Building an annuity trust into your estate plan means
that you irrevocably transfer ownership of securities or other
property to a trust for the ultimate benefit of the charity you
designate. You should note that, once the annuity trust is
established and funded, assets are under the management of the
trustee—generally a financial institution though in some cases
another qualified trustee.
The terms of the trust, however, are fashioned so that you
continue to receive a fixed annual payment equal to a total
value of the trust in the initial year of funding-providing a
steady stream of income for you or anyone else you name. If you
like you can even arrange for payments to these other
individuals to continue for a specified length of time after
your death. Ultimately, however the charity you’ve named in the
trust document is the sole beneficiary of the assets.
How can you determine if an annuity trust makes sense for
you? The following question can help you decide~
Are you interested in making a gift of securities or
property to a not-fot-profit organization?
Does you investment portfolio contain assets that
have appreciated significantly over time?
Would you appreciate an uncomplicated arrangement
that would result in a fixed annual payment that will
not fluctuate?
If you answered yes to any of the question above, an annuity
trust could make an important difference in the effectiveness of
your current financial strategy and estate plan.
Here’s how:
Funding the trust with highly appreciated assets enable you
to bypass capital gains tax on the sale of these securities.
This is because they have been transferred to a trust that is
exempt from paying this tax. In a situation where the value of
the securities has increased to a large degree, this could
amount to substantial savings.
In addition, for the year you fund the trust, within certain
limits you are able to take a charitable deduction on your
federal income tax return for the value of the securities that
not-for-profit group ultimately will receive. Again, this aspect
of an annuity trust can represent and important tax advantage.
Lastly, an annuity trust is a straightforward arrangement:
you can depend on a steady income in amounts that do not change
over time.
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