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Planned Giving

Income Producing Giving

Several types of gifts may be considered that can produce an annual income to the donor. There are basically four types of annuities or trusts that can accomplish this purpose. These types of donations are strictly controlled and usually managed professionally because of the detailed nature and tax implications and requirements. These gift types all provide significant tax benefits to the donor as well as benefits to the Foundation. The gifts are usually funded by cash, securities, or real estate assets.

1. Charitable Gift Annuity

a. This is a contract between the donor and the Foundation.

b. In exchange for an irrevocable gift (cash, securities, or other assets), the Foundation would agree to pay a fixed sum each year for life. The income is based on the size of the gift, a set interest rate, and the age of the donor. Income can be paid quarterly, semiannually, or annually.

c. The benefits for an income tax deduction and the taxability of the payments vary.

2. Charitable Remainder Annuity Trust

a. This gift is a trust set up to provide income to the donor.

b. The donor provides an irrevocable gift to a trustee (usually a bank) and income is provided for a period of years of life to the donor or a designated individual. At the end of the trust term, the asset is passed to the SD Historical Society Foundation. This may require a minimum amount for the asset donation. Payment is usually quarterly, semiannually, or annually.

c. The benefits for an income tax deduction and taxability vary with the donation.

3. Charitable Remainder Unitrust

a. This type of trust is similar except that the value of the donated asset is reset annually, and then a calculated payment is made to the designated individual.

b. The donor provides an irrevocable gift to the trustee who then makes the annual payments based upon the asset values. Usually this would be approximately 5% of the the value paid annually. At the end of the unitrust term, the asset passes to the Foundation.

c. The benefits for an income tax deduction and taxability vary with the donation.

4. Charitable Lead Trust

a. This trust is established with a trustee, and payments are made to the SD Historical Society Foundation instead of back to the donor.

b. The donor passes the asset to the trustee and establishes the period of time the Trust will be effective. Following the term, the asset passes back to the donor. This usually requires a minimum asset level with the trustee.

Benefits:

1. The donor or grantor in most cases receives a varying income tax deduction benefit from the initial donation. This is dependent on the type of gift and the amount of the gift.

2. Annual payments have different taxability to the individual receiving the payments.

3. The donor removes the property from the estate and reduces future estate taxes depending on the final distribution of the assets.

4. The donor provides a valuable benefit to the SD Historical Society Foundation.

Any examples are for illustration and a tax professional should be consulted prior to a donation.