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Life Income Gifts

The Foundation offers four different types of charitable life income gifts:

  • Gift Annuities
  • Charitable Remainder Annuity Trust
  • Charitable Remainder Unitrust
  • Charitable Lead Trust

These funds will make periodic payments to the donor and beneficiaries during their lifetimes. At the death of the final beneficiary, the remainder balance of the fund will support your chosen church or other causes close to your heart. Check out our planned giving calculators to see how a gift annuity or charitable trust could work for you.

Contact us today, and we’ll be happy to run a sample illustration of what one of these life income gifts could look like for your situation.

Gift Annuities

The charitable gift annuity allows you to secure a guaranteed income for life. You establish an account by making an irrevocable gift of cash or securities. The older you are, the higher your annuity rate will be set. The payment remains constant once the gift is made.

One real advantage of a gift annuity is that a portion of the income paid out may be considered ‘return of principal,’ which is tax-free income. These arrangements are set up with the execution of a simple contract. They can be done with small amounts of money, or very large sums.

Gift annuities are ideal for senior adults because they may provide life income for both the donor and his/her spouse. After the donor’s life, the remainder goes into a permanent fund at the Foundation, for the benefit of the church or charity of your choice.

Charitable Remainder Annuity Trust

Under the Charitable Remainder Annuity Trust arrangement, you irrevocably transfer cash or securities to a trustee, like Heartspring. You retain the right to a specified annuity for a definite or indefinite time period. If definite, the term cannot exceed 20 years. If indefinite, you may choose to have the trust pay an income for the lifetime of you and your spouse.

You decide on the fixed amount you want to receive each year, payable in periodic installments. The fixed amount cannot be less than 5 percent of the initial fair market value of the trust assets. You will receive an income tax deduction for the present value of the remainder interest. If you transfer an appreciated asset to the trust, you will not be taxed on the unrealized gain. Because the annuity is a fixed amount, it is unaffected by the trust’s income. Income in excess of the annuity amount accrues to the charity.

After the passing of the final beneficiary, the remainder establishes a permanent fund at the Foundation that will benefit the churches or charities of your choice.

The annuity trust has some very favorable benefits. You receive an income tax deduction and an estate tax deduction. It enables you to avoid tax on appreciated assets used to fund the trust. It allows you to increase income from a low-yield holding. With the income and estate tax savings, gifts can be made at a lower cost. You will also have freedom from investment responsibilities. The annuity trust provides a fixed and certain dollar income for life.

Charitable Remainder Unitrust

The Charitable Remainder Unitrust is very much like the Charitable Remainder Annuity Trust. However, there is a very significant difference in the determination of the periodic payment amount. Like the annuity trust, the unitrust payout cannot be less than 5 percent. However, the payout rate is applied to the fair market value of the trust assets, determined annually, to establish the periodic payment amount each year. This means that the payment changes as the value of the trust fluctuates from year to year. You may impose a ceiling on annual distributions to ensure that they do not exceed trust income in any year. Any shortfalls can be recouped in a later year, should trust income then exceed the current distribution requirement. Because of its flexibility, the unitrust is often funded by appreciated real estate in addition to cash and securities. One can also add assets to a unitrust at a later date.

After the passing of the final beneficiary, the remainder establishes a permanent fund at the Foundation that will benefit the churches or charities of your choice.

The unitrust has some very favorable benefits. You receive an income tax deduction and an estate tax deduction. It enables you to avoid tax on appreciated assets used to fund the trust. It allows you to increase income from a low-yield holding. With the income and estate tax savings, gifts can be made at a lower cost. You will also have freedom from investment responsibilities. The unitrust is a hedge against inflation.

Charitable Lead Trust

The Charitable Lead Trust is the reverse of the Charitable Remainder Trust (above). You or members of your family retain the remainder interest in property while making a gift of the income from that property. The lead trust can be established for a set period of time or for the life of one or more individuals you name.

There are two types of lead trusts: guaranteed annuity interest and unitrust interest. Lead trusts have limits on the income tax deductions allowed as the gift is “for the use of” the charity. If you have a substantial estate and anticipate high federal gift and estate taxes, the lead trust may fit within your estate plans. The trust property may be passed down to your children, grandchildren or others at greatly reduced gift and estate tax rates and, in some instances, free of gift and estate taxes.

Information on Life Income Gifts is offered for educational purposes. Heartspring Methodist Foundation is not offering tax, legal or other professional advice. For such information, please contact your qualified professional.

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