Life-income gifts provide donors, or their named beneficiaries, an income for life while committing resources to future use of Hospice. Donors to any of these life-income arrangements are often able to increase their spendable income and are entitled to an income tax deduction. The deduction is generally equal to the present value of the amount that will ultimately pass to Hospice. Gifts of long-term appreciated property also avoid or defer tax on the capital gain.
Charitable Gift Annuities
Charitable gift annuities are the simplest and most popular charitable like-income arrangement. Basically, a gift annuity is a contract between the donor and the charity. In exchange for a gift of cash, marketable securities or, in some circumstances, real estate, fixed payments are guaranteed to the donor and/or another beneficiary for life. Payments, which can be deferred to a later date if income is not needed immediately, are partially tax-free. It does not require a complicated agreement, and the amount needed to fund it can be as little as $5,000. Hospice receives the remaining principal at the death of the income beneficiaries.
Charitable Remainder Trusts
In simplest terms, a trust is an arrangement in which an individual transfers legal title to property to another (the trustee) who manages the property for the benefit of the individuals and/or organization specified in the trust arrangement. Charitable remainder trusts are popular gift plans because of their flexibility. These trusts may be funded with cash, securities, or real estate. Beneficiaries named by the donor will receive income for a period of years or their lifetime.
These trusts may take either of two forms: The Charitable Remainder Unitrust or The Charitable Remainder Annuity Trust. The principal difference between the two types of trusts is the manner of calculating the payment to the beneficiaries. Payments from a unitrust vary according to the investment performance of the trust. Payments from an annuity trust are fixed when the trust is created and will not vary over the lifetime of the beneficiaries.
Charitable Lead Trusts
Those donors with major charitable goals have discovered they can transfer substantial assets to intended beneficiaries at minimal or no transfer-tax cost by using a special vehicle called a charitable lead trust. Under this plan, you put assets into a trust that makes payments to charity for a designated period of time and then the remaining trust assets pass to your children.