Make a gift that generates income to you
If you wish to make a significant gift to Goshen but are not sure you can comfortably give up the assets, you might want to consider a planned gift. Through a planned gift, you can give the asset to Goshen but retain the right to the income for yourself and/or your spouse, children and others. This retention of income can be held for a period of years or for the lifetime of your named beneficiary. You will receive a charitable deduction for a portion of the value of your gift in the year the gift is made. You may also be able to avoid or defer capital gains tax.
Several planned giving vehicles are described here: Charitable Gift Annuity, Charitable Remainder Trust, Charitable Remainder Annuity Trust, Charitable Remainder Unitrust or a Charitable Lead Trust. The best vehicle to use varies greatly from donor to donor and depends on a wide variety of factors, including the type of asset being given, the age of the beneficiaries and the specific needs of the beneficiaries. A general calculation can be obtained by using the Gift Calc icon to the right. Detailed calculations concerning the benefits of each plan can be provided by the development office, and the staff can work closely with you and your advisers to determine the best way for you to make a planned gift. For your convenience and future reference, our Planned Giving brochure is available for download and printing.
Charitable Gift Annuity
If you wish to receive maximum spendable income now, are planning for retirement, wish to appreciate the value of deferring capital gains tax, desire the security and predictability of a fixed income, and would like to benefit Goshen, then a charitable gift annuity may be right for you. Goshen asks that you give a minimum of $5,000 to establish a charitable gift annuity.
What is a Charitable Gift Annuity?
A charitable gift annuity is both a gift and an investment. You contribute cash or marketable securities to Goshen in exchange for Goshen’s contractual promise to pay you and, if you wish, another annuitant, a fixed income for life at a rate based on the age(s) of the annuitant(s). This income is guaranteed by all the assets of Goshen College. You will be eligible for a charitable deduction equal to the difference between the value of the assets you transfer and the present value of the stream of annuity payments. A transfer of low-yielding appreciated securities may very well allow you to increase your income. If you prefer to delay receiving income for some period of time, you may make a deferred-payment charitable gift annuity contribution. Making a present transfer of assets while deferring the start of income payments entitles you to an increased charitable deduction and enables you to increase the annuity payments. A portion of each annuity payment represents the tax-free return of your investment in the annuity and, if you transfer appreciated securities, you may report the capital gain associated with the value of the annuity over a period equal to your life expectancy. In most cases, a portion of the annuity payment is tax-free income.
Charitable Remainder Trust
If you wish to retain income or to provide an income for someone else, would like to have your gift individually managed and are interested in increasing your capacity to make a gift to Goshen, then a charitable remainder trust may be right for you. A charitable remainder trust is particularly attractive if you fund it with appreciated property because there will be no capital gains tax when you fund the trust or at the time the trustee sells the asset(s). Generally, a gift of $100,000 is required to establish a charitable remainder trust.
What is a Charitable Remainder Trust?
A charitable remainder trust is a separately invested, irrevocable trust you create by designating a person or persons to receive income payments of at least 5 percent annually and transferring assets to a trustee you select. The trustee may be a trust company, like MMA Trust (a part of Mennonite Mutual Aid), one or more individuals, a bank, or a combination of these. The beneficiaries may be any person(s) you choose. They may receive income for their lives or for a specified term of years, not to exceed 20. At the death of the last beneficiary or at the end of the term of years, the trust terminates and the remaining principal is then used by Goshen to further its purposes. Donors may designate a specific purpose for the use of their gift.
Charitable Remainder Annuity Trust
A unique feature of a charitable remainder trust is that you may tailor the annual income the trustee will pay. A charitable remainder annuity trust pays a fixed dollar amount that you select when you create the trust. If you prefer the security of a fixed income and can fund the trust entirely at one time, an annuity trust may be a good choice for you. You may not make subsequent additions to an annuity trust.
Charitable Remainder Unitrust
A charitable remainder unitrust pays an income equal to a percentage of the value of the principal; you designate the percentage when you create the trust, and the trustee revalues the principal each year to determine that year’s income. The charitable remainder unitrust is the most flexible form of deferred gift and can be created to accommodate a wide range of donor and beneficiary needs. Since each trust is separately invested and managed, the trustee can tailor investment strategies to meet the needs of the trust’s beneficiaries. The unitrust can also be useful for gifts of illiquid assets such as closely held stock or real estate. It can also be a valuable retirement planning tool.
You may make additional contributions to a unitrust and the investment strategy may vary with your changing financial needs. For example, if you do not currently require the income, a net income unitrust can invest for growth and at a future date invest for yield. A net income unitrust can also accept illiquid property such as unencumbered real property or tangible personal property. Contributions of cash, marketable securities and real property generate charitable deductions equal to the present value of Goshen’s remainder interest.
Charitable Lead Trust
Making a gift of income while retaining ownership of the asset
If you would like the capital value of marketable or income-producing assets to remain in your family but do not need the income stream from these assets for a period of time, then a charitable lead trust may be right for you. A charitable lead trust may be particularly attractive if the value of your charitable gifts already exceeds the allowable deduction limits for income tax purposes. Because a charitable lead trust involves administrative costs and some start-up costs in the form of legal or financial advice, you probably should not consider such a gift arrangement for amounts less than $500,000.
What is a Charitable Lead Trust?
A charitable lead trust is a separately invested, irrevocable trust you create by transferring cash, marketable securities, or income-producing property to a trustee you select. The trustee may be a trust company, like MMA Trust (a part of Mennonite Mutual Aid), one or more individuals, a bank, or a combination of these. You designate Goshen as the beneficiary of income for a specified period of years or for a period measured by a named person’s life. Upon completion of that period, the trust assets may revert to you or pass to persons you have designated in the trust instrument to receive them.
A unique feature of a charitable lead trust is that you may tailor Goshen’s income interest. A charitable lead unitrust pays an annual income equal to a percentage of the value of the principal; you select that percentage when you create the trust, and the trustee revalues the trust each year to determine that year’s income. A charitable lead annuity trust pays a fixed dollar amount each year; you specify that amount when you establish the trust.
Income tax consequences of establishing a Charitable Lead trust
The charitable deduction associated with the creation of a charitable lead trust depends on your relationship to that trust. You will need to consult with your tax adviser to determine the character of that relationship. Under certain circumstances, you will be eligible for a charitable deduction in the year you create the trust equal to the present value of Goshen’s income stream. You will also be required each year to include any income earned by the trust in your income. Under other circumstances, you will not be eligible for a current charitable deduction, and you will not include the trust’s income in your own. This consequence is particularly useful to a person who wishes to contribute amounts in excess of the allowable deduction levels for income tax purposes.