Best Gift Ideas When Interest Rates Decline

Low interest rates are helpful if you are in the market for a home mortgage or a car loan, but low interest rates also can improve the tax results of certain charitable contributions.

• Charitable gift annuities. The tax benefits of a gift annuity include income payments that are partly tax free during the donor’s life expectancy, and this benefit expands under low interest rates. Charitable deductions are lower when interest rates decline, but some donors are unable to use deductions, anyway, because they do not itemize their deductions.

• Homes and farms. Friends who intend to contribute personal residences or farm property in their wills might consider a tax-saving alternative: deeding the property over while reserving lifetime use and occupancy. Deductions for land given in this fashion can be as high as 50% to 70%, based on age, in the present low interest rate environment.

• Forgiving payments. Donors who have arranged charitable remainder annuity trusts sometimes find they simply don’t need the income provided by these gifts. Giving up the right to remaining payments (part or all) frees up funds immediately for use in our programs and results in robust deductions for donors.

• Charitable lead trusts. Declining stock prices and record-low interest rates make today the perfect time for these “temporary” gifts of income. The plan would be to transfer income-producing assets or cash to a trust that pays charitable organizations for several years then returns the assets to the donor’s family – at significant savings in federal transfer taxes. Income tax savings are available, as well.

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