Life Income Gifts

Life Income Gifts

A charitable gift annuity is one of the favorite methods of gifting while retaining an income stream from the asset. It is a contractual arrangement between you and BSC Foundation. In exchange for your contribution of cash, securities, or other appreciated assets you will receive:
  • An excellent rate of return that is guaranteed and fixed for one or two lives
  • Payments that are partially tax-free for your lifetime
  • A charitable deduction for income tax purposes
  • Favorable treatment of capital gain assets (highly appreciated assets will cause some reduction in the tax-free portion)

The process is as easy as purchasing a certificate of deposit at your local financial institution. However, you do not need to worry about fluctuating interest rates or renewing the certificate. The annuity rate is based on the age of the income beneficiary(ies) at the time the gift annuity is established. After it is established, the rate does not change. The following chart provides sample gift annuity rates.
 

One-Life

 

Two-Lives

 
Age Rate of Return Ages Rate of Return
65 4.7% 65/65 4.2%
70 5.1% 70/70 4.6%
75 5.8% 75/75 5.0%
80 6.8% 75/80 5.3%
85 7.8% 80/80 5.7%

Deferred Gift Annuity

This gift annuity arrangement has many of the same advantages of an immediate charitable gift annuity. It can be used as a retirement planning or income deferral tool. Instead of an immediate payout, the payments start at a future date. The result is a higher charitable deduction and a higher rate of annuity payment.

Charitable Trusts

If you own stock that is paying you low dividends, maybe 1% or 2%, a life income trust may be an appropriate gift. You could transfer the stock to us and establish a charitable trust that would provide you with 5% or greater annual return. This income would be paid to you and/or loved ones for life, after which the assets would be distributed outright to us. Through such an agreement, you would be increasing your income and making meaningful (and tax deductible) contribution to us at the same time.

Example: Mrs. Jones, age 70, purchased some stock may years ago for $10,000 and now that stock is worth $100,000. She receives only $2,000 per year in dividends, or a 2% yield. By transferring the stock to a charitable trust and specifying that she wanted a 6% return for life she could:
  1. Triple her annual income (from $2,000 to $6,000)
  2. Avoid the capital gains tax she would otherwise incur on the sale of the stock
  3. Be entitled to a charitable deduction of approximately $55,000 (The amount of the deduction depends on the age of the donor, the rate of returns specified in the trust, the size of the gift, and other factors)
  4. Since the trust assets eventually pass to us, the asset would not be subject to estate taxes.

Charitable Lead Trusts

Charitable lead trusts are essentially the reverse of the life income gifts described above. The income from the trust is first paid to us; the charity's interest leads the way (hence the name of the trust). Under this arrangement, you transfer assets to a trustee who makes payments to us for a specified number of years, after which the assets are transferred to your heirs. The charitable lead trust allows you to pass assets on to your children and grandchildren either completely free or substantially free of all estate and gift taxes. It can make good sense for anyone in the 50% estate and gift tax bracket.

Bequests

We can be named as a beneficiary in your will in any one of a number of simple ways. An outright gift, either a designated dollar amount or percentage of your estate could be specified. We could also be named as a remainder beneficiary to receive funds only after specific sums have been paid to individual beneficiaries. It may be helpful to know that you can easily add us to your will through an amendment to your will called a codicil; thus your entire will does not have to be redrafted.

Not all of the available methods of giving can be included in this primer. Please contact the BSC Foundation, if you have any questions about a planned gift.