FAQ

Gift Planning
Frequently Asked Questions

Q: Can I receive the same payout rate on a charitable remainder unitrust as I can on a gift annuity?
Q: Why is a portion of a gift annuity's payment tax-free?
Q: Who manages your trusts?
Q: Are there management fees associated with gift annuities and trusts?
Q: Can I self-trustee my CRT or CLT?
Q: Will I receive a charitable deduction for my gift annuity and charitable remainder trust?
Q: Will my charitable deduction be equal to the amount I donate to the gift annuity or charitable remainder trust?
Q: Why does the charitable deduction into a life income contract vary from month to month?
Q: Can I list more than one charity as a remainder beneficiary of my life income contract?

 


Q: Can I receive the same payout rate on a charitable remainder unitrust as I can on a gift annuity?

A: Typically not. The gift annuity rate is typically higher than a rate that you can receive on a charitable remainder unitrust. This is because the payment from a gift annuity is fixed and will never change with time. Because $1,000 10 years from now is less valuable than $1,000 right now, a gift annuity's payment to you will be worth slightly less every year. A payment from a unitrust will fluctuate with the current fair market. Typically this will mean that you will have an increase in your payments every year to offset inflation. Because your payments are increasing every year, the payout rate must be lower in a unitrust in order to give you an equal benefit overall.

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Q: Why is a portion of a gift annuity's payment tax-free?

A: When you give an asset to Whitman College to fund a gift annuity, we will ask for the basis of the asset you are transferring. The basis is the amount you paid for the asset you are donating. When payments are made to you, it is assumed a portion of the payment is a return of the asset basis. As a return of basis is not taxable, that part of your payment is tax-free. The higher your basis in an asset the larger the amount of tax-free return of basis you will have with each payment.

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Q: Who manages your trusts?

A: We contract with a company called Kaspick and Company to manage our trusts where Whitman is the trustee.

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Q: Are there management fees associated with gift annuities and trusts?

A: Gift annuities are invested by the Whitman College investment committee and managed by the administration of the College. Because the College is managing and investing these assets no fee is assessed to your gift annuity.

Our trust administrators Kaspick and Company typically manage the trusts where Whitman College is the trustee. Kaspick and Company will charge a reasonable fee to administer the trusts, typically between .75% and 1.25% a year.

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Q: Can I self-trustee my CRT or CLT?

A: The IRS allows for donors and beneficiaries of a trust to self-trustee. Many donors like the control of allocating assets and buying and selling shares themselves. This is an excellent way to stay involved with your trust assets. By self-trusteeing you will avoid the Kaspick and Company fees, however, you will be responsible for all the tax returns for the trust and will likely have fees from other brokers that you personally contract with. In addition, all questions relating to the trust for tax purposes will likely need professional guidance from a CPA or attorney. You will be responsible for those fees as well.

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Q: Will I receive a charitable deduction for my gift annuity and charitable remainder trust?

A: Yes, when you donate money to a gift annuity or charitable remainder trust you will receive a current charitable tax deduction that can be used in the current year. If you cannot use your deduction in the current year, it can be carried forward to the next five years. 

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Q: Will my charitable deduction be equal to the amount I donate to the gift annuity or charitable remainder trust?

A: No. When you transfer money to a charity to buy a life income contract you are giving your money for two separate items. One, you are giving money to the charity as an investment. You require an actual payment quarterly for the remainder of the life income term. Two, you are making a charitable gift with the remainder principal left in the trust or annuity. The IRS has calculations to determine the value of the second part of your payment, the charitable deduction. We have computer programs to determine the deduction for you, and will send you receipts that you can show your tax preparer.

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Q: Why does the charitable deduction into a life income contract vary from month to month?

A: One of the factors that is used in the charitable deduction calculation is the current IRS discount rate. This is closely tied to the current interest rates. As the interest rate declines, the value of the charitable deduction also declines. The IRS discount rate is changed every month.

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Q: Can I list more than one charity as a remainder beneficiary of my life income contract?

A: Yes, you can. Although Whitman typically is the sole beneficiary of our life income contracts, you are allowed the option to list multiple remainder beneficiaries. Whitman College requires at least a 51% remainder interest in the principal for Whitman to be the trustee of the trust. This allows us to make vital decisions as to the investment allocation and tax requirements without having to call a vote from the other remainder beneficiaries.

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