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Your path to this gift:
You're considering a lifetime gift in partnership with Brunswick > Your planning objective is increased income > Your preference is fixed income payments > You want to retain some flexibility in the management of your gift
The charitable remainder annuity trust is an individually managed trust that combines regular, predictable income with some flexibility in management and investment. The annuity trust pays its beneficiaries – you, your spouse, family members, or other individuals – fixed-dollar income or a fixed percentage of the initial value of the assets that funded the trust.
Here are some of its benefits:
- Income from your annuity trust can be paid to you and your other beneficiaries for lifetime or for a term of up to 20 years.
- No upfront capital gains tax is payable if you fund your annuity trust with appreciated property. So, you can contribute appreciated but low-yielding assets and put the entire value of your gift to work generating higher income for you.
- Besides avoiding capital gains tax, you also receive a charitable income tax deduction when you create an annuity trust. Your deduction will be based on the full fair market value of the assets you contributed, reduced by the present value of the income interest you retained.
- The charitable income tax deduction for an annuity trust is usually higher than that for a unitrust, because the unitrust is likely to pay out more income to the beneficiaries over time. We will happily provide deduction comparisons for you and your advisors.
- When your annuity trust terminates – at the death of the last beneficiary or at the end of the trust term – the remaining balance will be available for the use you designated when you created the trust.
- Annuity trusts can't be flexible in their payout as unitrusts can. Therefore they can't accept gifts of illiquid assets, invest solely for growth, or pay out net income only.
Planning Tip -- Capture the Benefits of High-Yield Tax-Frees
Are you concerned about declining yields in your portfolio of tax-free bonds?
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Who Should Be Trustee?
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An annuity trust is a separate legal entity administered by a trustee.
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Either Brunswick can serve as trustee of your annuity trust, or you or another person or institution can serve as trustee. We currently administer several charitable trusts and do not charge you a fee for our services. (We do ask a minimum gift of $100,000 to establish an annuity trust for which we will serve as trustee.) Alternately, you may wish to follow your or your advisors' investment strategies.
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Whichever option you choose, we can share sample trust forms and discuss the details of establishing the annuity trust with you and your advisors.
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You can capture high interest rates and still make a gift to Brunswick by placing one or more of your older bonds into an annuity trust. The trust will hold the bonds, and pass their tax-free income through to you and your beneficiaries. In addition, you will receive a charitable income tax deduction based on the market value of the bonds you donated, minus the present value of the income interest you retained.
The effect is to make one asset perform two tasks for you – pay you high tax-free income and also generate a charitable deduction. Meanwhile, your gift has increased the long-term financial strength of Brunswick School.
Our office can give you and your advisors more information on this annuity trust planning option.
How Do You Create an Annuity Trust?
Setting up a charitable remainder annuity trust is not particularly difficult, but you should be advised by an attorney with expertise in the area of charitable trusts and estate planning. To save you time and expense, we can provide you with an initial draft of the annuity trust agreement for review by you and your attorney. Once your trust agreement is signed, you can fund your annuity trust by transferring assets to your trustee.
Email us, complete the personal illustration form, or call us at 203-625-5864 so that we can assist you through every step of the process.
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