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Charitable Remainder Trust

moneysproutA charitable trust is another way to make a gift and receive income for life. It is more flexible in nature than a gift annuity and can allow you to meet different personal goals. Your payments can be either fixed or variable in amount. See additional information below.

Retained Life Interest in Your Home or Farm

You can give your home or farm to AFE now, and continue to live in or use the property for the remainder of your lifetime. This enables you to make a major gift without a change in lifestyle. See additional information below.

To discuss these options, please contact AFE at (703) 838-5211.

Charitable Remainder Trust

With a Charitable Remainder Trust, you make a gift to AFE (and possibly other charities) and receive income for your lifetime (or a period of years that you specify). You may have an asset you wish to donate to the American Floral Endowment, or you may have an asset that is under performing and you would like to improve your cash flow from it. You may be reluctant to sell the asset and reinvest in something more productive because of substantial capital gains taxes. As an alternative, you might consider a charitable remainder trust that can be established benefiting you and, in the long run, providing support for the American Floral Endowment’s future.
You transfer the assets into a trust and designate a trustee. The trustee manages the assets, which involves selling them and reinvesting the proceeds as appropriate, and pays income to you (or other designated beneficiaries). When the trust sells appreciated assets, it pays no tax on the gains. Payments can be a fixed amount (annuity trust) providing you the security of the same payment each time; or payments can be based on a stipulated percentage of trust assets (unitrust), meaning payments will vary but have the possibility of increasing over time. When the trust terminates, the remaining principal is used to benefit the American Floral Endowment. A charitable remainder trust has additional benefits:

  • Provides you and/or other beneficiaries annual payments for life or a specified time
  • Provides an immediate income tax deduction for a portion of the value of the assets transferred
  • Converts low or non-income producing assets into cash flow without incurring capital gain taxes
  • Can provide supplemental income for retirement or provide for family members or other loved ones
  • You can name one or more charities as the ultimate beneficiaries of the trust
  • May provide estate tax savings

Estate Gift at Work

Mr. & Mrs. T, ages 68 and 65, own undeveloped land worth $250,000, which they originally bought for $50,000. They contribute the land to a charitable remainder unitrust, which will pay them 5% of the trust principal annually. They pay no tax on the capital gain when the trust is established or when it sells the land. They also receive an income tax deduction of $89,985. Payment in the first year would be $12,500 and if the trustee’s investments earn a net total return greater than 5 percent, their annual payments will grow. By the time the remainder is transferred at the end of their lives, the trust principal may have grown, possibly providing an even larger endowed scholarship fund for horticulture students.
(Example uses the April 2010 discount rate of 3.2%.)
We would be pleased to prepare an illustration showing how a charitable remainder trust would work in your situation. There is no cost or obligation and all information will be kept confidential. For an illustration or more information, please contact AFE at (703) 838-5211.

Retained Life Interest

Remain in Your Home (or Farm) While Making a Gift
You can make a gift of your residence or farm to the American Floral Endowment but reserve the right to use the property for the rest of your life. “Residence” includes condominiums as well as a house, and it can be either your primary residence or a vacation home.
You receive an income tax chartable deduction now without altering your lifestyle. In the event you have to move from the premises, you have several options that could result in a lump sum of cash or income to you:

  • Rent the property and retain the rental income.
  • Contribute the life tenancy and receive an additional charitable deduction.
  • Contribute the life tenancy to a charitable remainder trust.
  • Sell the property and allocate the proceeds with AFE, according to the then values of the life and remainder interests.
  • Sell your life estate to a third party.

 How a Retained Life Estate Gift Works

Mrs. N, age 75, whose husband died several years ago, lives alone in a home valued at $700,000. She deeds the property to the American Floral Endowment, reserving the right to live in it for the rest of her life. She continues to live in the home, paying her insurance, taxes, utilities and minor repairs, as always. By making her gift now rather than making it through her will, Mrs. N receives an income tax charitable deduction to begin saving on her taxes immediately. Based on a charitable deduction of approximately $440,000, Mrs. N will save $110,000 in income taxes over the next six years (assuming a 25% tax bracket), and she has removed a substantial asset from her potentially taxable estate.
To find out more about gifts of retained life estate, please contact AFE at (703) 838-5211.