Gifts That Pay You Income

Immediate-Payment Gift Annuity

To establish a charitable gift annuity, you make a gift to Catholic Charities and in exchange receive a fixed annual dollar amount for life. The principal remaining at your death will then benefit Catholic Charities.

While gift annuities can be funded at a younger age, this type of gift might be especially attractive if you are aged 70 or older, you want to support Catholic Charities, and you would like to secure an immediate stream of income for yourself or for yourself and your spouse. The amount of the payments is based on the age(s) of the beneficiary(ies). The older one is, the higher the payout rate one receives. In addition to the stream of fixed payments, the gift will also generate an immediate charitable income-tax deduction. If you are younger and you wish to begin receiving payments at a future date, a deferred-payment gift annuity might be a more suitable gift arrangement.

Gift Range: $10,000 or more

Example: Anne, aged 78, gives $25,000 in cash to Catholic Charities in exchange for a gift annuity. She receives an income-tax deduction of approximately $12,725, based on her age. She will begin receiving income checks of $1,625 each year for the rest of her life. When she passes away, the remaining principal will benefit Catholic Charities.

Pointer: The charitable gift annuity is especially rewarding if funded with appreciated long-term securities that generate little or no income. If you transfer such securities to Catholic Charities in exchange for a charitable gift annuity, you will avoid a significant amount of capital-gain taxation and any remaining capital gain will be reported in prorated amounts over the life (or lives) of the beneficiary(ies).

How It Works

1. Transfer cash or other property to Catholic Charities
2. Catholic Charities agrees to make payments for the life of one and up to two annuitants (payments are backed by our entire assets)
3. The balance of the transfer inures to Catholic Charities

Benefits

1. Payments for life that are favorably taxed
2. When gift is funded with cash, part of payment will be tax-free
3. When gift is funded with appreciated property, part will be taxed as capital gain, part will be tax-free, and part will be taxed as ordinary income

• • Federal income-tax deduction for a portion of your gift
  • Gift will provide generous support for Catholic Charities
  • Deferred-Payment Gift Annuity

Deferred-Payment Gift Annuity

This type of gift might appeal to you if you want to support Catholic Charities, are 40 to 60 years old, have a high income, need to benefit now from a current tax deduction, and are interested in augmenting potential retirement income.

The deferred-payment gift annuity involves the current transfer of cash or marketable securities in exchange for which Catholic Charities agrees to pay the donor an annuity starting at a future date—usually at the donor’s retirement. The gift can consist of a single transfer, a series of transfers, or periodic transfers to the plan in high-income years.

You realize an immediate charitable deduction for the gift portion of each transfer to establish a deferred gift annuity. A portion of each annuity payment, when the payments begin, will be a tax-free return of principal over the life expectancy of the annuitant. When appreciated long-term capital-gain securities are transferred, any reportable capital gain is spread out over the donor’s life expectancy.

Gift Range: $10,000 or more

Example: A married couple, Michael and Lisa, both 57, wish to supplement their retirement income with deferred-payment gift annuities. After consulting with their own financial advisors and a member of our staff, they decide to contribute $25,000 each year for the next ten years to our gift annuity program.

The tax and financial benefits of this arrangement to Michael and Lisa are as follows:

• Under the deferred-gift arrangement, Michael and Lisa are entitled to a charitable deduction for each annual contribution. While the deductions vary from year to year, the total charitable deduction over the ten-year period—based on current IRS mortality and interest assumptions—will be approximately $94,900 (about 37.9% of the amount they contribute over the ten-year period).
• Beginning in the year they both attain the age of 67, when retirement income becomes important, Michael and Lisa will receive $13,575 each year from their well-planned annuities. In addition, a portion of those payments will be excludable from their taxable income for their life expectancy.
• Unlike a qualified retirement plan, there are no upper limits to their contributions or other restrictive requirements on the design of the plan.

How It Works

1. Transfer cash or other property to Catholic Charities
2. Catholic Charities agrees to make payments for the life of one and up to two annuitants (payments are backed by our entire assets)
3. The balance of the transfer inures to Catholic Charities

Benefits

• Payments for life that are favorably taxed
• When gift is funded with cash, part of payment will be tax-free
• When gift is funded with appreciated property, part will be taxed as capital gain, part will be tax-free, and part will be taxed as ordinary income
• Federal income-tax deduction for a portion of your gift
• Gift will provide generous support for Catholic Charities

 

Charitable Remainder Unitrust

The unitrust provides for annual payments of a specified percentage—at least 5% of the value of the trust as it is valued each year—to the designated beneficiary(ies). Since the value of trust assets may vary from year to year, the payments may also vary. At the death of the last income beneficiary, the trust principal is distributed to Catholic Charities.

In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.

Gift Range: $100,000 or more

Example: George and Miriam purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. Now that they are both 65, they would like to augment their retirement income. To do this, they transfer the stock to a charitable remainder unitrust with a 6% payout rate.

In the first year, they will receive a $6,000 payment—four times the dividends they have been receiving—and those payments will increase in time if the assets of the unitrust appreciate in value. Moreover, they avoid tax on their profit in the stock and receive an income-tax deduction of about $27,400. In their 24% tax bracket, this saves them more than $6,575 in income taxes (24% of $27,400).

When the last beneficiary dies, the unitrust assets will benefit Catholic Charities.

How It Works

1. Create trust agreement stating terms of the trust; transfer cash or other property to trustee
2. Trustee invests and manages trust assets and makes payments to income beneficiaries you designate
3. Remainder to Catholic Charities for purposes you specify

Benefits

• Payments to one or more beneficiaries, varying annually with the value of the trust
• Federal income-tax deduction for the charitable remainder value of your interest
• No capital-gain tax when trust is established; property is sold by the trust
• Trust remainder will provide generous support for Catholic Charities

 

Charitable Remainder Annuity Trust

The annuity trust provides for payment of a fixed-dollar amount—annually or at more frequent intervals—to the designated beneficiary(ies).

The amount must equal at least 5% of the initial fair-market value of the trust. At the death of the last beneficiary, the trust principal is distributed to Catholic Charities.

In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.

Gift Range: $100,000 or more

Example: Bill and Carol purchased growth stock for $20,000 ten years ago. It is now valued at $100,000, but the annual dividends are only $1,500. They are both 75, and they would like to increase their retirement income. To do this, they transfer the stock to a charitable remainder annuity trust with a 5% payout rate.

In the first year, they will receive a $5,000 payment—over three times the dividends they have been receiving—and they will continue to receive $5,000 each year for the rest of their lives. Moreover, they avoid tax on their profit in the stock and receive an income-tax deduction of about $37,000. In their 24% tax bracket, this saves them $8,880 in income taxes (24% of $37,000).

When the last beneficiary dies, the annuity trust assets will benefit Catholic Charities.

How It Works

1. Create trust agreement stating terms of the trust; transfer cash or other property to trustee
2. Trustee invests and manages trust assets and makes payments to income beneficiaries you designate
3. Remainder to Catholic Charities for purposes you specify

Benefit

• Payments to one or more beneficiaries that remain fixed for the life of the trust
• Federal income-tax deduction for the charitable remainder value of your interest
• No capital-gain tax when trust property is sold
• Trust remainder will provide generous support for Catholic Charities