Charitable

Giving

Transform Lives Through Your Generosity

Choose from a variety of charitable giving

options to support the ministries and causes

you care about.

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Additional Resources

Choose From a Variety of Charitable Giving Strategies

Charitable Remainder Unitrust

A Charitable Remainder Unitrust, also known as a CRUT (or Unitrust), is an irrevocable transfer of assets from a donor (or donors) to a trust.

It is a special vehicle approved by the Internal Revenue Service that allows individuals to make a charitable gift, receive charitable deductions, and yet receive the income from the gift for life (or lives) for a term of years.

At the termination of the trust, any remaining funds are transferred free of the trust to the charity or charities designated by the donor when the donor established the trust. Because the assets eventually go to a charity, special tax benefits are available at the time of the gift by the donor.

Mr. Smith transfers $100,000 to fund a Charitable Remainder Unitrust. He chooses to receive 5% of the fair market value of the unitrust assets each year (payable quarterly). The first year, Mr. Smith receives $5,000. One year later, the trust assets are worth $110,000. Mr. Smith receives $5,500 for the upcoming year ($110,000 x 5%). If the assets are worth $120,000 the following year, (Mr. Smith will receive $6,000 for that year ($120,000 x 5%) and so on, each year after his life.

Following his death, our team at Provision will distribute the income from the CRUT to the causes Mr. Smith named as beneficiaries – which in this scenario are the International Mission Board, First Baptist Church, and the Baptist Children’s Home.

A Charitable Remainder Annuity Trust, also known as a CRAT is like a unitrust except that the CRAT pays a fixed amount each year rather than a percentage of trust assets. The payment remains the same for the duration of the trust, regardless of the investment returns. Because it makes a fixed payment, CRATs cannot accept future contributions.

In general, CRAT is a hedge against a declining economy as it provides a fixed income to the annuitant(s). The CRAT usually produces a slightly greater income tax deduction and estate tax saving than the CRUT. Trusts are typically funded with assets with a value of at least $50,000.

Charitable Remainder Annuity Trust

Mrs. Williams transfers $100,000 to fund her Charitable Remainder Annuity Trust. She chooses to receive $6,000 each year for the rest of her life (payable quarterly).

After her death, Provision distributes the income produced by the assets of her CRAT to the causes she named as beneficiaries – which in this scenario are the NC Baptist State Convention, Baptists on Mission, and Fruitland College.

A Charitable Lead Trust (CLT) is often described as being the opposite of a Charitable Remainder Trust. This type of trust pays a specified rate of income to a charity for a defined period of time, and when the trust terminates, the assets go back to the donor or are transferred to family. They may be either a unitrust or an annuity trust type.

Charitable Lead Trust

Due to their complexity, CLTs are generally used by individuals with larger estates and who are charitably inclined.

The most used type is called the Non-Grantor Charitable Lead Trust. When used, the remaining assets are given to the family at the termination of the trust. Typically, this type is funded with assets that are expected to appreciate significantly over time and then by transferred to family with reduced gift (or estate-tax) exposure. Unlike a Charitable Remainder Trust, a Non-Grantor CLT does not provide an income tax deduction for the donor, but the income earned in the trust is not attributed to the donor. The trust itself is taxed according to trust rates. The trust receives an income tax deduction for the income paid to charity.

The second type is a Grantor Charitable Lead Trust. With this type, the trust assets are returned to the donor when terminated. The trust provides an income tax deduction on its creation to the donor (based primarily on the payout rate and the length of the trust period). However, the grantor is taxed on the income paid to the charity. There are more limited uses for Grantor CLTs in both the unitrust and annuity variations, and therefore, most donors use the Non-Grantor Charitable Lead Trust type.

Charitable Gift Annuity

A Charitable Gift Annuity is a contract between a donor and an institution where the donor provides a gift in exchange for a lifetime of agreed-upon fixed payments.

The arrangement may be for either one or two lives. The payment rate can be negotiated, but there is a maximum rate that cannot be exceeded. As a general rule: the older you are, the higher the payout rate, and a one-life gift annuity will have a higher payout rate than a two-life annuity.

If establishing a Charitable Gift Annuity sounds like something you would like to consider, contact our team for a personal printout. There is no cost or obligation.

Suppose you are age 75, need good income and yet want to support your church’s missions efforts in the future. You decide in January of 2012 to give $10,000 cash to Provision in exchange for annual lifetime payments of 5.8%.

Here are the results:

You will receive annual payments of $580 for as long as you live.

Until the year 2023, $482 of your $580 payment will be tax-free.

Your payments are to be fully made, regardless of investment results, and are backed by the assets of Provision.

You will receive an income tax deduction in the year of the gift equal to $4,216.

Cash assets are not subject to capital gains tax. (If this gift annuity had been funded with stock with a $5,000 long-term capital gain, $2,108 of that gain would be bypassed, and the balance would be paid over your life expectancy. The tax-free portion of the annual payment would be $241 per year.)

None of the $10,000 would be included in your estate for estate tax purposes.

After making lifetime payments to you, 50% of the remaining gift annuity assets would fund an endowment with income being paid to the charity/ministry of your choosing…forever. The other 50% would belong to Provision to help the us in our ministry and to help guarantee other gift annuity payments.