Explore your options, including tables and sample rates of return, among the three illustrations outlined here. LSS/NCA encourages you to speak with your financial advisor and your loved ones about the planned giving options that are best for you.
Charitable Gift Annuities
A charitable gift annuity is the most commonly used life-income gift. It provides donors with fixed payments for life based on their age at the time of the gift. A portion of these payments is tax-free. Most annuities are funded with cash or appreciated securities. The minimum amount needed to fund a charitable gift annuity at LSS/NCA is $1,000.
The rates of return vary with the age of the annuitant(s) at the time of the gift; the rates for a single-life annuity are slightly higher than they are for a two-life annuity. The minimum age is 60.
Here are two examples:
This is an educational illustration and does not represent legal or tax advice. The value and cost numbers have purposely been selected as round numbers to allow for personal interpretation. The value used is not a minimum, maximum or suggested amount. Please consult your legal and tax advisors about your specific situation.
Charlotte W. is a retired nurse grateful to LSS/NCA for the adoption of her two children through the organization. She is careful about managing her budget, however, and didn't think she'd be able to consider a major gift to the LSS/NCA. She had $100,000 in CDs that were producing a 2% annual return for her. The Development Office showed her how she, at age 75, could use that same asset to fund a gift annuity at LSS/NCA for which she would receive annual payments of $7,100, a part of which would be tax free. Charlotte was delighted to realize that she could actually count on more income by giving her money away!
Gerald and Lydia Y. have been connected to LSS/NCA since the 1960s when they moved to the area and got involved through their congregation. They have some highly appreciated stock that they have hesitated to sell because of the capital gains tax they would have to pay. By giving that stock to LSS/NCA for a charitable gift annuity, however, they will greatly reduce those taxes while creating a revenue stream that is far greater than what they had been receiving from the stock. Because they are each 85, LSS/NCA will be guaranteeing an annual rate of return of 7.9% as long as one of them is alive.
In addition to the income they receive from their annuities, Charlotte and the Ys also received a charitable gift deduction in the year they made their gifts. And just as important, a portion of the annual income from their annuities is tax free.
Deferred Gift Annuities
Let's suppose you would like to consider a gift annuity to LSS/NCA but are still working and don't yet need the income it would produce. In this case, a deferred gift annuity might be the best choice for you. The longer you defer your payments from the annuity, the higher your rate of return will be.
This is an educational illustration and does not represent legal or tax advice. The value and cost numbers have purposely been selected as round numbers to allow for personal interpretation. The value used is not a minimum, maximum or suggested amount. Please consult your legal and tax advisors about your specific situation.
Brenda S., age 60, is a human resources specialist for the government who believes strongly in LSS/NCA’s mission of walking with those in need. She earns a comfortable salary, but when she retires in five years her income will be about half of what it is now. By deferring her first payment until her retirement, she will receive income at the rate of 7.6% instead of 5.7%. In addition, Brenda will be paying taxes on that income at a much lower rate, since her total income after retirement will be lower than it is now. Brenda is delighted to make a $20,000 gift to LSS/NCA. She receives a charitable deduction for it this year, and starting five years from now, she will receive $1,520 every year for the rest of her life, some of which will be tax free.
Charitable Remainder Trusts:
Unitrusts & Annuity Trusts
Charitable remainder trusts (CRTs) are the life-income gifts that provide the most flexibility to donors. They come in two versions:
- A unitrust will provide you or your beneficiaries variable income based on the principal of the trust.
- An annuity trust will provide fixed income.
Trusts can provide income to multiple beneficiaries for life or for a fixed set of years. As such, they may provide retirement income or perhaps college expenses for a child or a grandchild.
These trusts are called remainder trusts because they provide income to you or your beneficiaries for a certain amount of time, after which the remainder of your gift becomes the property of LSS/NCA.
The minimum amount needed to fund a Charitable Remainder Trust is $50,000. They are ideal if you:
- are interested in making a major gift to LSS/NCA and maintaining (or possibly increasing) your income;
- hold securities or real estate and want to avoid capital gains taxes; or
- need flexibility in the distribution of your gift.
Gertrude M. inherited a house that she had no use for. By giving the house to LSS/NCA, she was able to set up a trust that now pays all her expenses in her retirement community. She also avoided considerable taxes, indirectly increasing her income. She has the pleasure of knowing that someday, her gift will be used to establish a fund that will benefit LSS/NCA programs for generations to come.
For a personalized illustration of any of these life-income gifts, please contact Director of Development Summer Parrish at ParrishS@lssnca.org or (202) 723-3000.