What Gifting Strategies Are Available to Me?
There are a number of different gifting strategies available for planned giving. Each has its advantages and disadvantages.
Instead of making an outright gift, you could choose to use a charitable lead trust. With a charitable lead trust, your gift is placed in a trust. The recipient of the gift draws the income from this trust. Upon your death, your heirs will receive the principal with little or no estate tax.
If you prefer to retain an income interest in your gift, you could use a pooled income fund, a charitable remainder unitrust, or a charitable remainder annuity trust. With each of these strategies, you receive the income generated by your gift, and the recipient receives the principal upon your death.
Finally, you could purchase a life insurance policy and name the charitable organization as the owner and beneficiary of the policy. This would enable you to make a large future gift at a potentially low current cost.
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Advantages |
Disadvantages |
| Outright Gift |
Deductible for income taxes |
No retained interest |
| Charitable Lead Trust |
A current gift to charity
Current income tax deduction
Pass assets to heirs at a future discount
|
Transfer of assets is irrevocable
If current income tax deduction is taken, future income is taxable to donor
Donor gives up use of income for life of the trust
|
| Pooled Income Fund |
Income tax deduction
Income paid to beneficiary for life
Non-income-producing assets can be converted to income-producing assets
|
Income is unpredictable from year to year
Income received is taxed as ordinary income
Remainder interest will usually go to only one charity
|
| Charitable Remainder Unitrust |
Current income tax deduction
Avoids capital gains tax on appreciated property
Reduce future estate taxes
|
Transfer of assets is irrevocable
Qualified appraisal generally required
Complex administration and setup
|
| Charitable Remainder Annuity Trust |
Income tax deduction
Avoids capital gains tax on appreciated property
Fixed income
|
Fixed payment cannot be limited to the net amount of trust income
Qualified appraisal generally required
Complex administration and setup
|
| Gifts of Insurance |
Current income tax deduction possible
Enables donor to make a large future gift at small cost in the future
|
May require annual premiums
In some cases the death benefit could be part of donor’s taxable estate
|
© 2006 Emerald Publications
