Life Income Gifts

Many people who desire to make special gifts are faced with the dilemma of strong charitable intent on one hand, but the need to have sufficient resources to support themselves on the other. Worried that they may "outlive" their resources, they hesitate to commit to a gift that they truly desire to make. A Life Income Gift could be the solution to this dilemma.

Life income plans allow you to make a current gift to Texas Lutheran University in return for lifetime income payments. This is a financial and philanthropic arrangement in which a charitable gift of cash, securities, or other property continues to provide an income to you, and/or another person named by you for life or other period which you specify (not more than 20 years). After death of the final income beneficiary, the assets pass permanently to Texas Lutheran University.

Charitable Remainder Trust

There are two types of Charitable Remainder Trusts (CRTs) available to people wishing to make a lift income gift to Texas Lutheran University. These are the Charitable Remainder Annuity Trust and the Charitable Reminder Unitrust. Another type of life income gift available to our donors is the Charitable Gift Annuity.

A trust, of which there are many types, is simply a legal arrangement created by a document appointing someone to manage assets (the trustee) for the benefit of someone (the beneficiary). The beneficiary can be the creator of the trust (the trustor) or others that the trustor might name. A trust is not, by nature, complex and expensive, but you should understand the basic rules when using any trust.

CRTs offer the following advantages:

1. a secure source of annual income
2. an enhanced source of annual income
3. an immediate income tax deduction
4. an estate tax shelter
5. no capital-gains tax on appreciated securities and other property
6. a substantial benefit to a worthy charitable cause

Charitable Remainder Annuity Trust
An annuity trust pays a fixed dollar amount – at least five percent of the fair market value of the donated assets at the time of the gift. Any income not paid out is added to the principal. If income is insufficient to pay the fixed dollar amount, the principal is used to make up the deficit. Your income tax deduction depends upon your age, the age of other beneficiaries, the agreed upon percentage of the trust, and the fair market value of the assets donated. Once again, there will be no capital gains tax on the sale of appreciated property donated to this trust. The annuity trust is a good fit for individuals who need an absolute minimum amount of income.

To see how an annuity trust can be beneficial to your financial situation, use our online calculator. The calculator is completely secure and does not require you to input your name.

Charitable Remainder Unitrust
A unitrust pays a variable income. An agreed upon percentage, (at least five percent) of the fair market value of the trust's assets, as valued each year, is to be paid annually. You may elect a "standard unitrust" where excess earnings are always reinvested in the trust, and in which principal is invaded to pay the elected percentage rate when earnings are insufficient to do so. Or you may choose a "net income unitrust" where either the agreed upon percentage or the actual income from the trust is paid, if the amount is less than the agreed payout rate. A variation on this option is a "net income with make-up" provision. This allows deficiencies in payouts to accrue during low-income years to be "made up" in years when earnings exceed the agreed payout rate.

The tax considerations are the same as a charitable remainder annuity trust. However, a unitrust can be more flexible. A unitrust can also provide a hedge against inflation. One variation allows for more growth while another provides more income. It is simply a matter of what you want to accomplish, as well as the beneficiary's lifetime needs. Also, the document can be drafted so that you can make additional transfers of assets into the trust at any time. Recent tax rules require that the charity actuarially receives at least 10% of the value of the charitable remainder.

To see how a unitrust can be beneficial to your financial situation, use our online calculator. The calculator is completely secure and does not require you to input your name.

Charitable Gift Annuity

A charitable gift annuity (CGA) is a combination of a gift to charity and an annuity contract. You transfer assets to TLU; in return, we agree to make regular, fixed payments to you for the rest of your life. The transaction is both a purchase of an annuity and a charitable contribution. By its very nature, a CGA usually increases income to the beneficiary.

You receive a charitable income tax deduction for a portion of the value of your gift. Any capital gains tax on appreciated securities is spread over the life of the annuity, and some of the annuity income is tax-free for a certain number of years, depending on the age(s) of the beneficiary(ies). Annuity payments may begin immediately, or they may be deferred to some time in the future. The longer the payments are deferred, the higher the income and the greater the tax deduction.

To see how a CGA can be beneficial to your financial situation, use our online calculator. The calculator is completely secure and does not require you to input your name.

For more information and details about gift planning, call Renee Rehfeld, assitant vice president for development, 830-372-8030 or fill out a request form.