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Planned giving | Gift options

There are several ways you can make a gift to the Alliance and at the same time preserve or increase the asset's income. Each plan will reduce or eliminate capital gains taxes and provide a charitable deduction for a portion of the gift. Of even more importance for wealthy individuals, this kind of planned gift can remove the asset (and future year's appreciation) from your estate—with even more tax savings as a consequence.

Charitable trusts are beneficial to you as a donor and easy to establish. You are in control of the decisions every step of the way. You name the beneficiary—your spouse, elderly parents or others who count on you for help. You select the amount of income you want to receive each year, stated as a fixed dollar amount—the annuity trust, or as a percentage of the trust's assets—a unitrust. The lower the rate of the return you select (to a minimum allowed return of 5 percent), the higher your tax deduction for making this planned gift.

Charitable gift annuity

Several factors determine the amount of tax savings each year:

• The age of the beneficiary receiving income
• The rate of return selected
• Your tax bracket
• The portfolio's mix between tax-free investment income and ordinary income

A charitable gift annuity is a contract that guarantees a fixed income in exchange for your gift. For example, contributing a $100,000 asset this year gives you a charitable deduction of close to $50,000 and a considerable tax savings on the year's annual income tax return, according to your current tax bracket. In the coming years, as the asset in the trust grows, you can be satisfied you have secured the set dollar amount of income you want to achieve each year that the Alliance will have an even larger legacy after the trust payout is completed.

An annuity trust is especially attractive if you want a fixed, reliable source of income from your assets every year. Placing $50,000 of stock into a charitable remainder annuity trust at a fixed 7 percent as the annual return guarantees the fixed amount of $3,500 per year, no matter how the asset in the trust is performing.

If you are holding an underperforming asset, give it to the Alliance to place in a charitable trust. The Alliance can sell the asset and place the proceeds in a more diversified, higher-performing portfolio. You avoid all capital gains taxes, and as the asset in the trust increases in value, so will your annual share.

Charitable remainder unitrust

For this type of trust, payout of income to you as donor or your named beneficiary is based on the value of the trust each year rather than a fixed dollar amount. In some circumstances, unitrusts often are considered to be more beneficial because they provide protection against inflation.

Long-term, appreciated assets are excellent instruments to fund a gift annuity. The trust creates lifetime income for you and your beneficiary and, at the same time, reduces your tax exposure. If you set up a unitrust with an appreciated asset, you benefit from an immediate income tax deduction (subject to annual giving limitation) combined with saved capital gains tax. For many individuals, a unitrust is a wise charitable investment.

Charitable lead trust

One gift that enhances your assets for your heirs is a charitable lead trust. This gift is especially useful if you have income-producing assets you want to preserve and protect for your own heirs without needing the income from that asset to maintain your current lifestyle. Such a situation provides an excellent opportunity to create a charitable lead trust, an especially smart decision if your estate will be subject to substantial gift and estate taxes.

The lead trust provides annual income paid to the charity of your choice for the number of years you articulate when you first set up the trust. You decide whether the payment to the charitable organization is to be a fixed amount each year or vary according to the trust's overall value. When the set number of years of the trust ends, the asset reverts to you or your beneficiaries.

The tax benefits also vary according to the final distribution of the asset at the end of the charitable lead trust. One benefit of this instrument, especially for larger estates, is that estate taxes on assets transferred to named beneficiaries are fixed at the time you create the trust. If the trust grows from an initial commitment of $2 million to $2.5 million, your heirs will, essentially, benefit from the $500,000 increase in value—without incurring any additional estate tax on that portion of their inheritance.

Pooled income fund

Younger contributors often prefer to put funds into a pooled fund set up by the charitable organization and managed by a trustee bank. Its structure is similar to a mutual fund, but the donor cannot withdraw the original investment. The Alliance combines your contribution with similar gifts and leverages the entire investment "package" to achieve a far superior return.

This variable-income plan will provide you and/or your designee with lifetime income based on what the pooled funds actually earn each year. For your investment in a pooled fund, you receive an income tax deduction and tax savings; you avoid capital gains on the asset contributed; and you can alleviate possible estate taxes.

For more information about planned giving, contact Bennett Judson, The Roofing Industry Alliance for Progress' executive director, at (847) 299-9070, Ext. 7513, or e-mail bjudson@roofingindustryalliance.net.