A charitable remainder trust permits you to make a significant gift to SouthArk and continue to benefit from lifetime income from the gift assets, either a fixed or variable payment, and add to it at any time. Funding a charitable remainder trust provides an income for you and/or your beneficiaries for life—or for a period of up to 20 years.
Capital gains tax is avoided if the trust is funded with a long-term appreciated property. In addition, you are entitled to an immediate and substantial income tax charitable deduction.
The two types of charitable remainder trusts are Charitable Remainder Annuity Trust and Charitable Remainder Unitrust:
Charitable Remainder Annuity Trust
A charitable remainder annuity trust pays a fixed amount (at least 5 percent of the fair market value of the trust assets when the trust is established) to you or your beneficiaries at least once a year. The payment is determined when you set up the trust, based on such factors as your age, the number of beneficiaries, your desired income, and the length of the trust term. If the trust earns more income than the agreed amount, the additional earnings are reinvested. If the earnings are less, withdrawals from the trust’s principal make up the difference.
Charitable Remainder Unitrust
A charitable remainder unitrust differs from an annuity trust by paying a fixed percentage—at least 5 percent of the fair market value of the trust’s assets each year, rather than a fixed sum. That means the income will fluctuate from year to year as the trust’s value fluctuates, but because the long-term market pattern is usually one of growth, payments typically increase over time.
A unitrust enables donors to provide future support while achieving personal objectives such as providing for heirs, enhancing their retirement income, diversifying investments and saving taxes.
It is important to note one feature of the unitrust: Donors can make additional contributions to a unitrust, whereas they are prohibited with an annuity trust.
Charitable Gifts Annuity
One of the most common and popular ways to make a planned gift is with a charitable gift annuity, due to its simplicity. Through the contract, SouthArk agrees to pay a fixed sum each year for a lifetime, in exchange for your irrevocable gift.
Charitable gift annuities can be funded with cash, real estate or appreciated securities. Donors receive a tax deduction based on age, the payout rate and the federal discount rate. If you use an appreciated asset, a portion of each payout will be capital gain, which is therefore spread out over your lifetime.
Likewise, a part of each payment would be a tax-free return of principal, increasing the after-tax value of each payment. And because you have effectively removed the assets from your estate, you avoid estate taxes.
Charitable Lead Trust
A charitable lead trust allows a donor to make a significant gift to the SouthArk Foundation, minimize taxable estate, and pass assets on to non-charitable beneficiaries. A charitable lead trust works by first using the assets contributed to the trust to make annual payments to the SouthArk Foundation for a set number of years (usually 10 to 20). The trust is typically structured so that at the end of that time, the assets remaining in the trust pass to the non-charitable beneficiaries, without passing through the donor’s estate. Thus, the lead trust is a technique for making a “temporary gift” of income.
An example of this type of trust would be as follows: You give assets to a trust that pays the SouthArk Foundation an income for a number of years, which you choose. The longer the length of time, the better the gift tax savings for you. When the term is up, the remaining trust assets go to your family or other beneficiaries you select.
This is an excellent way to transfer property to family members down the line (typically children and grandchildren) at a minimal tax cost. This type of charitable lead trust (also called a nongrantor, or family lead, trust) is especially appealing to SouthArk Foundation supporters who are financially comfortable enough that they can forgo investment income on some assets.
Charitable Bequests
The most popular planned gift is the simple charitable bequest, which provides you with the opportunity to leave a lasting legacy. Your will ensures your property will go to the programs, initiatives and/or scholarships you designate.
Bequests by wills, irrevocable trusts, and revocable trusts are an important way in which SouthArk builds its endowments. Bequests can be for a specific amount, a percentage of your estate or a stated percentage of the residual amount of your estate. Considerable estate taxes may be avoided by naming SouthArk in your will.
You can designate how you want your bequest to be used—or leave it unrestricted to allow SouthArk Foundation to have the flexibility to meet the ever-changing needs of the college. Most importantly, you can change your bequest provision at any time during your life.
Wording for making a bequest to SouthArk Foundation is “I hereby leave (amount, percentage, asset or remainder) to SouthArk Foundation, Inc., an Arkansas nonprofit with principal offices in El Dorado, Arkansas for the (insert specific program, fund, or endowment or for the general benefit of a specific campus).”
I want to make a commitment now. Letter of intent for planned giving.
While this information is designed to introduce you to planned giving and the many opportunities available to you through SouthArk, we encourage you to seek the advice of your attorney, accountant, banker, broker, or other financial advisors. For more information on planned giving or other gifts, please contact:
Cynthia Reyna
Executive Director, SouthArk Foundation
870.864.7130, 870.665.9465
This email address is being protected from spambots. You need JavaScript enabled to view it.
What is Planned Giving?