GIFTS THAT PROVIDE INCOME…TO YOU AND OTHERS 

Did you realize that it is possible for you to make a gift to further God’s work while retaining needed income for yourself and/or your loved ones? In fact, you can choose from several methods of making gifts that feature a retained income.

Many people who make use of these gift plans find they can give more when they discover the benefits of tax savings, asset management, and regular payments to them for life.

They also find that gift giving need not mean sacrificing their own or their loved ones’ financial security. In fact, giving for income can assist in meeting a number of goals by helping you:

• Increase your current income from low-yielding stocks or other assets.
• Create a supplemental source of retirement income.
• Assure a protected income for your spouse or other loved ones who survive you.
• Arrange to provide funds to assist parents in later years.

Plan to cover educational or other expenses during a specified time for children or grandchildren. With these possibilities in mind, read on to learn about a variety of gift plans that allow you to give more while helping to preserve your economic well-being.

Trusts: Reach Many Goals At Once

As you may know, trusts are very flexible planning tools that can be used to accomplish a wide range of goals. Some people rely on them to reduce property management chores. Others use trusts to delay distribution of property for any number of reasons. Trusts also allow a person to arrange for property to be put first to one use, then to another. A charitable remainder trust offers a meaningful way to contribute to your donor advised fund while first providing income for yourself and/or others you name.

Here’s how such a trust functions:

You, as the donor, create a trust, drafted by an appropriate professional advisor. You transfer cash or other property to the trust to be managed by you or another you choose as trustee. The trustee manages the property for you, your spouse, and/or other beneficiaries you choose. Each year payments are made from the trust to you and/or other beneficiary(ies).You receive an income tax deduction and may enjoy capital gains tax savings in the year you create the trust.

Payments continue until the trust is “dissolved.” The trust document specifies when this is to occur, such as at the death of the last beneficiary or after a stated period of time. When the trust is dissolved, its assets become a gift to your donor advised fund. This gift portion is known as the charitable remainder. If you wish, it can be used to create a memorial fund honoring whomever you choose.

A Gift With Income That Never Changes

A charitable remainder annuity trust is a way to make a gift while receiving a fixed and regular income. Income from such a trust can be a reliable supplement to other retirement plans. Through the use of such a plan, professional management of assets can also be achieved for you and/or surviving loved ones. The payments received each year will be at least 5% of the amount originally placed in the trust. The exact amount is determined by you when the plan is created.

For example: Alice Smith, 72, decides to place $250,000 in a charitable remainder annuity trust. She funds the trust with stocks that cost $250,000 and are yielding 2%, or $5,000, per year in income.

Here are the results she achieves:

Annual income for the rest of her life (7% of $250,000)... $17,500

Capital gains tax
when the trust is created... $0

Immediate tax deduction... $118,885

(May be carried forward for as many as five future years if amount is more than can be deducted in the year of her gift.)

Alice is pleased to be able to substantially increase her income while making a significant gift to fund future work in God’s Kingdom.

A Gift With Fluctuating Income

Like the annuity trust, the charitable remainder unitrust provides for a gift that returns an income. But unlike the annuity trust, the income from a unitrust fluctuates with the value of the assets placed in the trust.

You determine the annual payout percentage when the gift is made. Each year this percentage (at least 5% as required by law) of the value of the trust assets is paid to you or others you select. When the value of the investments goes higher, more income is received. The income will be less if the value of the assets declines. Additions can be made to this trust, and a tax deduction is allowed for part of each amount contributed.

For example: If Alice Smith chooses a unitrust paying 6%, the first year she receives $15,000. Next year, if the assets are worth $275,000, her income rises to $16,500 (6% of $275,000). If the value of the assets is less next year, her income will be reduced by a corresponding percentage

.

She is entitled to a deduction equal to over half of the amount with which she funds the trust. She also avoids capital gains tax at the time the trust is created. The charitable remainder unitrust can be an excellent way to provide for an income today with the possibility of future growth for those who believe that investment assets will grow in value in future years.

For many taxpayers, deductions for Individual Retirement Accounts (IRAs) and other retirement plans have been limited or eliminated, so the unitrust could play a welcome role in planning for retirement years.