By Laurie Valentine- COO & Trust Counsel
Legacy giving not only offers a variety of ways to provide valuable support to charitable causes important to you, it can also help you solve personal financial challenges.
One such giving plan is a charitable remainder annuity trust (“CRAT”). A CRAT is an irrevocable trust that pays a fixed, never-changing income stream to the giver and/or others for life or a term of years and the remainder to one or more charities.
Your lifetime gift of cash, securities or real estate to a CRAT entitles you to a current charitable income tax deduction equal to the present value of the charity’s remainder interest. And, a CRAT can provide beneficial ways to solve a variety of financial challenges.
Help a grandchild with college expenses by creating a “term of years” CRAT. A gift of $50,000 to a 10% five-year CRAT will provide a grandchild $5,000 per year for 5 years (a total of $25,000) and the value of the charitable gift for income tax purposes is $25,900. If the trust assets earn an average annual total return of 7.0% over the five year trust term there will be almost $42,000 left to distribute to the charitable causes you name in the trust agreement.
A CRAT may be the right legacy giving plan to provide support to a family member. A gift of $50,000 to a two-life 5.0% CRAT allows you to set up a plan that would pay your family member $2,500 per year for the rest of their life and then that same amount would be paid to you for the rest of your life, if you survive the family member. The value of your deductible charitable gift depends on the age of the family member and you at the time you set up the gift.
For more information, please call us at (502) 489-3533 or toll free in KY at 1(866) 489-3533.
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.