Life Income and Other Gifts

Do you need a life income stream, a provision for heirs, or want to make larger gifts than would be possible out of current assets? Consider these options:

Charitable Gift Annuities

A Charitable Gift Annuity is an agreement between you and the Community Foundation. You make an irrevocable gift of at least $50,000 to the Community Foundation and receive a fixed, guaranteed income from the Foundation each year for the rest of your life and/or the life of another person. Upon the death of the life income beneficiary, the remaining value of the annuity gift is allocated to a fund at the Community Foundation, which then pays out income to the nonprofit organization(s) that you designate.

You can start receiving the income immediately or defer the start of the annuity payments until a later date. Because the payments can be deferred, gift annuities are a popular vehicle for supplementing retirement income. Annuity rates are based on the age of the annuitant(s) at the time of the gift and on whether the income payments begin immediately or are deferred. The older the designated annuitant(s) at the time of the gift, the greater the fixed income the Community Foundation can agree to pay.

This vehicle can ease the worries of outliving financial resources by providing a high income coupled with numerous tax advantages. It also creates a charitable legacy that will benefit the community in perpetuity.

How it works: A donor irrevocably transfers assets (cash or securitites) to the Community Foundation.The Community Foundation agrees to pay a fixed income to the donor and/or another beneficiary. Upon the death of the donor and/or second beneficiary, a fund is created with the remaining funds of the original gift to support the donor’s designated nonprofit(s).

Charitable Remainder Trusts

Charitable Remainder Trusts (CRTs) are flexible vehicles that allow you to make a charitable gift but retain an income stream (for yourself and/or others) for life or for a fixed number of years. At the end of the term of the trust, the remaining trust assets pass to a fund at the Community Foundation.

CRTs are particularly well-suited for gifts of appreciated securities and other assets such as real estate or securities producing little or no income at the time of the gift. Because the CRT is tax-exempt, it can sell the asset without incurring capital gains tax and reinvest for a higher yield.

This flexible planned giving strategy is best suited for gifts of $250,000 or more, and can be established during your lifetime or by will to provide income for family members. A CRT may help you eliminate capital gains taxes, reduce or eliminate estate taxes, improve lifetime cash flow, and when coupled with an asset replacement trust, provide for heirs as well.

The Community Foundation can act as a remainderman for CRTs by establishing endowed funds in the name of the original donor to make income gifts in perpetuity to the nonprofit organization of the donor’s choice. Successor generations can be involved in the distribution of grants if the donor so wishes.

How it works: A donor irrevocably transfers assets into a trust created by the donor and governed by a trust agreement. The donor usually names a bank or trust company of his or her choice to serve as trustee to invest the funds, pay the income, prepare the annual tax reporting forms and, when the last income beneficiary dies, distribute the remainder to a designated fund at the Community Foundation.

Charitable Lead Trusts

A Charitable Lead Trust allows you to provide income to your fund at the Community Foundation for a fixed number of years. You will make payments immediately (in a fixed amount or percentage of the assets) to a fund at the Community Foundation. With the most common type of Charitable Lead Trust (a non-grantor charitable lead trust), at the end of the trust’s term, the remaining assets are returned to you or your named beneficiary.

Charitable Lead Trusts are an excellent vehicle for making an immediate charitable gift to a Donor Advised Fund at the Community Foundation, while being able to transfer assets to others after a period of time free of estate and gift taxes.

How it works: A donor transfers assets to a trust and directs additional gifts to the trust. The trust awards income to a fund at the Community Foundation. Most commonly, Donor Advised Funds are established to receive this income. The donor then advises on distributions.