Split-Interest Giving Tools

The most popular and flexible type of life income plan is a charitable remainder unitrust (CRUT). Cash, securities, real property, or other assets are transferred into the trust. The trustee manages the trust assets and pays you or others you choose a variable income for life or for a term of years. When the trust terminates, the remaining assets in the trust are transferred to the Church or one of its institutions.

The typical donor:

• Needs income for life or a specified term of years.
• Desires more income as the trust value increases.
• Tolerates some investment risk to provide for growth.
• Wants to make additional gifts to the trust.
• Is between the ages of 55 and 80.

Gift features and benefits:

• Income for life (variable payments)
• Charitable income tax deduction
• Possibility of multiple beneficiaries
• Assets transferred to the trust can be reinvested
• Ability to choose the trustee (may be the donor)
• Flexible investment possibilities for the beneficiary

How do I Make a Gift Using a Charitable Remainder Unitrust?
A trust document tailored to your needs is drafted. Your assets are transferred to the trustee you choose. The assets are usually sold by the trustee and reinvested to match your income objectives. You receive variable income for your life or a specified period of years. At your death or the end of the period, the remaining assets are transferred to the charity of your choice.

Before you begin, you need to make sure your financial and legal advisors are part of your gift strategy team. A charitable remainder unitrust can have an impact on other parts of your financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in the creation of trust documents.

Other Facts You Should Know about a Charitable Remainder Unitrust
The "income tax deduction" you receive from a charitable remainder unitrust is based on an Internal Revenue Service (IRS) formula that considers the ages of the donors and income beneficiaries, the payout of the trust, and an IRS index rate known as the Applicable Federal Rate (AFR). The older you are, the larger your income tax deduction. Generally, if the trust is for a term of years rather than for life, the income tax deduction will be larger. If the present value of the remainder interest equals at least 10% of the value of assets transferred into the trust, the trust will qualify as a charitable remainder unitrust.

There are four types of Charitable Remainder Unitrusts:

1. A standard unitrust pays the stated amount from the trust regardless of how much income is earned. The payout is the stated percentage of the trust assets as valued annually.
2. A net income unitrust pays the stated amount from the trust to the extent of income earned in the trust without invading principal. The payout is the stated percentage of the trust assets as valued annually.
3. A net income with makeup unitrust pays the stated amount from the trust to the extent of income earned in the trust without invading principal. It has the ability to makeup income in subsequent years if the income earned is less than the stated payout rate.
4. A flip unitrust is a net income unitrust that "flips" to a standard unitrust when a specified date or event occurs such as a birth, a death, or the sale of a hard-to-market property.

The trust provisions you have control of when drafting your charitable remainder unitrust include:

• Choosing a trustee.
• Designating the income beneficiaries.
• Naming the charitable remainder beneficiaries.
• Deciding on a payout rate for the trust.
• Determining the frequency of the payments.
• Selecting the term of the trust.

Federal tax law outlines a tier system that determines the taxation of trust income to income beneficiaries of a charitable remainder unitrust. Whether or not all income produced by the trust is distributed to the income beneficiary, the trust pays no income taxes on its earnings as long as it has no unrelated business taxable income (UBTI). An example of UBTI would be debt-financed income. The income to the income beneficiary from the trust is taxed based on the historical pattern of how income in the trust was earned. Income distributions are taxed in the following order:

1. Ordinary income
2. Capital gain income
3. Tax-free income
4. Return of principal (corpus)

For example, suppose you transferred a piece of real estate to the trust, and then sold the real estate and reinvested in blue-chip stock that provides both dividend income and capital growth. As income is paid from the trust to you, you would report all income as ordinary income (tier 1) to the extent of all dividend income received into the trust. Only after recognizing all ordinary income would you then report capital gain income (tier 2) from the sale of the real estate. As a general rule, you should assume for planning purposes that trust income will be taxed as ordinary income.

A charitable remainder annuity trust (CRAT) is a popular type of life-income plan. Cash and securities are typical assets transferred into the trust. The trustee manages the trust assets and pays you or others you choose a fixed income for life or for a term of years. When the trust terminates, the remaining assets in the trust are transferred to the Church or one of its institutions.

The typical donor:

• Needs income for life or a specified term of years.
• Desires a fixed income based on the original value of assets transferred.
• Does not plan to make additional gifts to the trust in the future.
• Is between the ages of 55 and 80.

Gift features and benefits:

• Income for life (fixed payments)
• Charitable income tax deduction
• Possibility of multiple beneficiaries
• Assets transferred to the trust can be reinvested
• Ability to choose the trustee (may be the donor)
• Investment of assets is designed to balance annuity payments with preservation of principal

How Do I Make a Gift Using a Charitable Remainder Annuity Trust?
A trust document tailored to your needs is drafted. Your assets are transferred to the trustee you choose. The assets are usually sold by the trustee and reinvested to provide the annuity and preserve principal. You receive fixed income for your life or a specified period of years. At your death or the end of the period, the remaining assets are transferred to the charity of your choice.

Before you begin, you need to make sure your financial and legal advisors are part of your gift strategy team. A charitable remainder annuity trust can have an impact on other parts of your financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in the creation of trust documents.



Other Facts You Should Know about a Charitable Remainder Annuity Trust

The income tax deduction you receive from a charitable remainder annuity trust is based on an Internal Revenue Service (IRS) formula that considers the ages of the donors and income beneficiaries, the payout of the trust, and an IRS index rate known as the Applicable Federal Rate (AFR). The older you are, the larger your income tax deduction. Generally, if the trust is for a term of years rather than for life, the income tax deduction will be larger. If the present value of the remainder interest equals at least 10 percent of the value of assets transferred into the trust, the trust will qualify as a charitable remainder annuity trust. Also, a federally imposed 5 percent probability test determines the viability of the trust assets supporting the annuity payments. To qualify, the trust provision must meet this test.

• Choosing a trustee.
• Designating the income beneficiaries.
• Naming the charitable remainder beneficiaries.
• Deciding on a payout rate for the trust.
• Determining the frequency of the payments.
• Selecting the term of the trust.

A charitable gift annuity (CGA) is often a gift of choice when a guaranteed income is desired. A gift of cash or securities is transferred to Deseret Trust Company in exchange for a contractual life income paid monthly or quarterly. The income is guaranteed by the issuing charity. A portion of the gift is invested and used to provide income for life, and the remaining portion qualifies as a present-interest gift to the Church or one of its institutions. Part of the annuity income may be received tax free. Any capital gains taxes due on the asset that was exchanged for the annuity are paid over the annuitant's life expectancy.

The typical donor:

• Needs guaranteed income for life.
• Wants a fixed income based on the original value of assets transferred.
• Desires to make a "present gift" for estate planning purposes.
• Does not plan to make additional gifts to the annuity.
• Is between the ages of 55 and 80.

Gift features and benefits:

• Income for life (fixed payments)
• Possibility of one or two income beneficiaries
• Guaranteed contractual agreement
• Issued and administrated by Deseret Trust Company

How Do I Make a Gift Using a Charitable Gift Annuity?
Charitable gift annuities cannot be issued in every state because of differing regulatory requirements. LDS Philanthropies can advise you regarding availability in your state. The professional staff of LDS Philanthropies drafts a gift annuity document that names the annuitant and the gift recipient, either the Church or one of its institutions. Once the document is signed by both you and Deseret Trust Company, you transfer cash or marketable securities to Deseret Trust Company. If the asset to be exchanged is marketable securities, contact Deseret Trust Company for information, including its account information at Depository Trust, which your broker will need to complete the transfer of your securities.

Before you begin, be sure your financial and legal advisors are part of your gift strategy team. A charitable gift annuity can have an impact on other parts of your financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in the completion of your gift annuity documents.

Other Facts You Should Know About a Charitable Gift Annuity
Sample rates offered for a $50,000 gift using a charitable gift annuity with Deseret Trust Company on 29 April 2010 were:

1. age 65, 5.3%, income of $2,650, tax deduction of $16,562
2. age 70, 5.7%, income of $2,850, tax deduction of $19,545
3. age 75, 6.3%, income of $3,150, tax deduction of $22,440
4. age 80, 7.1%, income of $3,550, tax deduction of $25,375

A charitable gift annuity is a contract between you and Deseret Trust Company. You make a gift to a charity that is legally obligated to pay you a fixed amount of income for your lifetime. The transaction is, in reality, a bargain sale-part sale and part gift-because the value of your gift to the charity exceeds the value of the annuity promised by the charity. The annuity is backed by the general assets of the issuing charity (Deseret Trust Company). The rate you receive for your annuity is structured to provide the Church or one of its institutions with a gift amounting to approximately 50 percent of the amount transferred in exchange for the annuity.

When you establish a gift annuity with the Deseret Trust Company and are concurrently working with a licensed financial professional, Deseret Trust Company may choose to buy an annuity contract on your life from a commercial insurance company. In that situation, your annuity amount and terms of the agreement remain unaltered.

The Deseret Trust Company adheres to the charitable gift annuity rates established by the American Council on Gift Annuities, a national organization that suggests rates for nonprofit organizations to offer to annuitants. The recommended rates are based on age and are the same for both genders. There can be exceptions to those rates based on extenuating circumstances.

A deferred charitable gift annuity (DCGA) is often the gift of choice when a future guaranteed income is desired. A gift of cash or securities is transferred to Deseret Trust Company in exchange for a contractual life income paid at least annually. The income is guaranteed by the issuing charity. A portion of the gift is invested and used to provide income for life, and the remaining portion qualifies as a present-interest gift to the Church or one of its institutions. Part of the annuity income may be received tax free. Any capital gains taxes due on the asset that was exchanged for the annuity are paid over the annuitant's life expectancy.

The typical donor:

• Needs future guaranteed income for life.
• Wishes to have a fixed income based on the original value of assets transferred.
• Desires to make a "present gift."
• Does not plan to make additional gifts to the annuity.
• Is between the ages of 40 and 60.

Gift features and benefits:

• Income for life (fixed payments)
• Donor can select the starting date of the income based on life situation
• Possibility of one or two income beneficiaries
• Guaranteed contractual agreement
• Issued and administrated by Deseret Trust Company

How Do I Make a Gift Using a Deferred Charitable Gift Annuity?
Deferred charitable gift annuities cannot be issued in every state because of differing regulatory requirements. LDS Philanthropies can advise you regarding availability in your state. The professional staff of LDS Philanthropies drafts a deferred gift annuity document that names the annuitant and the gift recipient, either the Church or one of its institutions. Once the document is signed by both you and Deseret Trust Company, you transfer cash or marketable securities to Deseret Trust Company. If the asset to be exchanged is marketable securities, contact Deseret Trust Company for information, including its account information at Depository Trust, which your broker will need to complete the transfer of your securities.

Before you begin, be sure your financial and legal advisors are part of your gift strategy team. A deferred charitable gift annuity can have an impact on other parts of your financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in the completion of your deferred gift annuity documents.



Other Facts You Should Know About a Deferred Charitable Gift Annuity
A deferred charitable gift annuity is a contract between you and Deseret Trust Company. You make a gift to a charity that is legally obligated to pay you, beginning at a future date, a fixed amount of income for your lifetime. The transaction is, in reality, a bargain sale—part sale and part gift—because the value of your gift to the charity exceeds the value of the annuity promised by the charity. The annuity is backed by the general assets of the issuing charity (Deseret Trust Company). The rate you receive for your annuity is structured to provide the Church or one of its institutions with a gift amounting to approximately 50 percent of the amount transferred in exchange for the annuity.

When you establish a deferred charitable gift annuity with Deseret Trust Company and are concurrently working with a licensed financial professional, Deseret Trust Company may choose to buy an annuity contract on your life from a commercial insurance company. In that situation, your annuity amount and terms of the agreement remain unaltered.

The Deseret Trust Company adheres to the charitable gift annuity rates established by the American Council on Gift Annuities, a national organization that suggests rates for nonprofit organizations to offer to annuitants. The recommended rates are based on age and are the same for both genders. There can be exceptions to those rates based on extenuating circumstances.

The pooled income fund (PIF) is often referred to as the "mutual fund of life income gifts." A gift of cash or securities is transferred into a pooled income fund at Deseret Trust Company, which, as trustee, manages the assets and pays an income for life to you or the income beneficiaries you designate. At the death of the income beneficiary, the remaining assets left in the pooled income fund account are transferred to the Church or one of its institutions.

The typical donor:

• Needs variable income for life.
• Seeks income that is market sensitive.
• May participate in different pooled income accounts for varied needs.
• Is between the ages of 55 and 80.

Gift features and benefits:

• Income for life, market sensitive
• Mutual fund approach to a charitable trust
• Reinvestment of assets transferred to the trust
• Deseret Trust Company manages the fund

How Do I Make a Gift Using a Pooled Income Fund?
Deseret Trust Company has created and manages several pooled income funds. After cash or marketable securities are transferred to Deseret Trust Company, these assets are pooled, reinvested, and managed with other donors' assets to leverage investment performance. A percentage share of the income earned in the fund is paid to you or the income beneficiaries you choose. When the income beneficiaries die, the remaining assets in your portion of that fund are transferred to the Church or one of its institutions.

Before you begin, you need to make sure your financial and legal advisors are part of your gift strategy team. A gift using one of Deseret Trust Company's pooled income funds can have an impact on other parts of your financial and estate plan. The professional staff at LDS Philanthropies can assist you and your advisors in completing your gift.



Other Facts You Should Know about a Pooled Income Fund
The income tax deduction you receive when giving through a pooled income fund is based on an Internal Revenue Service formula that considers your age, the ages of other income beneficiaries, the projected assumed payout of the fund, and a federal index rate. The older you are at the time you make a pooled income fund gift, the larger your income tax deduction based on the amount of gift transferred.

The trust provisions you have control of when giving through a pooled income fund include:

• Naming the income beneficiaries.
• Choosing the charitable remainder beneficiaries.
• Selecting the frequency of income payments.

Charitable lead trusts (CLT) are often viewed as the opposite of a charitable remainder trust. A donor transfers property to the lead trust, which pays a percentage of the value of the trust assets, usually for a term of years, to the Church or one of its institutions. At the end of the trust term, the remaining assets in the trust and any growth it has realized are passed to your heirs. Although there is no income tax deduction when you create a charitable lead trust, your gift or estate tax is greatly discounted and any growth is passed to your heirs gift and estate tax free. It is one of the only transfer devices currently used that can discount the value of the original assets and result in little or no taxes. At the same time, you fulfill your charitable desires.



The typical donor:

• Has a moderate to large taxable estate.
• Has given to charities in the past.
• Holds assets with growth potential.
• Desires to pass certain assets to heirs.

Gift features and benefits:

• Gift and estate tax deduction on the value of assets transferred
• Growth transferred tax free
• Perpetuates a tradition of charitable giving
• Management of assets transferred