Skip to main content
Horizontal Rule

Gifts That Grow Your Legacy + Provide You Income: Charitable Annuities and Trusts

Boy gardening with his grandfather

If you or a family member has reached the age of 70 ½, you may have heard of a tax benefit known as the Qualified Charitable Distribution (QCD), which allows you to direct up to $105,000* annually from your IRA to a qualified charitable organization, like Akron Community Foundation. You won't pay income taxes on the distribution, and if you are required to take minimum distributions (RMDs) from your IRA because you have reached the age of 73, the QCD also counts toward your RMD.

One of the many components of a recent set of laws known as "SECURE 2.0" is a provision that expands the QCD by adding the opportunity for taxpayers to make a one-time $53,000* QCD transfer to a charitable remainder trust (CRT) or another split-interest gift such as a charitable gift annuity (CGA). This part of the law is called the "Legacy IRA" provision.

Because of these recent laws, many charitable individuals and families are interested in learning more about CRTs and CGAs. CRTs and CGAs are similar because each provides an upfront tax deduction, a steady lifetime income stream, and a remainder gift to a charity, such as a designated or field-of-interest fund at the community foundation, which will receive what's left at the end of the income term, such as your lifetime.

CGAs are often easier to establish than CRTs, especially if you plan to establish the vehicle with $50,000 or less. This makes the CGA an ideal tool to take advantage of the Legacy IRA provisions for QCDs.

A CGA, like any other annuity, is a contract. You agree to make an irrevocable transfer of cash or assets to a charity, such as Akron Community Foundation. In return, the charity agrees to pay you (or a designated beneficiary such as your spouse) a fixed payment for life. You are eligible for an immediate income tax deduction for the present value of the future amount passing to charity.

The amount of income you can receive from a CGA is determined according to national standards, and it is based on rate of return assumptions that are revised periodically based on the current interest rate environment. By contrast, a CRT is actually a trust — a separate legal entity. To establish a CRT, you'll work with your attorney to execute a trust agreement and also work with a person or entity (such as the community foundation) who will serve as the trustee. After you transfer stock or other property — ideally highly appreciated assets — to the trust, you'll receive an income stream based on a percentage specified in the trust document (and subject to IRS parameters).

Our team at Akron Community Foundation welcomes the opportunity to work with you and your advisors to determine whether a CGA or CRT might be a good fit for your charitable plans. For example, we can explore whether you already intend to leave gifts to charity following your death, discuss your income requirements while you are living, and review the types of assets you own and whether there is a particular highly appreciated asset (such as stock or real estate) that would make an ideal gift to a CGA or CRT to reduce your capital gains tax exposure.

As always, please reach out to the community foundation's staff whenever you or your advisors have questions about charitable planning techniques. We look forward to collaborating as you build your estate plans and consider ways to support your favorite charities and the community you love.

This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

*Indexed annually for inflation

Horizontal Rule

Stay Connected

Sign up for our e-newsletter