This is a real “win-win” situation. It is a way to make a gift to a charity that creates a long-lasting legacy, while creating a steady stream of income and tax benefits at the same time.
Creating a legacy takes many forms. For some people, a legacy grows from years of volunteering, while for others, it is a one-time gift to a charity that has great meaning for them. The use of a charitable gift annuity serves to support a cause or organization, while reaping significant benefits for the donor, according to Hawaiian Business in its recent article, “5 Steps to a Lasting Legacy.”
- Consider the Charitable Organizations or Causes That You Feel are Important. Think about how you’d like to make your community better for future generations. A legacy gift will benefit a specific nonprofit or cause.
- Find out if you satisfy the Requirements. The charity may have some rules about its legacy giving. For example, the Hawaii Community Foundation requires that you be age 60 or older and able to donate $20,000 or more. That gift can consist of cash, funds earning low interest, or appreciated assets (securities and real property). For those younger than 60, they suggest a deferred annuity in which the payment is triggered at 60 or older, to allow you to coordinate your payment with your retirement.
- Work with an Expert. Talk with an experienced estate planning attorney about how a charitable gift annuity would benefit you and meet your objectives.
- Tailor the Agreement to Meet Your Goals. In many instances, a gift, such as an annuity, is simple to create. It’s a contract between you and the charity. The charity may offer to work with you and your attorney to customize an annuity that is based on your personal situation and charitable investments. One key decision is how to use the remaining balance upon the death of annuitant(s) designated by the original donor. Decide if the remaining balance is to be used for broad charitable purposes or to support a specific cause.
- Reap the Benefits Here’s the part you and your CPA will love: you get an immediate charitable tax deduction for a portion of the gift and a set annual payment for as long as you live. Part of the annuity payments may be tax free, and there are no capital gains owed on any appreciated property used to start a charitable gift annuity. Any reportable capital gains, if they exist at all, are spread out over the annuity payments.
An estate planning attorney will help you to understand how this type of donation can be part of your estate plan. It is an attractive way to build a lasting legacy.
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