A life income gift allows individuals to make a substantial
gift to FIU while still providing for their personal financial
needs. These are "split interest" gifts which combine a gift
to FIU with income to the donor or other individual(s) the
donor may designate. Such arrangements are especially attractive
because they offer significant tax benefits and may also enable
the donor to increase his or her income from the assets contributed.
Charitable Remainder Trusts
Charitable remainder trusts are popular estate planning tools because of the planning flexibility they afford. A donor irrevocably transfers assets to a trustee, under a trust agreement that specifies how both income and principal are to be distributed. Such trusts generally pay income to the donor or other specified individuals for either their lifetimes or a period of up to 20 years. At the termination of the trust, the remainder is distributed to one or more charitable beneficiaries.
Charitable remainder trusts can take one of two forms.
- The charitable remainder unitrust provides for annual payments to the income beneficiary or beneficiaries equal to a fixed percentage of the assets of the trust, revalued annually .
As a result, the annual income from the trust varies according
to the investment of the assets in the trust. The donor determines
the fixed percentage (no less than 5%) when the trust is
formed.
- The charitable remainder annuity trust provides
for a fixed dollar payout per year, which must be equal to
5% of the assets transferred to the trust. The choice of
which type of charitable remainder trust is appropriate depends
on the donor's income objectives, tolerance for risk, and
charitable intentions. And, within the framework of the charitable
remainder unitrust, there is a wide variety of options to
structure income streams to meet the donor's short-term and
long-term financial goals.
Benefits: Some of the benefits of charitable reminder trusts include:
- Income for life or a period of years that might exceed
income from assets used to fund the trust.
- The unitrust form can provide income that may increase
over time as a hedge against inflation, and its income stream
can be adjusted to meet changing needs over time. The annuity
trust can provide the security of a fixed income investment.
- Forgiveness of capital gains taxes if the trust is funded
with appreciated property.
- A substantial income tax deduction in the year the gift
is made.
- Can reduce estate taxes and estate administration expenses.
- Wealth replacement techniques can minimize or eliminate
fear that inheritance for loved ones will diminish because
assets are removed from taxable estate.
Establishing a charitable remainder trust necessitates the assistance of an experienced tax or estate planning attorney. For more information about charitable remainder trusts and a free customized computer analysis of its benefits that fits your financial situation, contact Roger Wyman at the address below. Jeffrey G. Fischer
Executive Director
Office of Planned Giving
Office of Corporate & Foundation Relations
MARC 557
305.348.0130 phone
305.348.3337 fax
fischerj@fiu.edu
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