Many individuals are familiar with foundations established by significantly wealthy individuals. You can accomplish these same goals without the legal structure or the financial requirements of an individual foundation.

You can accomplish this through one of the following vehicles: Direct Gifting, Gift Annuities, Donor Advised Funds, and Charitable Remainder Trusts. These gifting vehicles can allow individuals to give today, receive immediate tax deductions, and in some cases receive a guaranteed income stream during their lifetime.

 

A Charitable Gift Annuity is one of the simplest deferred gifting vehicles available. It provides tax-free income, flexibility, capital gains savings, and security. Individuals can transfer cash or assets (usually appreciated assets) to a pre-established Foundation. They designate which charities will receive these funds upon their death.

This arrangement is given in exchange for a guaranteed income stream for the donor’s lifetime. In many cases individuals will receive a fixed guaranteed income stream that is higher than what the asset was previously generating. The donor is allowed to take a substantial income tax deduction based on IRS tables and receive the income stream on a partial tax-exempt basis. In addition, if one transfers an appreciated asset into the foundation, you can usually bypass capital gain tax.

The following illustration is an example of the benefits of a Charitable Gift Annuity. Tim, age 74, plans to leave 1,000 shares of a $50/share stock to NYFRF upon his death. He does not want to give the stock right now, because it is currently paying him a 2% dividend of $1,000 a year. Tim has thought about selling the stock and purchasing a different investment, but he would have to pay capital gains on the growth of the stock. A solution to this problem would be for Tim to transfer that stock to a Charitable Gift Annuity and have the principal pass to NYFRF at the time of his death. This would create the following benefits. He would receive a guaranteed income stream that would increase his current $1,000 a year in dividends to $3,450 a year. He would eliminate the capital gains tax and receive a current income tax deduction. Best of all, Tim would be able to meet his living expenses today, while providing future financial support for NYFRF.