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A Charitable Gift Annuity provides a fixed income for the life of the donor and/or a beneficiary(ies). The donor receives a charitable deduction in the year the annuity is established, and a portion of the annual income is tax-free. Gifts of $10,000 are the minimum amount accepted in setting up a Charitable Gift Annuity. The Charitable Gift Annuity program is attractive to prospective donors because of the rates that are offered.
A Charitable Gift Annuity is a contract binding Lakeland College to pay the annuity. Payment is fixed by Lakeland College and is to be paid from the College's general assets. The fixed payment guarantee is one reason for the popularity of the charitable gift annuity. The annuity is part gift and part annuity: the donor makes a gift and also purchases a fixed income for up to two beneficiaries for life. The income amount could commence within the year that the gift is made (immediate annuity) or it can be specified to commence on a date a year or more in the future (deferred annuity). There is a $10,000 gift minimum, a limit of two beneficiaries, and all beneficiaries must have a minimum age of 50 years.
A Charitable Gift Annuity donor is entitled to a charitable income tax deduction for a portion of the value transferred. The actuarial calculation is based on the age of the annuitant, payment frequency, annuity rate, and IRS tables.
A 75 year-old donor has $10,000 in appreciated securities that are paying $400 (4%) annually through dividends. This donor could increase his/her income from that asset by over 100% by setting up a gift annuity. If the $10,000 were given to Lakeland College in return for a gift annuity, the annuitant (based on his/her age) would be offered a rate of 8.2% and would receive annual payments of $820.00. In addition, he/she would benefit from an income tax deduction in the year of the gift and deferred capital gains tax due on the appreciation (capital gains tax is spread out over the life expectancy of the donor). The annuity rate is actuarially determined based on the age(s) of the donor(s) and /or beneficiary(ies). The rate is set by the Committee on Gift Annuities and can change periodically. However, once the annuity is set up, the rate is fixed and the payments will not change over the life of the annuity.
A Charitable Remainder Trust is an arrangement in which a donor transfers assets to a trust; the trust then pays an income to the donor or beneficiary(s) named by the donor. There are two primary types of Charitable Remainder Trusts. The first provides a fixed income payment to the beneficiary … this is an annuity trust. A trust that provides a variable income stream to the beneficiary(s) is called a unitrust.
The main difference between the two is that the income payment from a unitrust will vary based upon the results of the investment strategy of the trustee who manages the trust's assets. A trust can be established to run for the life of the beneficiary(s), or for a specified number of years. When the trust expires, the remaining assets become part of Lakeland's endowment.
A life estate agreement allows you to transfer title of a residence or farm that you own (you do not need to live in it) to Lakeland College, while you retain the right to use the residence for your lifetime, or the lifetime of someone you name. You keep any income that the property generates, and you are responsible for its upkeep. Upon death, Lakeland receives the property.