What It Is:
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 while making a generous gift to Wilson College. The income may continue for the lifetimes of the beneficiaries you name, a fixed term of not more than 20 years, or a combination of the two.
As an annuity trust donor, you irrevocably transfer assets, usually cash or securities, to a trustee of your choice (for example, Wilson College or a bank trust department).
During the trust's term, the trustee invests the trust's assets. Each year, the trustee distributes a fixed dollar amount to your income beneficiaries. The payments must be between 5% and 50% of the trust's initial value and are made out of trust income, or trust principal if income is not adequate. Payments continue until the trust term ends or until the highly unlikely event that the trust distributes all its assets. Payments may be made annually, semiannually, or quarterly.
When the annuity trust term ends, the trust's principal passes to Wilson College, to be used for the purpose you designate.
- You will qualify for a federal income tax deduction. Note that deductions for gifts of long-term appreciated property will be limited to 30% of your adjusted gross income and gifts of cash and non-appreciated property will be limited to 50% of your adjusted gross income. You may, if necessary, take unused deductions of either kind over the next five years, subject to the same 30% or 50% limitation.
- The income beneficiaries you name will receive annual income for life, or for the period you designate.
- If you fund the trust with an appreciated asset and the trust sells it, there will be no immediate tax on the capital gain. If you were to sell such an asset yourself, you would owe tax on all the capital gain realized in the sale.
- Your estate may enjoy reduced probate costs and estate taxes.
- You will provide generous support of Wilson College.
- Your gift will benefit from expert asset management, provided by the same professionals who manage Wilson College's endowment.