Income Generating Gifts
For many friends and alumni, the desire to make a gift to Eastern is coupled with a continuing need for income from those assets. Fortunately, Eastern's Planned Giving Program makes is possible for a donor to achieve both of these objectives and receive sustained tax benefits as well.
Life income gifts to Eastern may take two basic forms: Charitable Gift Annuities and Charitable Remainder Trusts. Often, gifts in one of these forms will actually increase a donor's or beneficiary's income. Additionally, these life-income gifts may provide some or all of the following rewards:
- An income for life
- Reduced or eliminated capital gains taxes
- A current income tax deduction
- Reduced or eliminated burdensome estate and gift taxes
- A much larger gift to Eastern University than you thought possible
Charitable Gift Annuity
A charitable gift annuity is a simple, one-page agreement between a donor and the University. Eastern promises to pay a lifetime annuity in exchange for a charitable gift. The amount of the annual fixed payment is generally determined by the age of the beneficiary. For example, currently a 90-year-old donor would be entitled to a 10.5% return. Your gift of $5,000 or more will establish a gift annuity.
Annuities may be for a single person, or a married couple may give funds for a joint annuity. For joint annuitants, income continues until the death of the surviving spouse.
Charitable gift annuities may also be structured to defer the onset of income until a future date. Younger donors can create an annuity currently and defer the payments until they retire or some other point in the future when the income will be more helpful.
At any given age, the deferred gift annuity rate is significantly higher-and the tax deduction is larger-than annuities that begin to pay income right away. The income tax deduction for this gift is available in the year the annuity is established.
Charitable Remainder Trust
Charitable remainder trusts are formal legal arrangements that distribute income to a donor or other beneficiaries for their lives or a specified term of years. Upon the death of the last surviving beneficiary or at the end of the fixed term, Eastern will receive the principal being held in trust. Usually, gifts of $100,000 or more are required to maximize the advantages of these instruments.
Charitable remainder trusts come in two forms: unitrust and annuity trust.
A charitable remainder unitrust pays income based on a percentage of the fair market value of the trust assets as determined annually. This form of charitable remainder trust may provide an effective hedge against inflation. When the value of the trust principal increases, so will the donor's income. Unitrusts may receive additional gifts during your lifetime or as a testamentary transfer through your Will.
An annuity trust pays income based on a percentage of the initial value of the trust and never changes. Since the annuity payment does not change during the term of the trust, an annuity trust provides the certainty of a fixed amount of income each year regardless of any fluctuations in the value of the trust assets.
Planned Giving Office
James G. Rogers, CPA, Vice President