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Could a Planned Gift Boost Your Retirement Income?

Posted in Charitable Planning

Yes! Some planned gifts can generate annual income to you while leaving the remainder to the charity of your choice after death.   A charitable gift annuity, pooled income fund and charitable remainder trust are such examples. And in the current low interest rate environment, the annual income payment to you from these types of gifting tools might exceed your interest earnings from a certificate of deposit or savings account.

Charitable gift annuities are offered by a variety of charities and they take the form of a contract, so they are relatively easy to establish. The donor receives an immediate income tax deduction for a portion of the contribution. The contract pays a fixed annual income for one or two people for their lifetimes, and the payout amount is determined by prevailing interest rates and the age of the annuitant(s). This makes them very attractive for older donors. Because it is an annuity, the income can be partially tax-free which makes them attractive for everyone. The donor can designate the charity to receive the balance of the fund after the lifetime(s) of the donor.

Pooled income funds are similar in that they are fairly easy to establish, they provide income and an immediate income tax deduction for a portion of the contribution.   They differ from charitable gift annuities in that the donor’s contribution is invested in a pool of funds, and payouts fluctuate according to investment returns so they are not fixed and predictable. That means that with higher investment returns of the underlying pool, the income from a pooled fund might go up but could also go down.   The income payouts are taxed as ordinary income. As with charitable gift annuities, the donor can designate the charity to receive the balance of the fund after the lifetime of the donor.

A Charitable Remainder Trust (CRT) is a legal entity (a trust) that is established by the donor(s). The CRT will state the annual income as a fixed amount or a fixed percentage for the donor(s) and whether the payouts are for lifetime(s) or a specific period of years. Similar to charitable gift annuities, the income can be tax-advantaged. After the income period, the remaining balance in the trust is distributed to the charity designated by the donor(s). Like the charitable gift annuity and pooled income fund, a CRT provides an immediate partial income tax deduction. The Charitable Remainder Trust is the most flexible of these three arrangements, creation of the CRT can take some time, and there are expenses associated with establishing and maintaining a trust; because of this, Charitable Remainder Trusts are generally only considered if the contribution will be over $100,000.

If you are planning your retirement income, you might want to consider making one of these planned gifts that will help you and help your favorite charity.


Disclosure: Mark Kluge only offers securities and advisory services through Wall Street Financial Group, Inc. (WSFG), Registered Investment Advisor. Member FINRA/SIPC. WSFG and BlueMark Advisors are separate entities, independently owned and operated.

Securities offered through Securities America Inc., Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. BlueMark Advisors and Securities America Companies are separate companies. Mark Kluge is licensed to discuss and/or sell securities in the following states: CA, FL, MA, NY, OH. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax and/or legal advisor regarding your specific situation. Please see disclosure page for full additional disclosures.

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