Charitable Gift Annuity

There are a number of different gifting strategies available for planned giving. Each has its advantages and disadvantages.

Charitable Gifting Possibilities

Instead of making an outright gift, you could choose to use a charitable lead trust. With a charitable lead trust, your gift is placed in a trust. The recipient of the gift draws the income from this trust. Upon your death, your heirs will receive the principal with little or no estate tax.

If you prefer to retain an income interest in your gift, you could use a pooled income fund, a charitable remainder unitrust, or a charitable remainder annuity trust. With each of these strategies, you receive the income generated by your gift, and the recipient receives the principal upon your death.

Finally, you could purchase a life insurance policy and name the charitable organization as the owner and beneficiary of the policy. This would enable you to make a large future gift at a potentially low current cost.

Charitable Gifting Choice Specifics

Outright Gift

• Advantages:
  • For income taxes
• Disadvantages:
  • No retained interest

Charitable Lead Trust

• Advantages:
  • A current gift to charity
  • Current income tax deduction
  • Pass assets to heirs at a future discount
• Disadvantages:
  • Transfer of assets is irrevocable
  • If current income tax deduction is taken, future income is taxable to donor
  • Donor gives up use of income for life of the trust

Pooled Income Fund

• Advantages:
  • Income tax deduction
  • Income paid to beneficiary for life
  • Non-income-producing assets can be converted to income-producing assets
• Disadvantages:
  • Income is unpredictable from year to year
  • Income received is taxed as ordinary income
  • Remainder interest will usually go to only one charity

Charitable Remainder Unitrust

• Advantages:
  • Current income tax deduction
  • Avoids capital gains tax on appreciated property
  • Reduce future estate taxes
• Disadvantages:
  • Transfer of assets is irrevocable
  • Qualified appraisal generally required
  • Complex administration and setup

Charitable Remainder Annuity Trust

• Advantages:
  • Income tax deduction
  • Avoids capital gains tax on appreciated property
  • Fixed income
• Disadvantages:
  • Fixed payment cannot be limited to the net amount of trust income
  • Qualified appraisal generally required
    Complex administration and setup

Gifts of Insurance

• Advantages:
  • Current income tax deduction possible
    Enables donor to make a large future gift at small cost in the future
• Disadvantages:
  • May require annual premiums
    In some cases the death benefit could be part of donor’s taxable estate