Gifts That Produce Income

In addition to enabling donors to make much larger gifts than many think possible, planned gifts can generate lifelong income, convert low-yielding appreciated stock or real estate into a higher income stream, reduce or eliminate capital gains taxes, produce significant federal income tax deductions and minimize or eliminate federal estate taxes.

Examples include the following:

Charitable gift annuities are simple contracts. In exchange for a gift of cash or appreciated securities, the University of Maryland Baltimore Foundation, Inc. pays a fixed amount to your designated beneficiary for life. A portion of the income from the gift may be tax-free, capital gains taxes can be minimized, and you are entitled to a substantial income tax deduction in the year the gift is made.

Deferred gift annuities are similar to charitable gift annuities but give you an opportunity to defer receiving income for 5, 10, 15 years or longer. A longer deferral period results in a higher annuity rate and larger tax deduction.

Reserved life estate gifts enable you to leave a personal residence, vacation home or farm to support the School of Medicine, while retaining the right to live in or use the property for the remainder of your life. Through this type of arrangement, you may be able to make a gift of the property, obtain an immediate tax deduction and continue to use the property as long as you wish. If you are contemplating making a gift of real estate through your will, giving the property now would allow you to receive the tax advantages and right to inhabit the property through a reserved life estate.

Charitable remainder trusts are commonly used to assist donors in their personal, financial, tax and charitable gift planning while fulfilling personal and family financial needs. A charitable remainder trust is an arrangement in which you irrevocably transfer assets, securities or property to an individually managed trust and name the School of Medicine as the charitable beneficiary. Your trustee (such as the University of Maryland Baltimore Foundation, Inc.) pays income to you or other designated beneficiaries for a pre-determined period of time, after which the remainder passes to the School of Medicine. Income provided to beneficiaries can be variable (a charitable remainder unitrust) or fixed (a charitable remainder annuity trust). Charitable remainder trusts are tax-exempt and provide an immediate income tax deduction.

Charitable lead trusts are similar to charitable remainder trusts except they operate in reverse—the charitable beneficiary receives annual income at the front end for a specified number of years before the trust corpus returns to the donor or family members. Significant gift and estate tax savings are realized if income-producing property passes to family members at the end of the trust’s term. Charitable lead trusts are a useful financial and estate planning tool, allowing you to provide support to the School of Medicine and pass assets along to your heirs.

For additional information on planned giving, please click here.

 

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