If a trust
agreement is established as irrevocable, it means that it can't be revoked (broken)
except under unusual circumstances. Why would anyone want an irrevocable trust?
are always specific reasons for making an irrevocable trust agreement. Perhaps
it involves a family business where some of the family members are getting on
in years and the family wants to make certain that management continues to run
smoothly even if hindrances, such as senility, enter the picture.
times the reasons for an irrevocable trust involve estate and/or income tax avoidance.
In order to be successful in such avoidance, the trustor must not have any direct
or indirect power or control over the trust property or income. The regulations
on this subject, set out in the Internal Revenue Code, must be carefully followed.
is the difference between a charitable remainder unitrust and a charitable remainder
The major difference is in the valuation of the assets
of the trust, which establishes part of the calculation for the determination
of the amount of income received by the income beneficiary(-ies). The annuity
assets are valued at the time the assets are placed in the trust. The trust assets
are never revalued. Annual payments remain the same, whether the assets appreciate
(increase in value) or depreciate (lose value).
The assets in the unitrust
are revalued annually. If the trust assets appreciate, the payment to the income
beneficiary(-ies) will increase. If the trust assets depreciate, the payment will
What happens to my assets in a trust for a charity if the charity
goes out of business before the expiration of the trust?
is authorized to name a substitute, if that is the sole charity.
I name a charity as trustee of my charitable remainder trust?
is often done if the organization is qualified to so act under local law. The
organization's representatives can satisfy you in that regard. Often they will
serve without fee, which is an additional incentive.
Can I use my insurance
to benefit charitable organizations?
Yes. This is an area overlooked
by many. You can name one or more charities as an alternate or as a primary beneficiary.
Furthermore, if you no longer need the policy proceeds in your estate for use
now, you can transfer
ownership of the policy to the charity or charities. If the policy has cash loan
value, the charity can draw this out and use it. In this case, you not only receive
a charitable gift deduction, but any additional premiums you pay are tax deductible
for you now. And, on your death, the charity receives the balance of the policy
proceeds and none of it is included in your estate for tax purposes.
can I fund a charitable gift annuity and how is my income calculated?
usual funding sources for a charitable gift annuity are cash and marketable securities.
There can be tax benefits associated with the gift of appreciated securities (the
current market value exceeds the cost or basis value). As a gift annuity is considered
partially a gift and partially an annuity, part of the gift avoids capital gains
tax entirely. Real estate and other marketable assets may also be used, but in
many cases acceptance of these kinds of assets are often on a case-by-case basis.
Generally, the charity will convert the assets to cash to fund the annuity.
income provided you by the annuity is determined by your age and the age of any
additional beneficiary and is calculated using tables established and filed with
regulatory agencies under which the charity operates its annuity program.
I set up a charitable gift annuity and delay the start of the income until I will
more likely need it, such as at my retirement, when my income is lower?
the flexibility associated with establishing charitable gift annuities makes them
a popular and effective retirement planning vehicle. Using a deferred gift annuity,
the annuity earnings accumulate on a tax-deferred basis. Thus the deferred payment
annuity accomplishes several things. First, the donor receives a tax deduction
in the year the annuity is established,
which is usually when the donor
is in a higher tax bracket. Secondly, the gift to the charity becomes larger as
the deferred earnings increase the annuity's principal. Finally, since the deferred
payment annuity grows in size while income is deferred, the ultimate income will
be more per year.
For more information or a confidential discussion of your charitable options, please email or call the Vice President and Chief Advancement Officer, Joanne Bean, at 207-893-7891.
Please note, individual financial circumstances
will vary. The information on this site does not constitute legal or tax advice, either in whole or in part. Donor stories and photographs are for purposes of illustration
only. As with all tax and estate planning, please consult your attorney
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