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Assisting Family Members Through Charitable Giving

Posted Feburary 2008

Many of our friends are finding that their parents or even older siblings are facing their greatest challenge: growing old. And with greater responsibility for helping to provide for housing and healthcare expenses, you may find yourselves, the "sandwich generation," squeezed between raising your own children and helping your elderly parents or other family members.

Through a variety of creative charitable gift arrangements, it is possible to fulfill your family obligations and support the work of , while also reaping tax benefits. In addition, with today's longer life spans, you may even find that some of these charitable options could supplement income in your own "golden years."

One idea you might consider is the charitable gift annuity; a simple, easy way to provide spendable income for yourself or a loved one and make a charitable gift at the same time. Basically, a gift annuity is a contract between a donor and . In exchange for a gift of cash or marketable securities, we guarantee fixed payments to the beneficiary(ies) for life.

A gift annuity does not require a complicated agreement, and the amount needed to fund the annuity is generally quite modest.

Example: Bob Smith, 52, is a successful executive with a good income. His mother, Dorene, is 82 and still lives in the family home. To help meet his mother's expenses, Bob provides $5,000 per year (more than $7,000 per year in pre-tax dollars).

By creating a gift annuity, Bob can make a gift to , provide for his mother, and receive a welcome charitable tax deduction at the same time.

After consulting with his advisors and a member of our staff, Bob makes a gift of $60,000 to establish a charitable gift annuity for his mother.

Benefits:

• Dorene will receive payments of $5,100 each year, of which, about $3,695 will be tax-free for the next eight years.
  
  
• Bob receives an immediate charitable income-tax deduction of over $29,000.
  
  
• If Bob makes the gift with long-term appreciated securities, he will reduce and spread out the capital-gain tax.

Provide for Yourself As You Age

While taking care of your family is important, you should consider preparing for your own post-retirement years as well. Those currently in their early sixties can expect to live another 25 to 30 years, and longer life spans mean that retirement assets will have to stretch over a much longer period of time.

Consider a life-income charitable gift plan to supplement your IRA, 401(k), 403(b), and 457 plans, Social Security, and other retirement investments. That way, you're guaranteed income for as long as you live.

Example: Barbara Stevens, a 50-year-old partner in a thriving law practice, makes all allowable tax-favored retirement-plan contributions. To supplement her retirement income, she decides to make a series of additional $10,000 contributions each year to a special kind of charitable trust created with until she retires at the age of 65.

The trust grows by 8% each year until it starts distributing 5% of its value annually to her when she reaches the age of 65. That year the trust will distribute more than $13,500 to Barb, and that could grow to more than $23,000 during her life expectancy. In addition, she will generate charitable deductions of approximately $54,400, and the trust will distribute more than $475,000 to at her death.

We're Here to Help

Preparing for retirement years—whether your parents', your sibling, or your own—can be a challenging experience. We can offer creative gift-planning techniques that will enable you to support and provide a better retirement for a family member or yourself. To request more information, please click here and fill out the reply form.

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