Life Income and Planned Gifts

Donors can make a gift to Hallmark Health and receive immediate financial benefits, including a guaranteed lifetime stream of income and a charitable tax deduction. A summary of benefits includes:istock_000007255985xsmall

  • A stream of income for the lifetime of the donor/or a second beneficiary (often a spouse)

  • A rate of return competitive with current market returns on investments (without the risk)

  • A charitable income tax deduction

  • Relief from capital gains taxes on gifts of appreciated property

  • Membership in a giving society

There are several life income gift vehicles that a donor may choose from, such as charitable gifts annuities, deferred gift annuities, pooled income funds, charitable remainder trusts and charitable lead trusts. Each life income product provides different advantages depending upon the individual needs and goals of the donor. Please contact our Development Office to receive more personalized information about which life income option might be best for you and/or a loved one.

Charitable gift annuities

A charitable gift annuity is a contract between the donor and Hallmark Health that provides advantages for both. Charitable gift annuities are a solid investment in Hallmark Health's future as they form a valuable part of our growing endowment. Charitable gift annuities may be funded with cash, securities or real estate. The minimum gift amount to create a charitable gift annuity is $5,000.

The payout rate on a charitable gift annuity is based on the age of the donor and/or beneficiary at the time the gift is made. The rates are suggested by the American Council on Gift Annuities (ACGA), a volunteer organization comprised of representatives from charitable and for-profit organizations. Hallmark Health Systems follows the rates suggested by the ACGA.

Deferred charitable gift annuities

A deferred charitable gift annuity is similar to a charitable gift annuity except that the payments are deferred to a future date. A donor may defer payments to years when income is needed more, such as retirement. The donor obtains a substantial charitable income tax deduction in the year the gift is made. Because payments are deferred, allowing the principal to grow, the donor enjoys a high payout rate later.

A deferred gift annuity is an excellent way to make a gift and receive a charitable income tax deduction while providing income for the future. Like the charitable gift annuity, the minimum gift amount is $5,000.

Pooled income funds

Pooled income funds are similar to mutual funds. Donors' gifts are joined and assigned a proportionate interest in the fund. Each beneficiary receives a variable income stream for life. A second beneficiary may be named to receive a lifetime income from the gift, and the payout rate does not change.

One of the greatest advantages of making a gift of appreciated securities to one of the pooled income funds is that capital gains taxes are completely avoided. A minimum of $25,000 is needed to join, after which gifts of $5,000 or more may be added at any time.

Charitable remainder trusts

A charitable remainder trust is a personal management plan that provides both a lifetime income and a charitable income tax deduction to the donor. The donor selects the payout rate, usually womenandchildresizebetween 4% and 8%, which gives the donor, and perhaps the donor's spouse or other beneficiary, an income every year for life. The higher the payout rate, the lower the charitable income tax deduction. If the trust is funded with appreciated securities, capital gains taxes are avoided. The trust may be designated to benefit a particular department or program at Hallmark Health or it may be unrestricted.

There are two types of charitable remainder trusts: the annuity trust and the unitrust.

The charitable remainder annuity trust pays a fixed, guaranteed dollar amount, regardless of the trust's investment performance. The income rate is determined at the time the trust is funded. The annuity trust is best for donors who seek a regular, fixed income and prefer to have the satisfaction of knowing the exact amount of the payment in advance. No additional gifts may be added to an annuity trust.

The charitable remainder unitrust pays the donor a predetermined percentage of the fair market value of the trust's assets as re-valued annually. If the trust's assets increase, the donor receives a larger payment, providing a hedge against inflation. Additional contributions may be made to a unitrust.

Charitable lead trusts

Charitable lead trusts are the reverse of charitable remainder trusts in that a stream of income is first paid to Hallmark Health for a number of years (based on a term or a lifetime), after which the remainder goes back to the donor or passes to another non-charitable beneficiary designated by the donor. The stream of income that flows to Hallmark Health is either a fixed amount or a percentage of the value of the trust property, as revalued annually.

A charitable lead trust is a fully taxable trust; the trust pays both income and capital gains taxes, unlike the charitable remainder trust that is tax-exempt. A donor is entitled to a charitable income tax deduction if the donor continues to be taxed on the trust income.

Many donors use a charitable lead trust to reduce or eliminate the gift tax cost of transferring wealth to children or grandchildren and to give appreciated property to heirs without further gift or estate tax liability. A charitable lead trust can be established during a donor's lifetime or by a provision in the donor's will.

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