Charitable Annuity Trust

What is a Charitable Annuity Trust?

A charitable remainder annuity trust ("annuity Trust") is a gift plan defined by federal tax law that allows you to provide income to yourself or others for life or a term of years while making a generous gift to West Wisconsin Land Trust.

As an annuity trust donor, you irrevocably transfer assets, usually cash or securities, to a trustee of your choice (for example, West Wisconsin Land Trust or a bank trust department). During the trust's term, the trustee invests the trust's assets. Each year, the trustee provides a fixed dollar amount to one or more income beneficiaries named by you. The payments must be at least 5% of the trust's initial value and are made out of trust income, or trust principal if income is not adequate. Payments may be made annually, semiannually, or quarterly.

Example:

If you irrevocably transfer $1,000,000 in property, with a cost basis of $250,000, to an annuity trust that pays 5% of its initial value each year for the lifetime benefit of individuals, age 81 and 77, benefits would include:

1. You will qualify for a federal income tax deduction of approximately $608,390. Your deduction may vary modestly depending on the timing of your gift. Note that deductions for this and other gifts of long-term appreciated property will be limited to 30% of your adjusted gross income. You may, if necessary, take unused deductions of this kind over the next five years, subject to the same 30% limitation.

2. Your designated income beneficiaries will receive fixed payments in quarterly installments totaling $50,000 each year for life.

3. Your entire gift property will be available for reinvestment, free of capital gains tax. If you were to sell and reinvest this property yourself, you would owe tax on $750,000 of capital gain.

4. Your estate may enjoy reduced probate costs and estate taxes.

5. You will provide generous support of West Wisconsin Land Trust.

6. Your gift will benefit from expert asset management, provided by the same professionals who manage West Wisconsin Land Trust's endowment.

These calculations are estimates of gift benefits; your actual benefits may vary depending on the timing of your gift.

If you would like to produce your own charitable deduction calculations, visit PG Calc.

For more information on donations, please contact the West Wisconsin Land Trust.