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 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 such as:
Help with College Expenses: Your grandson will be heading to college in the fall and you want to provide him with funds for tuition and other expenses. A gift of $50,000 to a 10% five-year CRAT will provide your grandson $5,000 per year for 5 years (a total of $25,000) and entitle you to a charitable income tax deduction of $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.
Financial Assistance to a Sibling: You have been providing $210 per month ($2,500 per year) to your 80-year-old brother for the past few years. While at age 78 you currently have no health problems, you want to make sure that support would continue for your brother no matter what your future circumstances. A gift of $50,000 to a two-life 5.0% CRAT allows you to set up a plan that would pay your brother $2,500 per year for the rest of his life and then that same amount would be paid to you for the rest of your life. Your gift to the CRAT entitles you to a charitable income tax deduction of approximately $21,750. And, this giving plan will provide a significant future gift to the charitable remainder beneficiaries.
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.