The Annuity Trust is the best choice when one wants a fixed dollar payout that will not change over the lifetime of the trust.
How an Annuity Trust Works
An annuity trust is usually funded with cash or publicly traded securities that have appreciated in value. It pays you, or someone you designate, income for life or for a term of years. The income is a fixed dollar amount that is set when the trust is established. It must be equal to at least 5% of the value of the trust assets when it is established. For practical purposes, payouts from annuity trusts generally range from 5% to 7% of the initial value.
If the trust is to run for a term of years, it cannot exceed 20 years. If the trust is to run for the lifetime of an income beneficiary, that person will usually need to be approximately age 65 or older when the trust is created for it to quality as a charitable remainder trust.
This kind of charitable remainder trust is only funded once. No additional transfers of assets can be made to it (unlike the charitable remainder unitrust).
Add Up the Benefits
- In the year you fund an annuity trust, you get a sizable income tax charitable deduction.
- The annuity trust can sell appreciated stock without paying capital gain tax, and can reinvest for higher income or greater diversification.
- The annuity trust may pay you more each year than were the assets used to fund it.
- You enjoy the satisfaction of making a large future gift to THIRTEEN.
For More Information
For a discussion of how you might benefit from such an arrangement, contact your attorney or speak with us in the Office of Planned Giving at THIRTEEN by calling 212.560.4989 or emailing us at email@example.com.