Gifts That Provide Income
Some people want to support the University's liberal arts mission but feel they can not give away income or assets that they or their loved ones might need in the future. If this fits your situation, you might be interested in a gift that provides an income to the person(s) of your choosing for their lifetime or a fixed period of years. These gifts can also be helpful solutions to common financial concerns.
Gifts that provide income are divided into two categories: those that pay a fixed amount and those that pay a variable income. Both gift types are irrevocable.
Fixed Income Gifts--the steady flow
Fixed incomes are important especially to older persons who are concerned about having enough financial resources to cover their lifetimes. There are two types: The charitable gift annuity and the charitable remainder annuity trust.
Gift Annuity
This is a contract directly between you and the University of Puget Sound. In exchange for a gift, the University would pay the income recipient (yourself, you and your spouse, or another loved one) a guaranteed lifetime income based on the amount of the gift and the payout rate in effect for the age(s) of the income beneficiaries. The University uses the payout rates established by the American Council on Gift Annuities--the older the income recipients, the higher the payout rate. Part of the income payment is also tax-free.
Charitable Remainder Annuity Trust
You would place assets into the trust which would be managed by the trustee. The trust would stipulate the annual amount of income that you, you and your spouse, or another loved one would receive. Income payments can be for one or two lifetimes, a fixed period of years or both. Cash and long-term appreciated securities are the appropriate assets to donate to a charitable remainder annuity trust.
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Variable Income Gift--the hedge against inflation
Younger donors are more concerned with increasing their incomes and protecting themselves against the consequences of inflation. The charitable remainder unitrust is the gift approach for them.
As in the charitable remainder annuity trust, you would place assets into the trust that would be managed by the trustee. However, the income beneficiary would receive an income equal to a fixed percentage of the trust's annual value. This provides some hedge against inflation--as the value of the trust increases, so does the beneficiary's income. Cash and long-term appreciated property (such as real estate and securities) are the appropriate assets to donate to a charitable remainder unitrust.
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Tax Benefits of Life Income Gifts
Fixed incomes are important especially to older persons who are concerned about having enough financial resources to cover their lifetimes. There are two types: The charitable gift annuity and the charitable remainder annuity trust.
Charitable Income Tax Deduction
Whether you create a charitable gift annuity or one of the charitable remainder trusts, you receive a current income tax deduction for a portion of the gift's fair market value.
By-Pass of Capital Gains Tax
In addition, if you donate long-term appreciated assets (securities, closely held stock, real estate) to a charitable trust, you by-pass the tax on the capital gain and the trust does not pay capital gain tax when it sells the property. In the case of the gift annuity, you by-pass tax on a portion of the gain and the balance is spread over the income beneficiary's lifetime.
Tax-Free Growth
Charitable remainder trusts are tax-free entities so that there is no income or capital gains tax on the principal. Consequently, the trust principal can grow quickly which frequently makes the unitrust a more interesting option for many donors.
Estate Tax Savings
Finally, you remove the donated assets from your estate for estate tax purposes.
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How Does Puget Sound Benefit?
After all the income payments have ceased, whatever remains in the gift annuity or charitable remainder trust passes to the University of Puget Sound to support the program agreed upon by yourself and the University when the gift was established.
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