the proceeds, defer payment of tax and delay distribution (and income recognition) to the donor until he or she reaches age 65 and is in a lower tax bracket.
- Charitable Remainder Unitrust: An irrevocable trust that generates an income stream for you or your beneficiaries, with the remainder of the donated assets eventually going to one or more nonprofit organizations you select.
- Details: This trust is similar to the Charitable Remainder Annuity Trust but instead the donor receives a fixed percentage of the fair market value of the trust assets each year, re-valued annually. If the value of the assets increases, then the annual payout does as well, this could potentially increase the ultimate payout to the charitable remainder beneficiary.
The benefits of the Charitable Remainder Unitrust are the same as those of the Charitable Remainder Annuity Trust.
- Pooled income fund: A charitable trust established and maintained by a qualified nonprofit organization, providing you and/or your beneficiaries with a potential lifetime income stream based on a prorated share of the income earned by the fund. Remaining assets are eventually distributed to the charitable beneficiaries you have recommended.
- Details: A pooled income fund is similar in many respects to a charitable remainder trust. Donors may be eligible to take an immediate partial tax deduction, based on their life expectancy and the anticipated income stream, but must pay income tax on the income they receive from the pooled income fund each year.
Pooled income funds offer professional investment management — and a way to convert appreciated assets into income without incurring capital gains tax.
Donors recommend charitable beneficiaries to receive the balance in the fund after the death of the last beneficiary.
- Charitable Gift Annuity: A contract with a nonprofit organization, in which you provide a gift and, in exchange, the nonprofit guarantees you income for life.
- Details: The contract is between the donors and the issuing charity, where the donors transfer property (cash, securities, and real property) in exchange for a fixed dollar payment during their lifetime. Tax deductions for this type of life-income gift vary with the number of recipients and the age of the donor at the time of the gift. The issuing institution guarantees the income, as it becomes a legal obligation of the charity.