By making a charitable gift, you can help the animals and, at the same time, receive income for life and for the life of a beneficiary. Charitable gift annuities and charitable trusts are the answer are used by many nonprofit organizations to benefit both their programs and their supporters. Annuities and trusts are wonderful strategies if you have appreciated assets (typically stocks or real estate) and you would like to increase your income. By creating a charitable gift annuity or a charitable trust, you can have income for life while benefitting the Maryland SPCA.
Charitable gift annuities are extremely popular. They work much like an insurance annuity. By making a gift, donors receive a guaranteed lifetime payment from the annuity, regardless of the market conditions. In addition, the donor receives a charitable deduction for the market value of the asset, based upon their age. The minimum gift amount for an annuity is $10,000, and the minimum age is 65.
Example: Mary White, who is 88, had a large amount of stock that was producing a small annual dividend each year. The stock was originally acquired for $40,000, but now has a value of nearly $300,000. Selling it would have created a large capital gain. Mary donated the $300,000 to establish a charitable gift annuity. She avoids capital gains taxes and receives annual income of 10% or $30,000 per year—far more than she previously earned. In addition, she receives a substantial tax deduction.
For people with appreciated assets (stocks or real estate), a trust gift can provide an immediate boost to their income and a tax deduction. This is a great strategy, especially for people who have highly appreciated assets that are producing little income. The trust is funded by the asset, and it is professionally managed. At the time the trust is established the donor selects a rate of return from the trust. The trust pays out that percentage of the trust’s value on a regular schedule each year for the donor’s lifetime, and if desired, the lifetime of one beneficiary. Upon the donor’s (or beneficiary’s) death, the principle passes to the Maryland SPCA, Inc. without any estate taxes.
The tax benefits of establishing a charitable remainder trust will vary depending upon the donor’s age at the time the trust is established, the payout rate desired, and whether there is a beneficiary. There is a $25,000 minimum to establish a charitable remainder trust if the Maryland SPCA, Inc. is serving as the trustee. Each trustee will establish its own minimum gift amounts.
Example: Elizabeth and John Smith have stock worth $100,000 that was purchased 30 years ago for $15,000. The annual dividend rate has averaged 2 percent, or $2,000. The Smiths would like to increase their income but selling the stock will subject them to capital gains taxes. Instead, they donate the stock to the Maryland SPCA, Inc. to establish a charitable remainder unitrust. The Smiths elected to receive a payout of 6 percent annually, which increases their income from the stock to $6,000. They also received a tax deduction based upon contributing $100,000. The Smiths end up with higher income that continues for their lifetimes, a substantial tax deduction, and the knowledge that they have helped a cause they care about deeply.
The examples are only illustrations of the benefits charitable gift annuities and charitable trusts can provide. In all cases, we recommend that you consult your financial adviser. The Maryland SPCA can provide detailed profiles tailored to your circumstances at no cost or obligation. We also offer an annuities and trusts brochure.
Our legal name is Maryland SPCA, Inc. Our Federal tax identification number is 52-6001558.
For more information about how you can create a charitable gift annuity or charitable trust, please contact the Development Office by email or phone at 410-235-8826, ext. 133.
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