Today’s blog post, Split-Interest Gifts, is the last entry of our 4th Quarter Blog Series, 5 Ways to be Generous Before Year-End. We hope this series has been thought-provoking and may have challenged you to explore additional ways to give!
Split-Interest Gifts are unique in that they offer ongoing benefits to the giver, while benefiting the ministry or charitable organization of choice. The donor will typically receive an up-front tax deduction & income for their lifetime, while the residual value will benefit the charitable organization. The up-front tax deduction is a partial amount due to the ongoing benefit (lifetime income) that the donor will receive.
Split-Interest Gifts can be an excellent choice for a donor who has a desire to give a substantial charitable gift today, but also wants (or needs) to retain income from the value of the donated asset(s). Most often, this provides supplemental income during the giver’s retirement years. Let’s take a closer look at the distinct types of split-interest gifts.
- Charitable Gift Annuities (CGA) – A CGA represents the most common of the split-interest gifts. The donor makes a gift to the charitable organization and receives an agreement detailing the exact amount of income that the donor(s) will receive during their lifetime. The simplicity of a CGA lends them effective for both small and larger charitable gift amounts.
- Charitable Remainder Trusts (CRT) – A CRT is typically the most complex of the split-interest gift strategies. It can be highly customized to accomplish specific goals desired by the donor. Because of this customization, a CRT must be structured as a legal entity, in addition to ongoing required administrative oversight & annual tax reporting. For these reasons, a CRT is an effective choice for facilitating substantial charitable gifts, especially when gifting highly appreciated assets (a farm, commercial real estate, stock, or business ownership shares).
- Charitable Pooled Trust (CPT) – A CPT (sometimes referred to as a Pooled Income Fund) is a unique tool that lands between the two previously mentioned giving tools. A CPT will usually provide a greater upfront tax deduction than a CGA, while eliminating the complexities associated with a CRT.
All the split-interest giving strategies shown above are effective, and they all offer a predictable income stream to the donor. Choosing the best split-interest gift strategy to use for your individual situation is essential! We would love the opportunity to discuss and guide you through that process.
Finally, within the next few days, we will be celebrating Christmas. The birth of Christ represents the most generous gift ever given, God’s plan of redemption! May you experience a beautiful Christmas season, while pondering the meaning of the greatest gift we could ever receive.
“For unto you is born this day in the city of David a Savior, who is Christ the Lord.” Luke 2:11 ESV
