The John Marshall Law School

Low Interest Rates Boost Unusual Gift Strategies

“It’s an ill wind that blows nobody any good,” according to 16th century writer John Heywood.  For example, the current low interest rate environment is great for mortgages, not so good for CDs and money market accounts, and very good for certain gift arrangements that people can use to support our programs. 

Tax-free Gift Annuity Payments.  Donors who arrange charitable gift annuities today will enjoy reliable fixed payments for life, plus charitable deductions.  Also important is that recipients’ payments will be mostly tax free during their life expectancies.  Under an IRS formula, the tax-free portion of an annuity payment soars if gifts are made while federal interest and discount rates are low.  So donors who establish a gift annuity this month might expect that 70% to 85% of their payments would be tax free. We can send you a personalized illustration.

Give a Home But Keep Living There.  We’ve received many gifts of residences over the years, usually from peoples’ wills.  A better plan – especially while federal interest and discount rates are low – may be to give a personal residence (including vacation homes) today but keep the right to live in the house for life.  Charitable deductions are at record high levels for these arrangements, and donors can invest their tax savings for additional income. 

Charitable Lead Annuity Trusts – No Time Like the Present.  It’s a perfect time to set up trusts that make annual payments to charities for a fixed number of years, and then distribute assets to family members (usually children) at reduced gift and estate taxes.  Furthermore, donors can reduce their future income taxes since investment income on assets transferred to the trust will no longer be taxed to them.>