This life income plan is created by transferring assets to a trust that pays you (and other beneficiaries, if you wish) or a not-for-profit organization income for life or a number of years. At the end of the trust, the remaining trust assets are either transferred to Hospice of Palm Beach County Foundation, or in the case of the lead trust, either back to the funder or their heirs. A bank or trusted advisor can serve as trustee.

The type of charitable remainder trust you choose determines your annual payments:

Charitable Remainder Annuity Trust
The charitable remainder annuity trust pays you a fixed dollar amount annually for life. The fixed payments are determined by the payout percentage selected at the beginning of the trust. You can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.

For example: Mrs. Jones irrevocably transfers $100,000 to create a charitable remainder annuity trust that will provide her with life income payments. Included in the trust agreement is the stated payout percentage of 7. She will receive $7,000 annually for her life ($100,000 x 7%). If income earned by the trust exceeds the fixed payment of $7,000, the excess is reinvested.

Charitable Remainder Unitrust
The charitable remainder unitrust pays you a fixed percentage of the fair market value of the trust assets, as revalued each year. Like the annuity trust, you can claim a charitable deduction on your income tax form the year that you create the trust. The payments you receive are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.

For example, Mr. Jones irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.

Charitable Lead Trust
Under this plan you irrevocably transfer assets to a trustee and provide that payments be made to us for a certain number of years (or until the end of your or another’s life). Then the principal is returned back to you (Grantor) or distributed to your children, grandchildren, or other heirs (Non-Grantor) at greatly reduced gift-and estate-tax rates and sometimes escapes them altogether.

For example, Mary funds a non-grantor lead trust with $1 million and stipulates that this organization is to receive $80,000 per year for 15 years, after which the remaining principal will be distributed to her two children. She will report a taxable gift of only $202,300. The difference ($1,000,000 - $202,300 = $797,700) is a charitable gift-tax deduction. If she had simply given the $1 million to her children, the entire amount would have been taxable.

For additional no obligation information about planning your gift to Hospice of Palm Beach County Foundation, please contact Tish Carlo, Director of Planned and Major Gifts at (561) 494-6880.