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Planned
Giving
Frequently
Asked Questions
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?
 There
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.
Many
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.
What
is the difference between a charitable remainder unitrust
and a charitable remainder annuity trust?
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 decrease.
What
happens to my assets in a trust for a charity if the charity
goes out of business before the expiration of the trust?
Your
trustee is authorized to name a substitute, if that is the
sole charity.
Should
I name a charity as trustee of my charitable remainder trust?
This
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.
How
often should I update my will or trust?
These
documents should be updated any time your financial or your
family circumstances change. As laws vary from state to
state, if you move you should have an attorney licensed
in and familiar with the new state's laws review your will
or trust agreement. It is always wise, even if there are
not any significant changes in your circumstances, to periodically
review these important documents.
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 alternate or as 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.
How
can I fund a charitable gift annuity and how is my income
calculated?
The
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 gain 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.
The
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.
Can
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?
Yes,
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.
Please
note, individual financial circumstances will vary. The
information on this site does not constitute legal or tax
advice. Donor stories and photographs are for purposes of
illustration only. As with all tax and estate planning,
please consult your attorney or estate specialist. All material
is copyrighted and is for viewing purposes only. Use of
this site signifies your agreement with the terms
of use. The content in this Planned Giving section has
been developed for Sisters of Notre Dame de Namur, Ohio
Province by Future
Focus. Please report any problems to section
webmaster. Revised: February 6, 2007 21:49.
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Sisters of Notre Dame de Namur, Ohio Province 701 East Columbia
Avenue, Cincinnati, OH 45215-3999 513-761-7636 | 513-761-6159
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Weaver. This page was updated: February 6, 2007 21:49
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