Income Generating Gifts
For many friends and alumni, the desire to make a gift to Washington and Lee's School of Law is coupled with a continuing need for income from those assets. Fortunately, Washington and Lee's planned giving program makes it possible for a donor to achieve both of these objectives and receive substantial tax benefits as well.
Life income gifts to the School of Law may take three basic forms: charitable remainder trust, charitable gift annuity and a pooled income fund. Often gifts in one of these forms will actually increase a donor's or beneficiary's income. Additionally, these life income gifts may provide some or all of the following rewards:
- an income for life
- reduced or eliminated capital gains taxes
- a current charitable income tax deduction
- reduced or eliminated burdensome estate and gift taxation
- a larger gift to the School of Law than otherwise possible.
Charitable Remainder Trusts
Charitable remainder trusts are formal legal arrangements that distribute income to a donor or other beneficiaries for their lives or a specified term of years. Upon the death of the last surviving beneficiary or at the end of the fixed term, the School of Law will receive the principal being held in trust. Usually gifts of $100,000 or more are required to maximize the advantages of these arrangements for you as well as for the School.
Charitable remainder trusts come in two forms: annuity trust and unitrust.
An annuity trust pays income based on a percentage of the initial value of the trust and never changes. Since the annuity payment does not change during the term of the trust, an annuity trust provides the certainty of a fixed amount of income each year regardless of any fluctuations in the value of the trust assets.
A charitable remainder unitrust pays income based on a percentage of the fair market value of the trust assets as determined annually. Because a unitrust pays a variable amount of income based on the annual market value of the trust assets, this form of charitable remainder trust may provide an effective hedge against inflation. When the value of the trust principal increases, so will the donor's income. Unitrusts may receive additional gifts during your lifetime or as a testamentary transfer through your Will. There are a number of variations of charitable remainder unitrusts, including "net income" unitrust, "net income with make-up" unitrusts and "flip" unitrusts.
Charitable Gift Annuity
A charitable gift annuity is a simple agreement between a donor and the University. Washington and Lee agrees to pay a lifetime annuity in exchange for a charitable gift to the School of Law or the University. The amount of the annual fixed payment is generally determined by the age of the beneficiary. Your gift of $5,000 or more will establish a gift annuity.
Charitable gift annuities may also be structured to defer income until a future date. Younger donors can create an annuity currently and defer the payments until they retire when the income will be helpful. The income tax deduction for this gift is available in the year the annuity is established.
Pooled Income Fund
A pooled income fund functions like a mutual fund and offers similar advantages. Your gift is combined or "pooled" with gifts from other donors. These assets are invested and reinvested by the trustee, according to guidelines established by Washington and Lee. The income earned on these investments is paid on a quarterly basis to each participant in the fund. Your share of the fund's earnings is determined by the number of units of participation originally assigned to your gift. Gifts to the pooled income fund begin at $5,000, with additional gifts of other varying amounts possible at anytime.