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Charitable Remainder Annuity Trust – Stable Income at a Negotiated Rate

What is a charitable remainder annuity trust?

A Charitable Remainder Annuity Trust is a separately invested and managed charitable trust that pays you, your spouse, and/or other beneficiaries a fixed annuity income for life or a term of years. You receive a charitable income tax deduction for a portion of your gift to the trust. No additional gifts are permitted. After the annuity trust terminates, the accumulated principal or "remainder interest" goes to Mental Health America. Minimum gift is usually $. For those who can make a gift of this size, the advantages are considerable.

  • Receive stable, predictable income (particularly appealing to older donors and income beneficiaries).
  • Depending on how your trust is invested, much of your income could be taxed at the capital gains rate of 15%.
  • Avoid ALL capital gains tax on any appreciated assets you donate.
  • Reduced estate tax liability if your estate is at the taxable level.
  • Enjoy the satisfaction of making a deferred gift to Mental Health America during your lifetime.

Example

A 70-year-old donor in the 35% tax bracket establishes an annuity trust with $100,000 of appreciated stock, originally purchased for $10,000. Trust pays donor 6.0% of the initial value as an annuity for life. Trust earns an 8.0% average total return. Assume IRS discount rate of 5.8%.

Trust principal

$100,000

Income tax deduction

$47,168

Income tax savings (35%)

$16,589

Cap. gains tax savings (15%)

$13,500

Annual income

$6,000

Projected after-tax benefit to donor

$70,247

Projected benefit to Mental Health America

$160,649

PLEASE NOTE: These examples are for illustrative purposes only and are not intended as legal or tax advice. Consult your own legal and tax advisors prior to making any material decisions based on this data.

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