AXA Advisors - Gifting Strategies : Article: Gifting Strategies

What Gifting Strategies Are Available to Me?

There are a number of different gifting strategies available for planned giving. Each has its advantages and disadvantages.

Instead of making an outright gift, you could choose to use a charitable lead trust. With a charitable lead trust, your gift is placed in a trust. The recipient of the gift draws the income from this trust. Upon your death, your heirs will receive the principal.

If you prefer to retain an income interest in your gift, you could use a pooled income fund, a charitable remainder unitrust, or a charitable remainder annuity trust. With each of these strategies, you receive the income generated by your gift, and the recipient receives the principal upon your death.

Finally, you could purchase a life insurance policy and name the charitable organization as the owner and beneficiary of the policy. This would enable you to make a large future gift at a potentially low current cost.

	Some Advantages	Some Disadvantages
Outright Gift	Deductible for income taxes up to certain limits	No retained interest
Charitable Lead Non-Grantor Trust	A current gift to charity Pass assets to heirs at a discount for gift tax purposes	Transfer of assets is irrevocable No current income tax deduction Donor gives up use of income for life of the trust
Pooled Income Fund	Income tax deduction up to certain limits Income can be paid to beneficiary for life Non-income-producing assets can be converted to income-producing assets	Income is unpredictable from year to year Income received is taxable Remainder interest will usually go to only one charity
Charitable Remainder Unitrust	Current income tax deduction up to certain limits Avoids capital gains tax on appreciated property	Transfer of assets is irrevocable Qualified appraisal generally required Complex administration and setup Income received is taxable
Charitable Remainder Annuity Trust	Income tax deduction up to certain limits Avoids capital gains tax on appreciated property Fixed income	Fixed payment cannot be limited to the net amount of trust income Qualified appraisal generally required Complex administration and setup
Gifts of Insurance	Current income tax deduction possible Donor may be able to make a large future gift at a reduced cost	May require annual premiums In some cases the death benefit could be part of donor’s taxable estate if the donor dies in a year for which an estate tax is in effect

This material was written and prepared by Emerald Publications.
© 2006 Emerald Publications

Under the Economic Growth and Tax Relief Act of 2001, numerous changes to the federal estate and gift taxes are scheduled to take effect between 2002 and 2010. These include repeal of the estate tax for the year 2010 although gift taxes on lifetime transfers would continue in effect. Current (meaning year 2001) estate and gift tax law would be reinstated for year 2011 and thereafter. Therefore, the Act provides several years of lower rates and higher exemptions followed by one year of repeal for 2010. You should consult your tax advisor regarding the possible application of this recent legislation to your situation before implementing any estate and gift tax planning techniques.

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