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What Gifting Strategies
Are Available to Me?
There are a number of
different gifting strategies available for planned giving. Each has its
advantages and disadvantages.
Instead of making an
outright gift, you could choose to use a charitable lead trust. With a
charitable lead trust, your gift is placed in a trust. The recipient of the gift
draws the income from this trust. Upon your death, your heirs will receive the
principal with little or no estate tax.
If you prefer to retain an
income interest in your gift, you could use a pooled income fund, a charitable
remainder unitrust, or a charitable remainder annuity trust. With each of these
strategies, you receive the income generated by your gift, and the recipient
receives the principal upon your death.
Finally, you could
purchase a life insurance policy and name the charitable organization as the
owner and beneficiary of the policy. This would enable you to make a large
future gift at a potentially low current cost.
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Advantages
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Disadvantages
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| Outright
Gift |
Deductible
for income taxes |
No
retained interest |
| Charitable
Lead Trust |
A current gift to
charity
Current income tax
deduction
Pass assets to
heirs at a future discount
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Transfer of assets
is irrevocable
If current income
tax deduction is taken, future income is taxable to donor
Donor gives up use
of income for life of the trust
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| Pooled
Income Fund |
Income tax
deduction
Income paid to
beneficiary for life
Non-income-producing
assets can be converted to income-producing assets
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Income is
unpredictable from year to year
Income received is
taxed as ordinary income
Remainder interest
will usually go to only one charity
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| Charitable
Remainder Unitrust |
Current income tax
deduction
Avoids capital
gains tax on appreciated property
Reduce future
estate taxes
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Transfer of assets
is irrevocable
Qualified
appraisal generally required
Complex
administration and setup
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| Charitable
Remainder Annuity Trust |
Income tax
deduction
Avoids capital
gains tax on appreciated property
Fixed income
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Fixed payment
cannot be limited to the net amount of trust income
Qualified
appraisal generally required
Complex
administration and setup
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| Gifts
of Insurance |
Current income tax
deduction possible
Enables donor to
make a large future gift at small cost in the future
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May require annual
premiums
In some cases the
death benefit could be part of donor’s taxable estate
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© 2003 Emerald Publications
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