Some donors find that charitable gift annuities or charitable remainder trusts enable them to meet their charitable goals, take advantage of tax benefits and ensure a stream of income for the rest of their lives. There are many types of annuities and trusts.
The Delaware Community Foundations can help you determine if an annuity or trust is right for you and, if so, which is the right vehicle for you.
The Charitable Trust Quick Reference below will give you an overview of some of the available types of trusts.
Charitable Trusts Quick Reference
Type |
Charitable Gift Annuity (CGA) |
Charitable Remainder UniTrust (CRUT) |
Charitable Remainder Annuity Trust (CRAT) |
Charitable Lead Annuity Trust (CLAT) |
|---|---|---|---|---|
Set Up By |
DCF staff with advice from your advisor, if desired. | Must involve professional advisor. | Must involve professional advisor. | Must involve professional advisor. |
Definition |
A gift annuity is a combination of a gift to charity and an annuity and is used when a guaranteed income is desired. A gift of cash or securities is transferred to Foundation in exchange for a contractual life income. Income is guaranteed by assets of the Foundation. A portion of each payment is interest earned and taxable as ordinary income. Part of the payment is return of principal and is tax free. If an annuitant survives beyond life expectancy, all payments are taxed as ordinary income. Any capital gains taxes due on the asset that was exchanged for the annuity are paid over the annuitant’s life expectancy. | Most popular and flexible life income plan; cash, securities, real property or other assets are transferred into a trust. Trustee manages trust assets and pays beneficiaries a percentage of the assets of the trust valued January 1 of each year. Payments may be for life or a term of years. When trust terminates, remaining assets in trust are transferred to Foundation for donor’s desired charity. Foundation may accept to be Trustee or may have a surviving interest in the trust. | Popular life-income plan where cash, securities, real property, or other assets are transferred into a trust. Trustee manages trust assets and pays donors or others that donor chooses a fixed income for life or for a term of years. When trust terminates, remaining assets in trust are transferred to Foundation fund for desired charity. | Viewed as opposite of a charitable remainder trust. Donor transfers property to lead trust, which pays a percentage of the value of trust assets, usually for a term of years, to the charity. At the end of trust term, remaining assets and any growth realized are passed to donor’s heirs. One of the few transfer devices currently used that can discount the value of original assets and result in little or no taxes. At the same time, charitable desires are met. |
Tax Benefits |
Tax deduction on charitable portion of initial contribution; annuity payments partially tax free based on calculations determined by IRS. Capital gains are spread over life expectancy. | Donor receives an immediate tax deduction for the charitable portion of the initial contribution. Deduction based on life expectancy and payout percentage to beneficiaries. | Donor receives an immediate tax deduction for the charitable portion of the initial contribution. Deduction based on life expectancy and payout amount to beneficiaries. | No income tax deduction when created but income earned in trust is not attributed to you. Trust is taxed according to trust rates. Gift or estate tax is discounted and any growth is passed to heirs free of gift and estate taxes. |
Best to Use When |
Donor needs guaranteed fixed income for life and gift amount is between $15,000 and $100,000. | Donor needs income for life or a specified term of years. Gift amount is over $100,000. | Donor needs income for life or a specified term of years. Gift amount is over $100,000. | Has a moderate to large taxable estate; desires to pass certain assets to heirs; wants to hold assets with growth potential. |
Require
|
$15,000 minimum. | $100,000 minimum. | Should have $100,000 minimum. | Estates over $5 million |
Tax Reporting |
Receives 1099R from Foundation. | Donor will receive K-1 to be included in tax return. | Donor will receive K-1 to be included in tax return. | Sophisticated vehicle used in passing wealth to heirs. |
DCF Fees |
Annual fee of one-half percent (.5%) of fair market value calculated monthly. Does not affect payment to beneficiary. | If Foundation is Trustee, annual fee is one-half percent (.5%) of fair market value up to $1,000,000; one-quarter percent (.25%) on the next $4,000,000 and one-tenth percent (.1%) of amounts over $5,000,000. | If Foundation is Trustee, annual fee is one-half percent (.5%) of fair market value up to $1,000,000; one-quarter percent (.25%) on the next $4,000,000 and one-tenth percent (.1%) of amounts over $5,000,000. | If Foundation is Trustee, annual fee is one-half percent (.5%) of fair market value up to $1,000,000; one-quarter percent (.25%) on the next $4,000,000 and one-tenth percent (.1%) of amounts over $5,000,000. |