Two Charitable Options to Give More Strategically in the New Year

Even though the past few years have been a challenge for everyone in very personal and different ways, one commonality we all share is that these unusual times have reminded us to cherish what we do have and review/revise our life priorities.

One of those priorities might be allocating a contribution toward a cause important to you in order to help those less fortunate (such as food security). Others may wish to support the community in other ways by giving to church, synagogue, school or other institution. As you consider your charitable giving priorities, consider split interest trusts or charitable gift annuities. Both options enable you to create or maintain cash flow from an asset or assets while at the same time satisfying a charitable objective – a win-win!

Charitable Gift Annuity

Many charitable organizations offer a charitable gift annuity as an option for their donors. A charitable gift annuity benefits the donor in much the same fashion as a split interest trust. The annuity provides a stated return for the non-charitable beneficiary. The charitable contribution that is taken in the year the charitable gift annuity is purchase is calculated using IRS actuarial assumptions.

As an example, if you chose to set up a charitable gift annuity in 2020 with Deerfield Episcopal Retirement Community, giving a gift of $50,000 yields 3.9% ($1,950 annually), a charitable deduction of $10,088 the first year and tax-free portions of each payout through year 2044. In the meantime, Deerfield will distribute the annual payout (based on your age) for as long as you live – regardless of the market and even if you outlive the balance of the gift.

“If you have family or charitable causes to which you’ve already committed your estate, the gift annuity allows you to use cash or stock as a gift now, and ultimately, after your death the remainder of the gift will go directly to the fund you’ve chosen,” said Michelle Wooley, Deerfield’s director of philanthropy.

Split Interest Trust

A charitable remainder trust (CRT) is a type of split interest trust. A CRT provides an annual stream of payments to one or more noncharitable beneficiaries for a term of years or for life. When the noncharitable interest expires, the remainder passes to charity.

CRTs are often funded with highly appreciated assets. The assets are transferred into the CRT and sold. There is no tax due on the sale because the CRT is exempt from tax. The trust then has the cash to make the required annual distributions to the non-charitable beneficiaries.

The grantor of the CRT who has funded the trust receives a charitable contribution deduction in the year the CRT is funded. The contribution amount is the present value of the charitable remainder interest and is calculated based on IRS provided actuarial factors. A CRT is often called a split interest trust because of the noncharitable beneficiary and the charitable beneficiary each have an interest in the trust.

There are many other types of split interest trusts. Some of these split interest trusts are attractive when interest rates are high and some when interest rates are low.


Contact your advisor or CPA if you have any questions regarding your philanthropic intentions. Moreover, if you are donating material goods – be it art, property, etc. – read our article outlining key IRS guidelines to follow when it comes to these types of donations.

Share:

Recent Posts:

How To Prioritize Travel and its Associated Expenses

Do you like to travel? Are you already looking forward to your next big trip? Do you spend more time planning your vacations than planning your finances? If so, you’re not alone. Recent surveys suggest that many Americans devote more time each year to planning their vacations than planning their finances.

Can You Afford That House?

An incredibly strong housing market over the last few years coupled with rising interest rates has put affordability out of reach for many home buyers.

Recent Quarterly Newsletters:

Thrive By Doing What You Love Edition

Read our Q4 2022 newsletter where we focus on how to thrive by doing what you love. We provide a “wheel of life” exercise to complete, outline a few end-of-year reminders, and announce our Parsec Prize winners.

Thrive By Ensuring Your Loved Ones Are OK Edition

Our Q3 2022 newsletter focuses on how to thrive by ensuring your loved ones are OK. In it, we have created an eight-page fillable guide you can create for loved ones to follow after you pass. We also provide other guidance on estate planning, caring for aging parents and preparing for a potential disability.

Recent Whitepapers:

Stay Up To Date With Parsec

Sign up to join our mailing list and receive quarterly newsletters, whitepapers, news, and more right in your inbox.
Scroll to Top

Not a Client But want to receive updates?

Please sign up to join our mailing list and receive our latest news, thought leadership content and invitations to upcoming webinars.