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Planned Giving Glossary of Terms
Charitable Bequest – A gift designated in your will that becomes available to the charitable organization(s) after the individual’s lifetime. The primary characteristic that distinguishes a bequest from many other planned gifts is its revocable nature, i.e. the donor can change his/her mind. Therefore, there is no charitable income tax deduction for a bequest. Sample bequest language.
Charitable Gift Annuity – A combination of a gift to charity and an annuity. For senior persons, annuity rates may be 8%, 9% or even higher. Since part of the annuity payment is tax-free return of principal, the gift annuity may provide the donor with a very substantial income. The combination of partially tax-free income and the initial charitable deduction makes this agreement quite attractive. And after all payments have been made for the lives of the annuitant, a favorite charity will benefit from the charitable gift. Can be immediate or deferred payments to donor.
Charitable Remainder Annuity Trust (CRAT) – Highly appreciated, low yield property may be transferred into a living remainder annuity trust. The individual selects an annuity amount or a percent of the initial fair market value that will be paid for one or two lifetimes. The annuity amount will be fixed and will not change regardless of the value of the trust principal or the return of the trust. The charity received the trust principal after all income payments have been completed.
Charitable Remainder Unitrust (CRUT) – Similar to the CRAT, but the amount paid may vary as the rate of return is re-evaluated annually based on market conditions and the return on the trust. After all of the income payments have been completed, the remainder is distributed to qualified charities.
Charitable Lead Trust – Property is transferred into a trust permitting a fixed annuity to be distributed each year to the selected charity for a chosen number of years. At the end of the chosen term of years, principal is distributed to family members.
Retained Life Estate – A donor can contribute a primary personal residence, second home or a farm to a charity and continue to occupy the property until death. The donor benefits from an irrevocable donation to charity, current income tax deduction and continued enjoyment of property for lifetime.