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Charitable Remainder Annuity Trusts
How Does It Work?
You can establish a charitable remainder annuity trust by irrevocably transferring assets to a trustee, who then makes fixed annual payments to you and/or other beneficiaries. At the end of the trust term, the assets remaining in the trust are distributed to Stanford for the purpose you designate. Stanford serves as trustee of many charitable remainder annuity trusts.
When you establish a charitable remainder annuity trust, you and the trustee agree to the amount of the annual payment to you and/or other beneficiaries. The amount of the annual payment must be at least 5% of the trust assets' initial fair market value and is generally taxable to the beneficiaries.
This type of trust may appeal to older beneficiaries who appreciate knowing exactly how much they will receive each year and are not as concerned about the effects of inflation over time.
- Receive fixed annual payments
- Pay no immediate capital gains tax on the transfer of appreciated assets
- Federal, and possible state, income tax charitable deduction
- Reduce or eliminate estate taxes
- Make a gift to Stanford
This Might Interest You If...
You want to make a gift to Stanford and you:
- Want to receive fixed annual payments for life
- Have assets that you are able to give away. Assets that work especially well include:
- Cash or funds earning low interest rates
- Appreciated securities
- Have a large part of your portfolio in one company and want to diversify your investments
- Would like to have a charitable remainder annuity trust managed by the Stanford Management Company
- Want to reduce your current income taxes with an income tax charitable deduction
Usually cash or appreciated securities.
If you are interested in learning more about creating a Stanford charitable remainder annuity trust, please contact the Office of Planned Giving. We would be happy to provide you with information about how a charitable remainder annuity trust would work for you based on your circumstances.
People considering a planned gift should consult their own legal and tax advisors. The staff in the Office of Planned Giving are happy to speak with advisors as well.
Example: Charitable Remainder Annuity Trust
Susan Jones, age 80, owns securities worth $300,000, which she bought many years ago for $20,000. These assets pay cash dividends of $6,000 (2%). Miss Jones is in the 35% income tax bracket and the 15% bracket for capital gains taxes. She would like a higher return on her securities, but if she sells the stock, then she would owe $42,000 in capital gains tax.
By transferring her shares to a Stanford charitable remainder annuity trust with a 6% payout, she increases her current income to $18,000 and avoids paying any immediate federal capital gains tax, even if the university decides to sell the securities now or in the future. In addition, she receives a charitable income tax deduction of approximately $160,000 (based on an IRS discount rate of 1.2%).
When the trust comes to an end at her death, the remaining assets in the trust will support undergraduate scholarships at Stanford, according to her wishes.
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