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Life Income Gifts
Gifts that Give You Something in Return Perhaps you would like to make a substantial gift to Wellspring House 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 – funded by cash, stock or property – allows you to meet these important obligations while making significant contributions to Wellspring and receiving a charitable deduction on your current income taxes. Wellspring offers two types of life income gifts:
Each option has its own purpose and advantages. Charitable Remainder Trusts A Charitable Remainder Trust is an irrevocable trust into which you transfer cash, securities or property, retaining 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 it pass to Wellspring House. The benefits to the donor may include:
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: B and D 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. B and D created a charitable remainder annuity trust funded with $100,00 of appreciated stock (without triggering 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 demonstrated how the Trust will work.
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. A Pooled Income Fund For donors who wish to make a gift to Wellspring of $20,000 or more, the Pooled income Fund is another excellent option with two important benefits: 1) it entitles the donor and/or another beneficiary named by the donor to income for life. 2) the donor also qualifies for a current charitable income tax deduction. The gift may be funded by cash or by appreciated securities and is invested in an income producing fund similar to a mutual fund. The amount of the gift is used to purchase ‘shares’ in the fund. In return, the beneficiary receives a proportional amount of the income earned by the fund. If the value of the shares appreciates, the amount of the income (as well as the amount of your gift) may increase over time. Income payments are paid quarterly and vary with the Fund’s performance. A Final Note Low interest rates, while a boon to borrowers offer meager returns to retirees whose assets are invested in certificates of deposit or low-yielding stocks and bonds. Life income gifts such as those described here can increase your rate of return significantly for the rest of your life and give you a generous current income tax deduction as well. This type of gift is a sound way to increase your spendable income without resorting to risky or speculative investments, and will give you the advantage of a tax deduction not available through other types of investments. At the same time you will be making a valuable contribution that will support Wellspring’s work into the future. Planned
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