Edison State College Foundation Inc

Climbing the Gift Annuity Ladder

Back when CD interest rates were higher, it became popular for investors to purchase new CDs every six months, with maturity dates ranging from six months to as long as five years.  The idea was to maximize overall interest payments by blending long-term and short-term rates. 

Unfortunately, “laddering” CDs hasn’t worked so well in today’s low interest rate environment.  Charitable gift annuities, on the other hand, can offer friends a form of laddering that ensures higher payouts and personal satisfaction, as well.  Here is an example:

When Ruth turned 76 in 2012, she contributed $10,000 for a gift annuity that pays her $600 (6%) a year for her life.  Last month she established another $10,000 gift annuity, and, because she’s a year older, we will pay her $620 annually.  At current payout rates, if she continues this giving pattern, her payments from “laddered” gift annuities would be as follows:

Year	Gift	Age	Payout
2012	$10,000	76	$600 (6.0%)
2013	10,000	77	620 (6.2%)
2014	10,000	78	640 (6.4%)
2015	10,000	79	660 (6.6%)
2016	10,000	80	680 (6.8%)

Total

$50,000

$3,200 (6.4% average)

Ruth also will receive substantial charitable deductions and her annual payments will be about 80% tax free during her life expectancy. 

 

---

 

Creative Charitable Gift Annuity “Apps”

There seems to be no end to the useful applications generous people have found for charitable gift annuities:

• A Minnesota woman set up nine charitable gift annuities in her will, all benefitting members of her family.  She wanted to help a worthwhile cause, but also wished to ensure that family members would think of her every time they received a quarterly gift annuity payment.
• When their housekeeper of 32 years announced her retirement, a married couple and their family went together and set up a charitable gift annuity for the lady that would augment her Social Security payments and serve as a token of their love and appreciation.
• An IRA owner asked the IRS if she could leave part of her IRA to an organization to establish a gift annuity for a family member.  (The IRS approved.)
• “Minimum distribution” rules required Cynthia to withdraw $25,000 last year from her 401(k) plan – all taxable income that she currently has no need to spend.  She decided to use $20,000 of the distribution for a charitable gift annuity that will greatly reduce her taxes and provide 80% tax-free payments during her life expectancy.

We would love to help you explore the many opportunities to benefit yourself and others with a charitable gift annuity.  Just call our office.

 

---

Do I Really Need an Attorney to Write My Will?

It’s possible to write your own will using “cookie cutter” legal forms or computer software.  But there are countless ways to go wrong with a do-it-yourself will, and it pays to have the expert guidance of an estate planning attorney for a document that may dispose of hundreds of thousands, or even millions, of dollars.  A simple will is one of the least expensive of all legal documents, and the potential cost savings to your family, and benefit to your own peace of mind, will far outweigh the legal fees. 

The first step in making a will is to contact an attorney, who will take matters from there, send you a planning checklist and schedule an appointment.  The hard part for many people is determining whom to call.  The answer can be fairly simple: Ask friends or family members for references.  Who was the attorney who wrote their wills or served as estate attorney when there was a death in the family?  Were they satisfied with that person’s performance?

If you have recently moved to a new community and can’t get the first-hand experiences of others, call the local bar association and ask for names of attorneys who are active in estate planning and probate work.  The American Bar Association provides links to state associations at abanet.org/barserv/stlobar.html.  Ask prospective attorneys how much of their practice is devoted to wills and probate, and what the estimated costs will be.

We would be happy to provide you with information on how bequests to our future can be a satisfying part of your estate plan, including trusts that provide for family members with eventual assistance for our programs.  Just call our office.

 

---

Hidden Sources of Retirement Income

Many retired men and women report that their biggest concern in life is simply running out of money.   But additional sources of income are sometimes available to retirees.

• Unneeded life insurance can often be converted into a paid-up lifetime annuity. Or you can cash the policy and reinvest the proceeds to provide more retirement income
• Your house can create additional revenue.  If you move to a retirement community you can sell your principal residence and take advantage of the $250,000 exclusion ($500,000 for married taxpayers) on capital gains taxes (you must have owned and occupied the house for two of the five years prior to sale). If the exclusions won’t cover your capital gains taxes, consider transferring the house to a charitable remainder trust and reserving lifetime payments of at least 5%.  You’ll avoid all taxes and receive a charitable deduction, as well.
• Working part-time is sometimes an option.  Post-retirement employment won’t reduce your Social Security benefits if you are age 66 or older; some reductions occur from ages 62 through 66.
• Many retirees own U.S. savings bonds that can be cashed and converted into an income stream.  With most bonds, this means paying tax on accumulated interest, but there is a satisfying alternative:  A charitable gift annuity.  You must report any interest that has built up on the bonds, but your gift annuity will create a charitable deduction that may reduce or even eliminate the taxes.  Furthermore, you will receive lifetime payments at attractive payout rates, part of which will be tax free during your life expectancy.  What’s more, the gift annuity is “an income you cannot outlive.”