Gifting Options - Planned Giving - Life Income Gifts
Life income gifts involve the irrevocable transfer of assets in exchange for income for life (or a term of years in some cases) for one or more beneficiaries. Only after the passing of the last beneficiary are the remaining proceeds used for the purpose the donor designated. The NC State Engineering Foundation offers two types of charitable remainder trusts (the annuity trust and the unitrust ) and two types of charitable gift annuities (one with payments that start now and a deferred option with payments starting in the future). All of these gifts share several common characteristics:
- An immediate income tax deduction for the remainder value of the gift
- Estate tax savings
- Income for life or a term of years
- Relief or total avoidance of capital gains tax on the transfer
- The satisfaction of making a significant gift in support of whatever areas you choose in the College of Engineering at NC State
Charitable Gift Annuity
Deferred Gift Annuity
Charitable Remainder Trusts
The Unitrust
The Annuity Trust
Charitable Gift Annuity
The easiest and simplest form of a life income gift is the charitable gift
annuity. This is a simple one and a half page contract between the donor and
the NC State Engineering Foundation, whereby the Foundation guarantees to pay
the donor, the donor and his or her spouse, or another beneficiary, a set sum
annually for life. The payments remain the same over the lifetimes of the income
beneficiaries, and often a portion of the income received is tax exempt. The
interest rate paid depends on the ages, of the income beneficiaries and whether
the payments are to start at once or be deferred to some point in the future.
Charitable gift annuities can be funded with cash or securities. Additions
are not permitted to a charitable gift annuity or a deferred gift annuity;
however, a new contract can be drawn at any time.
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Deferred Gift Annuity
Deferred gift annuities can be an excellent retirement income or IRA substitute.
Since the payments are deferred for at least one year, the interest rate paid
will be substantially higher than for an immediate payment annuity and the
charitable deduction will be larger as well. In certain circumstances, real
estate can be used to fund a deferred charitable gift annuity.
Requirements to establish a charitable gift annuity or deferred gift annuity:
- Minimum of $10,000
- Minimum age of 55 for a standard annuity. Minimum age for a deferred annuity of 40 with a 15 year deferral
- One or two lives only
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Charitable Remainder Trusts
This type of irrevocable gift can provide significant future support to the
ECE Department at NC State while potentially increasing the income of the beneficiary
or beneficiaries. Payments will be made to the beneficiaries for either their
lifetimes or for a term of years (20 is the maximum allowed by law). The donor
directs how the proceeds will be used. Only at the conclusion of the trust
is the College of Engineering able to use the gift for the intended purpose.
There are two types of charitable remainder trusts--the unitrust trust and
the annuity trust.
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The Unitrust
If your goal is to provide an income stream to yourself, your spouse or other
beneficiaries and provide a hedge against inflation, then you should consider
a charitable remainder unitrust . This type of charitable trust allows you
to make additions to the trust principal at any time, and pays income based
on a fixed percentage of the trust assets as valued each year. As the value
of the trust increases, you share in that appreciation by receiving a larger
income distribution.
This type of trust can be funded with cash, securities, real estate or other personal property. The donor avoids capital gains tax on the transfer to the trust thereby leaving the entire value of the gift available to be reinvested to benefit the named life beneficiary. The assets placed in the trust will not be taxable in the donor's estate as long as the beneficiaries are limited to the donor or the donor and his or her spouse.
Requirements to establish a charitable remainder trust:
- Minimum amount of $50,000
- One or two lives only unless a term-of-years trust is used
- Beneficiary 50 years of age or older unless a term-of-years trust
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The Annuity Trust
If you would prefer to receive constant payments from your life income gift,
you might consider a charitable remainder annuity trust. Like a charitable
remainder unitrust , the annuity trust provides the donor with capital gains
tax avoidance, immediate income tax deduction and the ability to designate
how the funds will ultimately be used by the College of Engineering. However,
unlike the unitrust, the payment from an annuity trust is based on a percentage
of the market value of the trust assets at the time it is funded and the payment
amount never changes. Additions to the annuity trust are not allowed.
Requirements to establish a charitable remainder trust:
- Minimum amount of $50,000
- One or two lives only unless a term-of-years trust is used
- Beneficiary 50 years of age or older unless a term-of-years trust
