Charitable Remainder Annuity Trust

Annuity Trusts provide fixed income during the lifetime of the donor of Habitat for Humanity Inland Valley or another income beneficiary. The annual payout amount will not change regardless of the value of the trust principal. Cash and highly appreciated-low yielding assets may be transferred into a charitable remainder annuity trust. The donor selects an annuity amount which will be paid to one or two individuals for life.  The amount of the annuity payout will continue as long as there is principal in the trust to make the payments.

Tax Benefits

Major benefits of an annuity trust include (i) Bypass of Capital Gain Tax when appreciated assets are used to fund the trust, (ii) Potential for increased income, and (iii) A Charitable Income Tax Deduction reducing current income taxes.  An annuity trust usually is funded with low yielding highly appreciated assets such as securities, and in certain instances may be funded with real property such as land or buildings.  The donor selects the life income recipients, the annuity amount, and the charities such as HFHIV, to receive the trust principal after all income payments have been completed.

Trust Funding

For example, an individual might transfer into an Annuity Trust appreciated securities with a cost basis of $10,000 and current fair market value of $200,000. The donor could select a $10,000 fixed annuity for himself and a loved one for life and then direct that the principle to be distributed to HFHIV after the death of both individuals

Increased Income

After the asset is contributed to the annuity trust, the trustee may choose to sell the donated asset and reinvest in a much higher yielding portfolio. The sale avoids capital gains tax. When the donors are the income beneficiaries they may realize even higher income which could be sheltered by the charitable income tax deduction for up to six years. 

Fixed Payment

The annuity trust is very straight forward - a fixed amount is paid for two lives, the donor and donor’s spouse for example.  It is entirely appropriate to use an annuity remainder trust if the donors are seniors and feel comfortable with a fixed income amount..  For these persons, the comfort of knowing that their payment is not dependent upon market variations may be considerable and the fixed payment of the annuity trust may increase their peace of mind.

1. You transfer cash, securities or other appreciated property into a trust.
2. The trust makes fixed annual payments to you or to beneficiaries you name
3. When the trust terminates, the remainder passes to HFHIV.

Donor Benefits.

·         You receive an immediate income tax deduction for a portion of your contribution to the annuity trust.

·         You pay no upfront capital gains tax on any appreciated assets that you contribute.

·         You or your designated income beneficiaries receive stable, predictable income for life or a term of years.

·         You have the satisfaction of making a significant gift that benefits you now and HFHIV later.

To learn more about you can benefit from making a Charitable Annuity Trust with HFHIV, please contact Eric Bunge, Director of Special Gifts, at (951) 296-3362 ext 208, or email Eric@habitativ.org.

The information in this report is believed to be accurate and is provided for general information purposes only. Habitat for Humanity Inland Valley is not engaged in rendering legal or tax advice. The application of any laws discussed herein may vary from state to state. Consultation with independent counsel is recommended for individual applications.