Gifts That Pay You Income
Life-income gifts can be a wonderful way to give to Millikin while getting a benefit for yourself and your loved ones, as well. Life-income gifts can provide you with a reliable stream of income, while offering significant tax savings and making a meaningful future gift to Millikin.
Millikin has benefitted from the generosity of donors who have created charitable remainder unitrusts and charitable remainder annuity trusts. Click through the tabs below for more information about these life-income gifts.
Charitable Remainder Trusts
A charitable remainder trust is established by irrevocably transferring assets to a trustee, who invests those assets and pays you or another beneficiary a particular amount of income for your lifetime or a period of years. The remaining assets in the trust are distributed to Millikin after your lifetime. There are two types of charitable remainder trusts: charitable remainder unitrusts (CRUTs), and charitable remainder annuity trusts (CRATs). Read on to learn more about these giving opportunities.
Charitable Remainder Unitrust
A CRUT is a tax-exempt, irrevocable trust designed to reduce the donor's taxable income by paying the donor or another beneficiary an annual amount of interest-at least 5% but no more than 50%-based upon the principal of the trust, which is revalued annually. This amount is paid for the lifetime of the donor or beneficiary, or for a fixed term of no more than 20 years. Additional assets can be placed in the trust. When the trust ends, the remaining assets-the "charitable remainder"-are distributed to Millikin. You receive a federal income-tax deduction for the charitable remainder value of Millikin's interest in the trust, and are not subject to capital-gain taxes if the trust was funded with appreciated assets.
Example: Joanna Smith, age 65, owns several shares of stock worth $100,000, which she purchased many years ago for $10,000. She would like to sell the stock, but doesn't want to pay the steep capital gain tax on the sale. By working with her financial advisor and attorney, Joanna transfers the stock into a unitrust paying an annual amount of 5%. She will receive 5% of the fair market value of the trusts assets, revalued each year, for her lifetime. This amount is significantly more than the dividends she was paid for the stock, and she also completely avoids paying the capital gains tax that would have been levied had she sold the stock. After Joanna's lifetime, Millikin will receive the remaining trust assets.
Charitable Remainder Annuity Trust
A CRAT is similar to a CRUT in how it is established; however, rather than paying the beneficiaries a percentage of the trust assets as revalued annually, the CRAT provides payment to you or a beneficiary of your choosing in a fixed-dollar amount based on the value of the trust when it is established. The amount must be at least 5%, but no more than 50%, of the initial fair-market value of the trust. Unlike a CRUT, additional assets cannot be placed in a CRAT. Benefits include a federal income-tax deduction for the charitable remainder value of your interest, and you avoid capital gain tax if the trust is funded with appreciated property.
We strongly advise donors considering this type of gift plan to first consult with their attorney and/or financial advisor for additional information.