Giving and Receiving: Four Tax-Smart Ideas
Many friends would like to contribute more, but are concerned that they cannot afford to give up current income. Here are some ways to give while keeping income for life. In some cases, it’s even possible to boost income through these gifts.
Charitable gift annuity — A gift annuity offers a fixed stream of payments for life to one or two individuals, as well as a charitable deduction. A portion of each annuity is tax-free income. Capital gains tax can be reduced and deferred if the gift annuity is funded with appreciated stock or other assets.
Charitable remainder annuity trust — This trust pays the donor (or any beneficiaries the donor names) a fixed amount each year for life or a term of up to 20 years. The payout amount must be at least 5%, but not more than 50%, of the amount contributed to the trust. The charitable deduction, which depends on how long the trust will last and the annuity amount chosen, must be at least 10% of the amount transferred to the trust.
Charitable remainder unitrust — The payout from a unitrust is a percentage of the annual value of the trust, so income increases when the value of the trust assets rises. There is a 5% minimum payout (50% maximum), and the value of charity’s remainder interest must be at least 10% of the trust’s initial value.
Remainder in home or farm — It’s possible to make a gift of a home or farmland but continue living in the home or farming the land (or receiving rental income) for life. The deduction depends upon the value of the property and the age(s) of the donor(s).
The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.
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