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Charitable Remainder Trusts/Charitable Gift Annuities
Old 10-11-2010, 11:04 AM   #1
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Charitable Remainder Trusts/Charitable Gift Annuities

Has anyone ever done one of these? I'm considering making a significant (for me) donation to my alma mater and I figure I could do it either of two ways:
- Through a straight Charitable Remainder Trust wherein I would give them a chunk of money and could receive the earnings from that chunk for as long as I live and then they would keep the chunk.
- Do a 1035 transfer from an existing Vanguard Variable Annuity to a Charitable Gift Annuity and, at some point, begin taking annuity payments from it. When I die the college, rather than an insurance company, gets to keep the principal.

The main thing that concerns me is that the college probably uses some sort of financial intermediary who will rip off some percentage of my donation every year. (I know I can ask the college who handles the money, but I haven't yet.)
Of course, one way to avoid that would be to simply leave the chunk in my will and just leave them an outright cash gift.

If anyone has had any experiences along these lines I would appreciate your insights.
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Old 10-11-2010, 11:08 AM   #2
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CRT's are usually done in conjunction with a permanent life insurance policy to replace the principle at death (school/charity gets the donation, beneficiaries get the life insurance, you get the deduction and income while alive, income helps pay the life insurance premium). If you don't plan on leaving the principle to anyone, that would be a different story.
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Old 10-11-2010, 02:18 PM   #3
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From the donor's side, I think one purpose of a CRT is to remove the funds from your estate to reduce federal/state estate tax. You could probably also use it as an estate-planning tool to remove the estate from the grasp of potential beneficiaries or creditors, too. Not so easy for the unscrupulous to mess with your will documents when there's nothing left to divert except the cash flow.

From the charity's side, I think a CRT is designed to accustom the donor to giving their assets to the dear ol' alma mater. Sort of a gateway drug and a contact path to keep you breathlessly updated on the progress of every little campus project, just in case you feel the urge to give more.

Touring Notre Dame University some colleges is an entertaining example. One set of donor's names will be on the building, a different set of names in the building's lobby, a third set in one of the building's labs or classrooms, and so on. USNA sells commemorative seats in its main auditorium and the sports stadium-- every single seat has a nameplate on it. You practically expect to see nameplates on the water fountains and the urinals, too.

After a few hours at Rice University I noticed a label plate and started paying more attention. Over the next four days, no matter where we went on the campus, nearly every tree was named for an alumni donor. Next time we're there I'm going to start checking the squirrels for tags...
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Old 10-11-2010, 04:49 PM   #4
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Quote:
Originally Posted by Nords View Post
From the donor's side, I think one purpose of a CRT is to remove the funds from your estate to reduce federal/state estate tax.
Agreed. My Variable Annuity will have some pretty onerous tax consequences when both I and my wife (as the beneficiary of that annuity) pass on if it hasn't already been annuitized or otherwise dealt with via a charitable dontation.

Quote:
From the charity's side, I think a CRT is designed to accustom the donor to giving their assets to the dear ol' alma mater. Sort of a gateway drug and a contact path to keep you breathlessly updated on the progress of every little campus project, just in case you feel the urge to give more.
I look at it a little differently. I have been a regular contributor to my alma mater for many years, increasing the donations annually as circumstances permitted. I'm currently in the lowest category of the so-called "Leadership Donors." I will keep doing that but I thought that I might give them one big hit in conjunction with estate planning. I do have very strong (positive) feelings about my alma mater. I know what levels of giving get a building named after you and I am far, far from that level. A number of years ago the school had a capital campaign which occurred shortly after my mother died. (She was the second parent to die and at that point her modest estate passed to me, as an only child.) I gave the school the minimum they would accept for the capital campaign ($10K) paid over 5 years from my inheritance. That allowed me to name a study carrel in the library in honor of my parents. So it will be a long time before there is a "Friar1610 Hall." [/QUOTE]

Quote:
Notre Dame University some colleges is an entertaining example. One set of donor's names will be on the building, a different set of names in the building's lobby, a third set in one of the building's labs or classrooms, and so on. USNA sells commemorative seats in its main auditorium and the sports stadium-- every single seat has a nameplate on it. You practically expect to see nameplates on the water fountains and the urinals, too.
Couldn't do it for urinals at USNA, could they? Might displace the signal flags.
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Old 10-12-2010, 12:40 AM   #5
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Originally Posted by friar1610 View Post
Couldn't do it for urinals at USNA, could they? Might displace the signal flags.
I think our local homeless, the hungry, the illiterate, and the disabled surfers need my charity dollars a lot more than my alma mater...

I think all of those organizations would love to have the fundraising services of any typical alumni association. I think the work/study sophomores would feel a lot better about their smiling&dialing hours, too.
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