Life Income Gifts
Charitable Gift Annuities available in select states beginning July 1, 2005.
Life-Income gifts allow you to make a gift to Wills Eye while providing you with tax savings
and increasing income for you and/or other individuals.
Charitable Gift Annuity
$10,000 minimum first gift
A charitable gift annuity is a simple contract between a donor and Wills Eye, whereby the
Wills Eye agrees to pay a fixed annuity to a donor for life in exchange for an irrevocable gift
of at least $10,000. The donor may also name a second, successive lifetime income
beneficiary if he or she so desires. Additionally, the donor will receive an immediate
income tax deduction for the remainder value of that gift that will eventually benefit a
designated interest within Wills Eye.
Example: One-Life Gift annuity
Joseph wishes to donate $50,000 to Wills Eye using appreciated stocks. He is 75 years old.
Based on his life expectancy, Wills Eye agrees to pay him a fixed income equal to 7.1% of his
gift, or $3,550 annually, of which $1,150 is tax-free and $1,150 is capital gain. Joseph
receives an immediate income tax deduction of $21,484 for the remainder value of his gift.
The tax deduction coupled with the tax-free income and capital gain portion effectively
increases his return to 10.6% for her gift.
Example: Two-life Gift Annuity
Jim and Delores wish to significant make a gift to Wills Eye. They are retired and live on a modest pension and from the income on their investments. Jim is 80 and Delores is 75. The Development Officer at Wills Eye suggest a two-life gift annuity as a way make the gift and receive an annuity payment to supplement their income.
Jim and Delores donate $50,000 of appreciated stock. Based on their life-expectancy, Wills Eye agrees to pay Jim and Delores a fixed income equal to 6.6% of their gift, or $3,300 annually of which $860 is tax-free and $1,272 is capital gain. They receive an immediate income tax deduction of $18,470 for the remainder value of their gift. The tax deduction coupled with the tax-free income and capital gain portion effectively increases their return to $9.5% for their gift.
Back to Top
Charitable Remainder Trust
$100,000 minimum first gift
A Charitable Remainder Trust is a trust into which you irrevocably place a minimum of $50,000 in assets in exchange for an income either for life or for a term of 20 years. You may fund the trust with cash, securities, or real estate.
When you use appreciated securities held long-term, you avoid capital gains tax on the appreciation and the trust's assets are allowed to build tax-free.
At the end of the trust term (no more than 20 years) or when all income beneficiaries pass away, the remaining principal transfers directly to Wills Eye as the remaining beneficiary.
There are two basic types of Charitable Remainder Trusts:
- The Charitable Unitrust - trust income is based on a fixed percentage of the fair market value of the trust, revalued annually. Your income will vary from year to year.
- The Charitable Annuity Trust - trust income is based on a fixed dollar amount. Your annual income will remain fixed for the life of the trust.
If stock is used to fund the CGA, you will pay no immediate capital gains taxes on highly appreciated stocks when the gift is made. If you find yourself locked into securities that are highly appreciated but pay low dividends and wish to sell these securities to be reinvested, you typically face capital gains taxes of up to 15%.
Consider this example:
Larry, an investor, has enjoyed success in the stock market. Now, Larry wants to help provide for Wills Eye, diversify his portfolio and reinvest in securities with higher income. To accomplish these goals, Larry transfers his investment assets to a Charitable Unitrust where he receives a fixed 7% lifetime income. By transferring his securities to the charitable trust, Larry avoids all capital gains taxes and receives a partial charitable income tax deduction. Even more, Larry is pleased to know that Wills Eye will receive the remainder of the trust principal upon his death or after a twenty year period.
Back to Top
|
