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Forms of charitable giving
Part 2 of ‘Increased charitable giving, new rules’ in Aug. 4 farragutpress

Another form of trust, a charitable remainder trust, offers additional means for retirement investing for high-income executives and professionals who generally take maximum advantage of the tax-deferred retirement plans.

The particular format is referred to as an “income only” charitable remainder unitrust and works like this: Let’s say that at age 45 an executive sets up this type of unitrust that pays a lifetime income of 5 percent per year, or the actual amount of trust income, whichever is less.

The trust is funded with $50,000. The annual exclusion amount available to both the executive and the executive’s spouse each year is added to the trust for 20 years. The trust is invested in growth stocks distributing little or no income.

If the trust grows at approximately 8 percent annually, the executive will have accumulated more than $1 million by the age of 65. Now the trust assets can be reinvested to produce immediate income and allow annual payments of $50,000 a year.

Family foundations, once considered as the domain of the extremely wealthy, are now becoming an option for people of more moderate means. The majority of foundations have under $10 million in assets, according to the Foundation Directory Online. Nearly 20 percent of the active family foundations, according to the directory, have less than $50,000 in assets.

Establishing a family foundation certainly rates consideration by anyone making a sizeable gift to charity. This allows donors to play a role in evaluating who should be the objects of their bounty.

They can enjoy their philanthropy privately and anonymously. Donors can add family members to the process, teaching offspring important lessons about giving and the joy of generosity.

However, as is usually the case, the IRS has imposed strict rules upon the operation and maintenance of family foundations. As with other forms of planned giving, seeking professional guidance is essential.

Jeff Francis is senior vice president and senior investment officer for First Tennessee Brokerage. For more information about this or other personal finance issues, please call 865-971-2321 or visit your local First Tennessee financial center.


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