The annuity trust provides for the regular payment of a fixed dollar amount to the designated beneficiary(ies) for a term of years or for the lifetime of the beneficiary(ies).
The amount must equal at least 5 percent of the initial fair-market value of the trust. At the death of the last beneficiary, the trust principal is distributed to the UW Foundation.
In addition to the income you will receive from the trust, you will also be entitled to a charitable income-tax deduction for the value of our remainder interest in the trust assets.
Bill and Carol Brown purchased growth stock for $20,000 10 years ago. It is now valued at $100,000, but the annual dividends are only $1,500. They are both 75, and they would like to increase their retirement income. To do this, they transfer the stock to a charitable remainder annuity trust with a 5 percent payout rate.
In the first year, they will receive a $5,000 payment — more than three times the dividends they have been receiving — and they will continue to receive $5,000 each year for the rest of their lives. Moreover, they will avoid tax on their profit in the stock and receive an income-tax deduction of about $37,000. In their 24% tax bracket, this saves them $8,880 in income taxes (24 percent of $37,000).
When the last beneficiary dies, the annuity trust assets will benefit any UW Foundation program you choose.
How it Works
- Create a trust agreement outlining the terms of the trust.
- Transfer cash or other property to the trustee.
- The trustee invests and manages the trust assets.
- The trustee makes payments to the income beneficiaries.
- The remainder goes to the UW Foundation for purposes you specify.
Benefits
- Income to one or more beneficiaries that remains fixed for the life of the trust
- Federal income-tax deduction for the charitable-remainder value of your gift
- No capital-gain tax when the trust property is sold
- The trust remainder will provide generous support for the UW Foundation
*Please consult with a tax advisor if interested in these options.
