There are a number of life-income gifts available that allow you to shape a gift arrangement that best fits your needs. You can arrange for your life-income gift to pay income to yourself or another person. Your gift can pay a fixed or variable income; it may include tax-free income in whole or part; and you can arrange for the income payments to commence immediately or at a future date, such as the date of your planned retirement.
Charitable gift annuity
Mary, an alumna 75 years of age, wants to support the University but needs the income from her assets. She contributes $10,000 and receives a guaranteed income from the University at a rate of 8.2% for the rest of her life. This amounts to an annuity of $820, of which $450 is tax-free. When she makes her gift, she obtains an income tax deduction of over $4,500.
Charitable remainder trust
Walter and Amy, ages 77 and 74, want to increase their income from their stock holdings. They own stock worth $250,000, with a cost basis of $100,000. If they sell the stock outright and reinvest the proceeds, they would lose a substantial portion of their investment to capital gains taxes. However, when they transfer the stock to an NYU life-income trust, they avoid capital gains tax and have the entire value of their asset working to earn income for them. They select an income rate of 7%, increasing their earnings from $5,000 to $17,500. They also receive an income tax deduction of over $100,000.
Deferred gift annuity
Lois, age 50, wants to save more for retirement, but she has already contributed the maximum amount for the year to her employers qualified retirement plan. She contributes $10,000 to NYU's deferred gift annuity, instructing that income payments must commence when she turns 70. NYU will pay Lois a guaranteed fixed annuity of $2,170, for a rate of return of 21.7%. In addition, Lois obtains an income tax charitable deduction of about $6,000 in the year she makes the gift. With this gift, Lois increases her future retirement income. There is no limit on the amount Lois can contribute to this plan each year, and she can designate when the income payments will commence.
(Please consult with your tax professional to see how these alternatives might affect your tax liability.)