Life income gifts: The gifts that give back

Life income gifts are often referred to as gifts that give back. In simple terms, a life income gift is a plan that permits a donor to make a gift to charity while also creating a stream of income for the donor or other loved ones.

Life income gifts come in many forms. In 1977, through the generosity of two anonymous donors, the Rhode Island Foundation established its first pooled income fund. Today, many Foundation donors utilize charitable gift annuities (CGAs) and charitable remainder trusts (CRTs) to accomplish similar goals. CGAs and CRTs are appealing to donors with appreciated assets that produce little or no income because they create an income stream, allow the donor to avoid or defer capital gains tax, produce an immediate income tax deduction for the present value of the charitable remainder interest, and establish a philanthropic legacy.

Garry and Virginia Plunkett had all of these goals in mind when they established CGAs with the Foundation in 2010 and 2013. “At this late stage in our lives we have put most of our assets into low risk securities. But these also have low income, so they are perfect candidates for transferring into Charitable Gift Annuities,” says Garry. Also, some of the couple’s assets appreciated over the years, so the Charitable Gift Annuities provided a significant income tax deduction. It also avoided recognizing capital gains, and simplified their estate planning, all while supporting philanthropic objectives that were important to them.

In Garry’s view, “Actually kind of a no-brainer.” They have directed that, when they pass away, the accumulated CGA assets be added to the Pocassetlands Stewardship Fund, which Garry helped establish at the Foundation in 2007 to provide stewardship funding for protected natural habitats in Tiverton.

“Charitable Gift Annuities are an opportunity for people who are not wealthy to get the wonderful experience of participating in real philanthropy,” says Garry. “We get a reliable stream of income in our waning years, we see the charitable remainder of the CGA accumulate, and it’s one less thing our executor will have to deal with.” Garry has worked for 25 years helping to save, and then provide stewardship for open spaces in Tiverton, and says, “It is very satisfying to know that the Pocassetlands Stewardship Fund will get a serious infusion of cash someday, from our CGAs.”

Garry and Virginia are currently planning to surrender some life insurance to establish a third CGA. They no longer need the insurance, and Garry believes they don’t really need the income from the annuity. But it would be another source for charitable giving during their lifetimes. He explains, “The insurance is only helpful when I die, but if we put its cash value into a CGA, it creates income for philanthropy we can enjoy while we’re alive – that’s a lot more fun! Meanwhile, it’s a backup resource if bad things happen, and expensive, long term nursing home care comes into the picture.”

Learn how you can plan now to give later.


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