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Gifts that Pay Income

A Dually beneficial and often overlooked planned giving option is a Life Income Gift. A life income gift provides lifetime income to a donor as well as a significant tax benefits through the establishment of charitable gift annuities and charitable trusts.

A charitable gift annuity is a contract between Providence General Foundation and a donor. In exchange for your irrevocable gift of cash, securities or other assets, the Foundation agrees to make fixed cash payments (in installments) for the life the donor or married couple. Life income payments begin after the gift is made. and donors need to be at least 65 years old to qualify for this giving option.

Donors can also elect a deferred payment gift annuity. With a deferred payment annuity, your income payments begin at a specified future date. By deferring payments to a later date, you receive a higher annual income, which may be used as a source of guaranteed retirement income. Donors need to be at least 35 years old to qualify for the deferred payment option. The many financial benefits of gift annuities for the donor can include a federal income tax charitable deduction, reduced and deferred capital gains tax on appreciated property, reduction of taxable estate, and enhanced cash flow. There is a minimum contribution requirement of $10,000 to establish a gift annuity. Cash, mutual funds, stock, or real property may be used to fund an annuity.

A charitable remainder unitrust is often considered the most popular and flexible type of life income plan. A charitable remainder unitrust is an irrevocable trust that can provide income to one or two beneficiaries with the remainder going to charity. Cash, real property, securities, or other assets are transferred into the trust. The trustee manages the assets and pays the donor (or designated beneficiary) a variable income (The amount paid will vary with the investment performance of the trust) for life or for a designated number of years. When the trust terminates, the remainder of the trust is transferred to the Providence General Foundation as a lump sum gift.

Another popular type of life-income gift is a charitable remainder annuity trust. A charitable remainder annuity trust is an irrevocable trust that can provide income to one or two beneficiaries with the remainder going to charity. Cash, securities, real property, or other assets are transferred into the trust. The trustee manages the assets and pays a fixed income for life or for a set number of years. When the trust terminates, the remainder of the trust is transferred to the Providence General Foundation as a lump sum gift.

A charitable lead trust is almost the opposite of a charitable remainder trust. Like a charitable remainder trust, Cash, securities, real property, or other assets are transferred into the trust. However, with a charitable lead trust, Providence General Foundation receives an income stream for the life of the trust instead of the donor. At the end of the trust’s term, the remaining value and any growth it has realized are passed on a beneficiary or heir. Although there is no income tax deduction when you create a charitable lead trust, your estate tax is greatly discounted and any growth is passed to your heirs gift and estate tax free. For this reason, a Charitable Lead Trust can be beneficial for donors who anticipate high transfer taxes when passing on their assets to their heirs.