Gifts that Give You Something in Return
Perhaps you would like to make a substantial gift to Big Cat Rescue but feel unable to do so because you need the income for retirement or to provide for someone who depends on you.
A ‘Life Income Gift’ provides you the satisfaction of making a meaningful lifetime gift without sacrifice.
A life income gift allows you to transfer assets now, and yet continue to receive income from the cash, stock, or other properties contributed. Besides knowing the good work your gift will do, benefits of a life income gift provide you with:
- Increase your income for life;
- Receive a generous charitable contribution deduction; and
- If you contribute stock, avoid any capital gains tax on the appreciation.
A life income gift may be particularly attractive if you have low-yielding assets, yet the same are highly appreciated — for instance a stock paying little or no dividends, but is now worth much more than you paid for it. By using the stock to fund a life income gift to Big Cat Rescue instead of selling it yourself, you can avoid or greatly reduce capital gains taxes and increase your spendable income.
Examples of Life Income Plans
Charitable Remainder Trusts
A Charitable Remainder Trust is an irrevocable trust into which you move cash, securities or property, reserving all or a part of the income from the invested asset for life – your life and /or that of a loved one, or for a fixed term of years. When the trust ends, the assets remaining pass to Big Cat Rescue.
Income from the trust may either be paid in the form of a fixed dollar amount (annuity trust) or a fixed percentage of the asset held in the trust (unitrust).
Charitable Remainder Trusts may be set up for either a fixed term of years or for life. In addition, they may be set up for up to two beneficiaries.
For example:
Jane and John Doe want to make gifts to their two grandchildren to help pay for their college tuitions and contribute to their income during the first years of work. Since they are financially comfortable and willing to irrevocably set aside a sum to accomplish this purpose, their financial advisor suggested a fixed term annuity trust for eight years.
Jane and John created a charitable remainder annuity trust funded with $100,000 of appreciated stock (without incurring a capital gains tax). The trust was invested conservatively to earn 7% while paying the grandchildren a total of $8,000 per year. Their financial advisor prepared the following chart to demonstrate how the Trust will work.
| Year End | Trust Value |
Cumulative Pay Out |
Year 1 |
$99,000 |
$8,000 |
Year 2 |
$97,930 |
$16,000 |
Year 3 |
$96,785 |
$24,000 |
Year 4 |
$95,560 |
$32,000 |
Year 5 |
$94,249 |
$40,000 |
Year 6 |
$92,846 |
$48,000 |
Year 7 |
$91,345 |
$56,000 |
Year 8 |
$89,739 |
$64,000 |
At the end of eight years, the grandchildren will have received $64,000 in annuity payments, and the charity would receive the principle – more than $89,000.
The charitable remainder annuity trust pays you a fixed dollar amount annually for life. The fixed payments are determined by the payout percentage selected at the beginning of the trust. You can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
Charitable Remainder Unitrust
The charitable remainder unitrust pays you a fixed percentage of the fair market value of the trust assets, as revalued each year. Like the annuity trust, you can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.
For example:
Mr. Edwards irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.
Life income gifts such as those described here can increase your rate of return considerably for the rest of your life and give you an abundant current income tax deduction as well. This type of gift is a solid way to increase your spendable income without going to risky or speculative investments, and will give you the benefit of a tax deduction not available through other types of transactions. At the same time you will be making a valuable donation that will support Big Cat Rescue’s work into the future.
When you are a life income donor, Big Cat Rescue will honor you with membership in the Legacy Society. We realize that with your special gift, you consider us to be part of your family, and we want to do our best to keep you informed as to how your gift will be used and to give you the opportunity to tell us of your wishes.
Your accountant or attorney can provide additional information on gift opportunities and which method would be the most beneficial for you and your family. This information is general in nature and does not constitute legal or financial advice, and should not be relied upon as a substitute for professional advice.
You can start helping right now with a tax deductible donation:
|