- What types of assets can I use to establish a life income gift?
- May I allocate a life income gift to a specific purpose?
- Are there minimum beneficiary ages for these gifts?
- Are there minimum gift amounts?
- Does Princeton limit the types of gifts it accepts?
- How large may the payments to income beneficiaries be?
- Will I be entitled to an income tax deduction for establishing a life income gift?
- Is it possible for other charities to benefit from these gifts?
- Will I pay capital gains taxes if I fund a gift with appreciated property?
- How does Princeton benefit from life income arrangements?
- Are there any fees?
What types of assets can I use to establish a life income gift?
Charitable remainder trusts may be funded with virtually any asset, such as cash, stock (publicly traded or closely held), and real estate. Charitable gift annuities and pooled income funds may be funded solely with cash or marketable securities.
May I allocate a life-income gift to a specific purpose?
You may choose to designate your gift as unrestricted, which allows the University to direct it to its highest funding priorities, or you may choose to allocate your gift to a specific purpose, such as financial aid, your class’s Annual Giving endowment, or a particular academic or athletic department or program.
Are there minimum beneficiary ages for these gifts?
The minimum age to establish a charitable gift annuity at Princeton is 55 (age 60 for a two-life CGA) and the minimum age to begin receiving payments is 65 (both annuitants, if a two-life CGA). There are no minimum ages for establishing pooled income funds or charitable remainder trusts, but certain IRS-prescribed remainder minimums must be met for charitable remainder trusts. Age may affect tax benefits as well.
Are there minimum gift amounts?
For charitable gift annuities and pooled income funds, the minimum gift amount is $25,000. For charitable remainder trusts funded with cash or publicly traded stock, the minimum gift amount is $100,000. For trusts funded with other assets, such as real estate, the minimum gift value is $100,000. While the minimum for charitable lead trusts is $250,000, they are typically established at $1 million or more.
The payout rates of charitable gift annuities are established by the American Council on Gift Annuities and determined at the date of the gift; the payments remain fixed for the life of the beneficiary. The older the beneficiaries, the higher the payout rates.
Will I be entitled to an income tax deduction for establishing a life income gift?
The donor can claim a charitable deduction for a portion of the fair market value of the gift. The amount of the deduction reflects the fair market value minus the value of the payments received by the income beneficiaries. Various factors, including the ages and number of beneficiaries, the payout rates, and the federal discount rate, will determine the amount of the deduction. Princeton’s gift planning staff can provide examples based on various scenarios.
Is it possible for other charities to benefit from these gifts?
The “remainder” of a charitable remainder trust may be allocated to more than one charity. Under New Jersey law, if Princeton serves as trustee of the trust, the University must be irrevocably designated to receive at least 51% of the remainder. Charitable gift annuities and pooled income funds may not name other charitable beneficiaries.
Will I pay capital gains taxes if I fund a gift with appreciated property?
With charitable remainder trusts, charitable gift annuities, and pooled income funds, the capital gains taxes will both be reduced and deferred.
How does Princeton benefit from life income arrangements?
Upon the death of the last surviving income beneficiary of a charitable remainder trust (or, with some trusts, the end of a specified term of years), Princeton will receive the remainder of the trust’s assets.
Upon the death of the last surviving beneficiary of a charitable gift annuity, the University will receive the residuum (the net remaining portion) of the gift.
Upon the death of the last surviving beneficiary of a pooled income fund, Princeton will receive the beneficiary’s proportional share of the fund’s principal.
In all cases, Princeton will use the funds it receives in the manner designated by the donor.
Are there any fees?
To cover the costs of investment management, program administration, tax preparation, and legal work, Princeton charges an annual fee in the range of 0.60% to 0.65%; these fees are not deducted from the beneficiary payments. The actual fee depends on the type of life income gift and the account value. For example, a trust with a market value of $100,000 will have an annual fee in the range of $600 to $650.