Life Income Agreements
Life Income Agreements enable a donor to receive a steady income stream for life or a set number of years from appreciated assets that may have been producing little or no income for the donor. Lutheran Foundation of the Southwest focuses on four types:
* Charitable Remainder Unitrusts (CRUT)
* Charitable Remainder Annuity Trusts (CRAT)
* Charitable Lead Trusts (CLT)
* Charitable Gift Annuities (CGA)
These irrevocable agreements offer favorable tax treatments to the donor. Click the links above to learn which Life Income Agreements might be best for you.
Charitable Remainder Unitrust
With a Charitable Remainder Unitrust (CRUT), a donor irrevocably transfers money or appreciated property to Lutheran Foundation of the Southwest (LFSW) in return for an annual income from the reinvested assets for the donor and/or other beneficiaries. At the beneficiary's death, payments cease and the remaining Unitrust assets (the "Charitable Remainder" gift) go to the ministries of our sponsors as you have designated.
An individual donor may have multiple Unitrusts, or can add funds/assets to an existing Unitrust anytime during its term.
What are some if its key benefits?
* Helps provide a wide spectrum of caring services through dynamic Lutheran ministries in Texas.
* Can provide income for another as well as for yourself - a spouse, parent, child, etc. Income can be paid to you for life and then to another family member, or for a specified period of years.
* Generates income from under-producing appreciated assets. Payout rates after the sale of the assets may well exceed dividends, rental fees or other potential revenues otherwise available.
* Eliminates Capital Gains Taxes.
* Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate.
* Increases potential payouts (compared with fixed amount annuities) when fair market values increase. This can be a powerful hedge against inflation.
* Allows additional assets to be given into the existing Unitrust at any time.
* Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
* Provides income that is taxed at lower overall rates than ordinary income-tax rates.
* Reduces income taxes. A portion of the appreciated asset donation is income tax deductible, even though the annual payouts themselves may be taxable.
How does a Charitable Remainder Unitrust work?
A Charitable Remainder Unitrust pays a donor income based upon a fixed percentage of the fair market value of the donated assets, instead of a fixed dollar amount as with some other types of Life Income Agreements. This fluctuating payout - calculated annually - is based upon the fair market value of the assets each January 1. This type of agreement can be especially beneficial to donors because any earned income not paid out is added to the principal for subsequent years' calculations and added to the earnings. Actual payments can be made quarterly or annually.
Who should consider a Unitrust?
A Unitrust can start paying income to the donor or designated beneficiaries in the same quarter it is set up. However, a Unitrust most directly benefits any individual who needs a current tax deduction but can defer receiving additional income. Thus, a NIM-CRUT can be used as a retirement plan. The trust is initially invested for principal growth, earning little or no income, and making no payments. Then at a later date when income is desired, the trust is shifted to higher-yield assets so that lots of income is available to make up the earlier deficits.
Your LFSW consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.
Charitable Remainder Annuity Trust
With a Charitable Remainder Annuity Trust (CRAT), a donor irrevocably transfers money or appreciated property to Lutheran Foundation of the Southwest (LFSW), in return for an annual income from the reinvested assets for the donor and/or other beneficiaries. At the beneficiary's death, payments cease and the remaining Trust assets (the "Charitable Remainder" gift) go to the ministries of our sponsors and -- following our guidelines -- to other charities as you have designated. An individual donor may have multiple Annuity Trusts.
What are some of its key benefits?
* Helps fund Lutheran ministries in Texas.
* Can provide income for another as well as for yourself - a spouse, parent, child, etc. Income can be paid to you for life and then to another family member, or for a specified period of years.
* Generates income from under-producing appreciated assets. Payout rate may well exceed dividends, rental fees or other potential revenues from the assets.
* Eliminates Capital Gains Taxes.
* Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate.
* Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
* Provides income that is taxed at lower overall rates than ordinary income-tax rates.
* Reduces income taxes. A portion of the appreciated asset donation is income tax deductible, even though a portion of the annual payouts themselves may be taxable.
How does a Charitable Remainder Annuity Trust work?
A Charitable Remainder Annuity Trust pays a donor a set income per year, based upon an agreed-to percentage of the fair market value of the donated assets at the time the Trust is established. Its payout is fixed throughout the term of the Trust, no matter how investment values fluctuate (trust could conceivably be depleted if payments are too high or interest earned is too low to support payments). Payments can be made quarterly or annually.
Who should consider a Charitable Remainder Annuity Trust?
A Charitable Remainder Annuity Trust is especially appropriate for anyone who is asset rich but cash poor, i.e. an individual who owns appreciated assets that are yielding little or no income at a time when he/she needs increased income for retirement or other needs.
Additionally, a CRAT can be a valuable estate planning tool for any donor who needs an immediate income tax deduction, but also needs to retain a level income stream for retirement.
Your LFSW consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.
Charitable Lead Trust
With a Charitable Lead Trust (CLT), a donor irrevocably transfers money or appreciated property to Lutheran Foundation of the Southwest (LFSW). The trust makes charitable payments to the Foundation and its sponsors for a term of years, after which the intact principal goes back to the donor, children, or other beneficiaries with either no or greatly reduced federal gift and estate taxes. A donor may have multiple Charitable Lead Trusts.
What are some of its key benefits?
* Helps fund dynamic Lutheran ministries in Texas during your lifetime, when you can see results.
* Passes assets to down-line family members (children, grandchildren, etc.) with reduced or no gift taxes.
* Allows you to personally re-assume asset ownership at the end of the term if you desire, yielding certain income tax charitable deductions.
* Gift taxes incurred - if any - will generally be lower than estate taxes which would instead be due on assets not transferred until the donor's death.
* Is flexible. You choose the term of years and the annual payout to the Foundation.
* Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate - substituting lower-rate gift taxes instead.
* Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
* Reduces income taxes. A portion of the appreciated asset donation is income tax deductible, even though the annual payouts themselves are taxable.
How does a Charitable Lead Trust work?
A Charitable Lead Trust is the reverse of other Charitable Remainder Trusts. With this trust, all income goes to the designated LFSW ministries, then the remainder reverts to the heirs at the end of the trust's term. Payments are made to the Foundation quarterly or annually, at your option. You also choose...
* The term of the trust from 10 to 20 years.
* The beneficiaries you want to receive the remainder principal.
* The size and how the annual payment to the Foundation is determined.
* Designated charitable recipients
A guaranteed annuity interest specifies that the Foundation and its ministries annually receive a set amount or a stated percentage, based upon the trust's value at its inception.
A Unitrust interest provides for a stated percentage payout annually, based upon the fair market value of the trust assets reassessed each year.
Who should consider a Charitable Lead Trust?
A Charitable Lead Trust is especially suited for wealthy individuals in high estate and gift tax brackets who desire to benefit Lutheran Foundation of the Southwest and its sponsors and still pass assets on to family members with little or no tax penalties.
Your LFSW consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.
Charitable Gift Annuity
With a Charitable Gift Annuity (CGA), a donor irrevocably transfers money or appreciated securities to Lutheran Foundation of the Southwest (LFSW), in return for a quarterly or annual income from the reinvested assets for the donor and/or other beneficiaries. At the beneficiary's death, payments cease and the remaining annuity assets (the "Charitable Remainder" gift) go to the ministries of our sponsors as you have designated. The older the donor or beneficiary at the date the annuity is established, the higher the annual payout percentage. A donor may have multiple Charitable Gift Annuities.
NOTE: A portion of the amount used to fund a Charitable Gift Annuity is tax deductible, as is a percentage of the payouts (depends on donor's age, tax bracket and other factors). In contrast, a standard annuity issued by a financial or insurance institution is generally tax deferred and merely delays when the full taxes must be paid by you or your heirs.
What are some of its key benefits?
* Helps fund dynamic Lutheran ministries in Texas.
* Can provide income for another as well as for yourself - a spouse, parent, child, etc. Income can be paid to you for life and then to another family member, or for a specified period of years.
* Is backed by the assets of the Lutheran Foundation of the Southwest and so payments continue for the full term of the annuity, as defined in the annuity agreement.
* Generates income from under-producing appreciated assets. Payout rate may well exceed dividends, rental fees or other potential revenues from the assets. LFSW will sell the asset and invest the proceeds for greater income.
* Offers higher yields for older donors or for delayed payment start dates. Payout percentage rates are set by American Council on Gift Annuities actuarial guidelines. Delaying payments can increase percentages.
* Reduces Capital Gains Taxes.
* Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate.
* Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
* Provides income that is taxed at lower overall rates than ordinary income-tax rates.
* Reduces income taxes. A portion of the appreciated asset donation to fund the annuity is tax deductible, and part of the annual payouts themselves may be partially tax free for a period of years.
How does a Charitable Gift Annuity work?
A Charitable Gift Annuity pays the donor a set income per year, based upon the fair market value of the donated assets at the time the Annuity is established and the ages of the income beneficiaries. Its payout is fixed throughout the term of the agreement, no matter how investment values fluctuate. Payments can be made quarterly or annually. This annuity is a contractual agreement between the donor(s) and the Foundation; payments are backed by the assets of LFSW.
Who should consider a Charitable Gift Annuity?
Like other Life Income Agreements from Lutheran Foundation of the Southwest, a Charitable Gift Annuity helps its donor obtain future income from under-producing assets, while also gaining a current charitable tax deduction. The Gift Annuity, however, is most beneficial for older donors because it generally offers potentially higher annual payout rates than Charitable Remainder Annuity Trusts or Unitrusts.
Additionally, a Deferred Gift Annuity can be a valuable estate planning tool for any donor who seeks an immediate income tax deduction, but can afford to delay income until retirement or some other date in the future.
Your LFSW consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.