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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.

 
Advantages
Disadvantages
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

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

Pooled Income Fund

Income tax deduction

Income paid to beneficiary for life

Non-income-producing assets can be converted to income-producing assets

Income is unpredictable from year to year

Income received is taxed as ordinary income

Remainder interest will usually go to only one charity

Charitable Remainder Unitrust

Current income tax deduction

Avoids capital gains tax on appreciated property

Reduce future estate taxes

Transfer of assets is irrevocable

Qualified appraisal generally required

Complex administration and setup

Charitable Remainder Annuity Trust

Income tax deduction

Avoids capital gains tax on appreciated property

Fixed income

Fixed payment cannot be limited to the net amount of trust income

Qualified appraisal generally required

Complex administration and setup

Gifts of Insurance

Current income tax deduction possible

Enables donor to make a large future gift at small cost in the future

May require annual premiums

In some cases the death benefit could be part of donor’s taxable estate


© 2003 Emerald Publications

 

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