Life Income Gifts
Life income gifts allow donors to enjoy the benefits of an increased return on their investment income while also providing significant resources for Billings Clinic.
Life-income arrangements include:
Benefits of a Life-Income Plan include:
- a stream of income for life
- a charitable income-tax deduction in the year you make the gift
- a charitable estate-tax deduction
- a Montana Tax Credit if funds benefit an endowment
- you gift that will benefit Billings Clinic now and in the future
Charitable Gift Annuity
|I recently established my fifth gift annuity with Billings Clinic Foundation. It was easy to set up and it provides me with guaranteed monthly income. I highly recommend a gift annuity to anyone interested in financial security. -Marge Lunde, Billings Clinic Nurse Alum.
In this illustration the donor would receive a federal income tax deduction of $18,879 in the year of the gift, possible income tax savings of $5,664 and a Montana Endowment Tax Credit ($35,000 x 40%) $7,561.00.
*This educational illustration is not professional tax advice; consult a tax advisor about your specific situation.
Establishing a Gift Annuity is simple. You choose the assets, such as cash or stock, to fund a gift annuity, which in turn, provides you a guaranteed fixed income for life. Arrangements are available for one or two persons and provide comparatively high yields without speculative or risky investments. Income payout rates are based on the age(s) of the annuitant(s) – the older the annuitant(s) the higher the payout rate. A portion of this income is also tax free.
You receive an immediate charitable income tax deduction for establishing a Gift Annuity. And if you direct the charitable remainder to our endowment fund it also qualifies for the Montana Endowment Tax Credit. These deductions reduce the “cost” of a gift by providing you with immediate tax savings.
Benefits of Charitable Gift Annuity
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- Guaranteed, fixed payments for life
- Attractive rates of return
- A substantial income deduction
- A portion of each payment is tax-free
- Satisfaction of knowing that your gift will make a difference at Billings Clinic
Deferred Gift Annuity
A deferred charitable gift annuity is similar to a regular gift annuity in that the donor receives a life income in exchange for an irrevocable gift of cash, securities or other assets. However, in this case the lifetime annuity payments are deferred to a future date set by the donor. The donor qualifies for a federal income tax deduction at the time of establishing the gift annuity. This is ideally suited for a younger donor who could use the tax deduction today but doesn’t need the income until retirement.
EXAMPLE: A cash gift of $50,000 from donors aged 60 and 58. They choose to postpone receipt of annuity payments for 10 years. They receive a 9.3% rate or $4,650 annually for their lives and are eligible for a $12,304 Federal income tax deduction (IRS discount rate of 4%). The donor designates how the remainder is to be used upon death, such as, to establish an endowment fund.
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Charitable Remainder Trust
Charitable Remainder Trusts (CRTs) continue to grow in popularity among our Billings Clinic donors for several good reasons.
Charitable Remainder Trusts:
- Are easy to understand and to arrange
- Create income and estate tax savings
- Help avoid capital gains tax
- Provide inflation protection
- Generate income
- Provide donors with a special feeling of supporting Billings Clinic
The versatility and uniqueness of these arrangements are becoming more widely recognized, working particularly well for donors who own highly appreciated, and low income property such as low-dividend stocks.
Appreciated property can be transferred into a CRT at its current market value; allowing you to benefit from its total appreciated value. The property may then be liquidated “tax-free” by the trustee and reinvested in higher-return assets. This often results in more income for donors.
You receive an immediate charitable income tax deduction for a portion of the original gift amount. The deduction is calculated using IRS-approved actuarial tables and is based on the gift amount, ages of the income beneficiaries and the income payout percentage. A CRT may also be established for a term of years, in which case the deduction is based on the length of the term and the payout rate.
Two CRTs, the Unitrust and the Annuity Trust, are available. Both arrangements offer a “tax-free” reinvestment feature, but differ on how income is determined.
An Annuity Trust provides you an income stream, which remains fixed for the duration of the trust. This may be an important feature for our more senior donors, offering them income stability and security. Income from a Unitrust, however, will vary and is determined by applying an agreed-to payout percentage to an annually-valued Unitrust principal. As the Unitrust increases in value, income increases, thereby providing you a valuable hedge against inflation. A Unitrust is a particularly effective charitable income arrangement when principal and income growth potential is important.
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For more information contact: Amberly Pahut, Senior Development Director at firstname.lastname@example.org