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Life Income Gifts

MCHT offers a variety of gifting techniques that give donors regular income payments for life, or for a fixed term of years, in exchange for a gift of cash, appreciated securities, or other assets, including real estate. Listed below are several options, each slightly different from the other.

  • Charitable Gift Annuities
  • Deferred Charitable Gift Annuities
  • Charitable Remainder Unitrusts
  • Charitable Remainder Annuity Trusts

While the benefits to donors will vary for each option, there are many advantages to these gifts:

  • The donor can choose to be the sole recipient of income (a one-income plan), or choose a plan that provides income to two successive donors (a two- income plan).
  • Income can be a fixed amount or variable, depending on the option selected.
  • There will be an income tax charitable deduction for a portion of the gift, which is calculated in part by the age(s) and gender(s) of the recipient(s).
  • For gifts of appreciated securities or property, your deduction will be based on appreciated value and will not be subject to capital gains tax.
  • Once the one or two income beneficiaries have died, the donor can choose how the remaining value of the gift will be used to support the mission of MCHT, either for MCHT’s general purposes, or restricted for one of MCHT’s core missions.

Agent for MCHT

MCHT uses Bar Harbor Bank & Trust Company as its Agent for investment management and administrative services for gifts that provide a life income. MCHT reserves the right to change or add agents in the future. A donor may also choose to select a different Agent for investment and related fiduciary responsibilities. MCHT may also be willing to act as co-trustee of a charitable trust when the trust names MCHT as an irrevocable beneficiary of 50% or more of that trust.

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.

Charitable Gift Annuities

Through MCHT’s Charitable Gift Annuity (CGA) program a donor may make an irrevocable gift of cash, securities or other assets, and in exchange MCHT will pay one or two named annuitants a fixed sum each year for life. Payments are based on rates recommended by the American Council on Gift Annuities and are guaranteed by MCHT’s general resources, backed by a reserve account. A minimum initial gift of $10,000 is required; additional gifts of $5,000 are welcome. Donors and annuitants must be 60 years of age or older to qualify for MCHT’s CGA plan.

Advantages

  • Guaranteed fixed income for life
    • Rates of return up to 9% for a single life (slightly less for two lives)
  • Charitable income tax deduction for a portion of the gift
    • Tax advantaged income (some payments will be tax free under most circumstances)
    • Reduced capital gains taxes (pay capital gains only on the gain attributed to retained life interest)
    • Potential reduction of federal (and possibly, state) estate tax liability

Sample Recommended Guaranteed rates of Return

TwoLifeAgesRate
604.4%60/603.9
654.7%65/654.2%
705.1%70/704.6%
755.8%75/755.0%
806.8%80/805.7%
857.8%85/856.7%
909.0%90/908.2%

These rates are determined by the American Council on Gift Annuities and are adjusted annually. The rates shown are for 2012. See www.acga-web.org/ for official rates at all ages and for a variety of two-life age combinations.

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.

Deferred Charitable Gift Annuities

A Deferred Charitable Gift Annuity (CGA) allows younger donors and annuitants to defer the start of payments until they have reached retirement age. As with donors of regular CGA’s, deferred CGA donors can take a charitable income tax deduction in the year the gift is made. Often that deduction is higher the longer the payment is deferred. Since payments are deferred, designated annuitants will also receive substantially higher income payments later. This type of gift works best for donors still in high-income years, between the ages of 40 and 60, who are focused on the income tax deduction available and the promise of retirement income. MCHT will not begin payments until the annuitant or annuitants reach age 60. Once payments begin, the deferred CGA performs just as a regular CGA, by providing a guaranteed stream of income.

Deferred-payment Annuity Rates

Contribution AgeIncome begins atRate
50657.5%
55656.4%
60655.5%
65705.9%

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.

Charitable Remainder Unitrust

A Charitable Remainder Unitrust is a separately invested and managed charitable trust that pays a percentage of the principal, re-valued annually, to the donor or other designated beneficiary for life, or for a term of years. After the unitrust terminates, the accumulated principal or “remainder interest” is paid to MCHT, for the purposes specified by the donor. The recommended minimum gift is $100,000 and this can be donated in cash, publically-traded securities, closely-held stock, real estate, or other types of assets. Additional gifts may be made at later times. Here are some of the advantages of such a Charitable Remainder Unitrust:

  • Receive an income tax charitable deduction.
    • Avoid capital gains taxes on appreciated assets donated at the time of the funding.
    • Reduce estate tax liability.
  • Increase income over time if the underlying investment performs well.

For traditional unitrusts, federal law requires a minimum payout of 5% per year of the principal of the trust, revalued annually. As an example, using a gift of $100,000, the first year’s payout would be $5,000. In the second year, if the total return of the investment of this asset was 7%, then the new value of the principal would be $102,000 ($107,000 principal, less a $5,000 payout). Therefore, at a payout rate of 5%, the second year’s income would be $5,100. Investment performance will vary, so there are no guarantees that income each year will always increase.

The income tax charitable deduction is based on the age(s) and gender(s) of the life income recipients, and the rate of return agreed to mutually by the donor(s) and MCHT.

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.

Charitable Remainder Annuity Trust

A charitable remainder annuity trust is a separately invested and managed charitable trust that pays the donor and/or other designated beneficiaries a fixed annuity income for life, or for a term of years (as contrasted with a unitrust that pays a variable income). Like other life income arrangements, the donor receives an income tax charitable deduction for a portion of the gift. No additional gifts are permitted. After the annuity terminates, the accumulated principal or “remainder interest” goes to MCHT, for the purposes specified by the donor. A minimum gift is usually $100,000. Here are some of the advantages of such a gift:

  • Receive a stable, predictable income
  • Avoid all capital gains on any appreciated asset
  • Reduce estate tax liability

Federal law requires a minimum annuity equal to 5% of the principal, although higher rates are negotiable, based on the age(s) and gender(s) of the income beneficiaries. The income tax charitable deductions are also based on the age(s) and gender(s), as well as the annuity payout selected in discussions with MCHT.

To request a personal illustration, please contact David Warren, Planned Giving and Major Gifts Officer. All illustrations and conversations will be done on a strictly confidential basis.