Living Trusts

Ways to Create a Lasting Legacy Through Gift Planning - Trusts

Life income plans are a sophisticated and flexible way to make a gift to AHAF, or one of its programs over a period of years while providing income for you or your beneficiary. Naming AHAF as the recipient of such a gift can help you qualify for an immediate charitable tax deduction, reduce your estate tax, avoid or reduce capital gains tax, and give you the satisfaction of contributing to the fight against Alzheimer’s disease, macular degeneration, or glaucoma.

Some of the most popular life income plans are:

• Charitable Lead Trusts
  These are created by irrevocably transferring income-producing assets (cash, stock, other assets, or a combination of these) to AHAF to be managed and invested. The income from these assets (either a fixed dollar amount or a fixed percentage of the trust principal as revalued annually) is paid to AHAF for a specified number of years. Upon termination of the trust, the remaining trust assets, including any appreciation in those assets, pass to you or your designated beneficiaries, with little (or no) gift taxes.

For each year of the trust’s existence, it receives a charitable income tax deduction for the amount of that year's income paid to the Foundation from the trust. Additionally, because the trust assets are removed from your estate, they are exempt from estate taxes.

• Charitable Remainder Trust
  This is established by irrevocably transferring income-producing assets to the Foundation to be managed and invested. You or your beneficiary will receive income payments for life or a period of up to 20 years, at the conclusion of which the trust's remaining assets will transfer to the Foundation for its general use or use as specified by the terms of the trust instrument.

Depending on how the trust is invested, the payments to you or your beneficiary may consist of ordinary income, capital gains income, tax-free income, or return of principal. Regardless, you are entitled to an immediate charitable income-tax deduction of the projected value of the "remainder interest" at the time the trust terminates. If appreciated property is used to fund the trust, you can reduce or eliminate capital gains tax on the appreciation.

• Charitable Remainder Unitrust
  A unitrust can be established during your lifetime or in your Will, and is a versatile option that can supplement retirement funds, create education funds or financial support for a beneficiary, or help you accomplish other individual objectives. It pays income to you or your beneficiary based on a percentage (at least 5 percent) of the market value of the trust assets, which are revalued annually. Although the payment percentage is fixed, the distribution from the unitrust varies. The assets most often donated to unitrusts are highly appreciated securities with low yields. By establishing a charitable remainder unitrust, you can reduce or avoid capital gains taxes and receive an immediate charitable income-tax deduction based on the projected value of the "remainder interest" at the time the trust terminates. As the principal of the unitrust grows, the annual distribution also increases. You may add more assets to the unitrust at any time.

• Charitable Remainder Annuity Trust
  Unlike the unitrust, the annuity trust maintains a fixed income payout rate (at least 5 percent) for the life of the trust. This is an attractive option for those who prefer the security of fixed income payments instead of variable payments with growth potential. Unlike the charitable remainder unitrust, new assets cannot be added to an existing annuity trust; a new trust must be established for additional assets. A new trust must be established for additional assets.

For more information or to contact us with your intentions for a gift planning donation, please contact Barbara Spitzer at 301-948-3244.

Last Reviewed On: 11/21/08