Life Income Plans

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Life income plans are a form of deferred gifts to an organization like Goshen College that are considered a partial gift in that some of the funds are held by the organization to make the promised payments to the income beneficiaries for the rest of their lives. At the death of the last surviving income beneficiary, the charity (the remainder beneficiary) receives any funds remaining in the account.

We offer several life income plan options:

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 this planned giving calculator. 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.


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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.

Calculate your gift annuity.

What is a charitable gift annuity and how does it work?

A charitable gift annuity is an agreement between you and a charitable organization like Goshen College whereby you (the annuitant) make a payment to the College in exchange for a guaranteed income for the rest of your life. The amount of income is based on the age(s) of the annuitant(s) and the amount of the payment.

How many income recipients can there be for each gift annuity agreement?

One or two. There can be no more than two but they can be any age so while the two are often spouses, they could a parent and child or any other two people.

Are the payments from a gift annuity considered taxable income?

Some is taxable and some is tax-free. When the portion of the original payment into the agreement that was reserved to fund the income over the annuitant’s life expectancy is paid out, it is considered return of principal and thus tax-free. Once the calculated life expectancy is reached, the entire payment becomes taxable.

Do I receive a tax deduction for the amount I place into a gift annuity agreement with Goshen College?

The portion of the amount paid in that is reserved to fund your promised payments over your life expectancy is not considered a gift and thus not deductible as a charitable gift. The remainder is considered a gift to the college and so that portion can be claimed as a charitable deduction in the year that the agreement is funded.

If I fund a gift annuity with an appreciated asset, do I avoid capital gains taxes?

No, but you defer payment of your capital gains taxes. The capital gains are reported over the calculated life expectancy so there is some advantage of paying these taxes over time rather than all in one year.

What is the minimum amount needed to establish a gift annuity with Goshen College?

$10,000

How is a deferred charitable gift annuity different than a regular gift annuity?

When payment is made to Goshen College for a gift annuity, the donor can ask the payments to the income beneficiaries be deferred to a later time rather than starting immediately. This increases the rate paid and assures a higher income at a time when other sources of income could be diminishing.


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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).

Calculate your charitable remainder trust.

What is a charitable remainder trust and how can it benefit Goshen College?

A charitable remainder trust is a separately invested, irrevocable trust a donor creates by transferring assets to the trust, to be managed by a trustee. The donor designates a person or persons to receive annual payments from the trust (of at least 5% annum) for the rest of their lives or for a period 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 named charity(ies), such as Goshen College, receive the remaining principal.

What is the difference between a charitable remainder unitrust (CRUT) and a charitable remainder annuity trust (CRAT)?

A charitable remainder unitrust pays out according to a set percentage of the value of the trust, determined each year, and an annuity trust pays exactly the same amount each year, even if the underlying trust changes in value. For that reason, a CRUT can be added to at any time and the CRAT cannot have additional gifts placed into it.

Do I pay capital gains on gifts that I transfer to a charitable remainder trust?

No. One of the strong advantages of charitable remainder trusts is that highly appreciated assets like real estate, stocks, bonds or mutual funds can be used to fund the trusts and capital gains taxes are never owed on the appreciation when the trust sells the assets. Just make sure the assets are given to the trust before they are sold!

Can I claim a charitable deduction for the gifts I transfer to a charitable remainder trust?

You would receive a deduction for a portion of the gifts. Since there are income beneficiaries who will be receiving income from the trust, the gifts are not fully deductible. The deduction is calculated based on the age of the income beneficiaries or the term of years during which payments are made, the percentage paid out each year if a unitrust, etc.

How much will I receive in annual payouts from a charitable remainder trust?

With an annuity trust, the annual payout is a set amount for the life of the trust, based on the age of the income beneficiaries. If you use a unitrust, the payments are based on an agreed upon rate when the trust is signed, with the minimum payout rate of 5%. The payment is re-calculated every year, typically based on the value of the CRUT on December 31.

Can I change my mind and later withdraw the funds I place into a charitable remainder trust?

No. Once the funds are placed into the trust and you receive a partial tax deduction in the year of your gift, you cannot reverse the process and take the funds back. In other words, gifts placed into a charitable remainder trust are irrevocable.

What is the minimum amount needed to establish a charitable trust?

$100,000


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Charitable Lead Trust

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.

Calculate your charitable lead trust.

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.