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Top 5 reasons why gift annuities and trusts are great tools for charitable giving

October 24, 2019 | by Jane Lee Heuser


Top 5 reasons why gift annuities and trusts are great tools for charitable giving

Have you considered supporting charity but felt unsure of the financial impact? If so, creating a charitable gift annuity or trust may be the right option for you! These types of gifts are known as “life income gifts” because they pay you or your loved ones an income for life or a period of years.

The two most common types of life income gifts are charitable gift annuities and charitable remainder trusts. A gift annuity provides a fixed payment for life, while a charitable trust offers a variable payment for life or a designated period of time (up to 20 years).

Here are the top 5 reasons why gift annuities and trusts are great tools for charitable giving:

1. SUPPLEMENT RETIREMENT EARNINGS WITH A STEADY STREAM OF INCOME.

When you establish a charitable gift annuity, the charity provides a fixed payment to you or a loved one for life in exchange for a gift of cash or stock. You can choose to receive payments immediately or defer payments until a later date. A deferred gift annuity results in an increase in the annuity rate and an increased income tax deduction, which is still recognized in the year of your gift.

With a charitable trust, the charity pays a fixed percentage of the trust’s value each year. As the trust principal grows, the income payments grow, too, providing a hedge against inflation. Likewise, if the trust’s earnings are less than the annual trust payment, the trust payments will decrease. 

2. RECEIVE AN IMMEDIATE INCOME TAX DEDUCTION FOR A PORTION OF YOUR GIFT. 

A charitable gift annuity or trust is considered a partial gift, as the donor contributes property in exchange for payments from the charity. Donors who itemize deductions on their taxes may be eligible for an income tax deduction for a portion of the gift.

This income tax deduction is subject to the deduction limits for charitable gifts of cash or appreciated property. If you can’t use your deduction in the current tax year, any excess deduction may be carried over for five years.

3. INCREASE YOUR INCOME!

Charitable gift annuities and trusts are an attractive alternative to CDs or money market accounts, especially in today’s low-interest environment. The rates for a charitable gift annuity are based on the age of the annuity beneficiary. Click here to view current sample rates, effective as of July 1, 2018. Annuity payments can be made to you or a loved one. Part of the annuity payment is considered a return of principal and is free from income tax.

The minimum payment rate for a charitable trust is 5%. The payment amount will vary each year depending on the market value of the trust. The taxation of the payments will vary based on the trust investments.

4. DONATE APPRECIATED ASSETS WITHOUT IMMEDIATE RECOGNITION OF CAPITAL GAINS. 

When you donate appreciated assets to a gift annuity and are also the beneficiary, you may spread the gain over your life expectancy and defer capital gain taxes. You can also donate appreciated assets to a charitable trust without immediate recognition of capital gains taxes.

5. EXPERIENCE THE JOY OF MAKING A DIFFERENCE.

By establishing a gift annuity or charitable trust, you are investing in the future of your favorite charity. At Duke, your gift can make a difference by providing students with scholarship funds, assisting with cancer research, providing for patient care and support, and much more.   

Interested in learning more about charitable gift annuities, trusts or other types of planned gifts? Please contact a member of our team to explore your options. In addition, Duke’s Office of Gift Planning provides a treasure trove of information on its website. We encourage you to subscribe to our Blueprints blog to receive quarterly insights and timely news about Duke and gift planning trends.

About the author

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Jane Lee Heuser Associate Director of Trust and Estate Administration

Jane is a native of Chicago, Illinois, and moved to beautiful North Carolina in 2005. She is a graduate of the University of Illinois and joined the Gift Planning team in 2012. Jane is responsible for handling the day-to-day administration of Duke's trust and gift annuity accounts. She also manages estates for Duke and works with donors in developing their charitable plans. Prior to joining Duke, Jane managed trusts and estates at a small law firm and was a vice president with The Northern Trust Company in Chicago. Jane loves to travel and is conversant in Cantonese and French. She keeps busy with her husband and two teenagers and is an active volunteer in Durham and Chapel Hill.

Jane Lee Heuser can be contacted via email or by phone at (919) 681-6776.

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