A stable source of income
A charitable remainder annuity trust provides a way to avoid
fluctuations in interest rates and ensures that you or someone
you designate receives a fixed income. You may make a gift
of cash, appreciated securities or property to set up the
trust either during your lifetime or through your will.
This trust agreement locks in a long-term annuity rate and
you or your designated beneficiaries receive regular annuity
payments for life, or joint lives, or for a term of up to
20 years. The rate chosen depends on prevailing market conditions.
A gift to the community
Ultimately, the remainder in the trust becomes the property
of the Jewish community and is used to meet its most critical
needs, or to support an organization or cause which you can
specify.
Tax benefits
Should you elect to use appreciated property to fund the
trust, you will avoid any initial income tax on the capital
gain. The contributed property is received by the trust at
its fair market value, and the annuity rate is multiplied
by this value to calculate the payments to the income beneficiaries.
In addition, you will be entitled to a current income tax
charitable deduction based on the present value of the anticipated
remainder—which will ultimately be paid to the Jewish
community.
Example:
You decide to contribute stock worth $20,000, which cost
you $5,000, to a Charitable Remainder Annuity Trust. The trust
then disposes of the stock and reinvests the proceeds. The
trust is credited with the full value of the stock, and neither
you nor the trust is charged initially for payments of income
tax on the capital gain. The trust provides income at a fixed
rated of, for example, 7%, guaranteeing payments of $1,400
per year ($20,000 x 7%).
At a glance:
- Provides a fixed lifetime annuity at a favorable rate
- Eliminates initial tax on capital gain for contributed
appreciated property
- Provides a current income tax charitable deduction
- Avoids estate taxes on contributed assets
- Enables you to make a significant contribution to the
Jewish community
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