Establish lasting legacies

By Dan Kadlec, contributing editor


BILLIONAIRES: Establish lasting legacies.

YOU: Benefit by working giving into your estate planning.

The estate tax took a break this year, but it's bound to come back at some point. So you may want to trim the size of your eventual estate -- and get a generous tax deduction -- by donating valuable assets now.

With a gift annuity, you can do so without giving up the rental income that your old vacation home generates, say, or the dividends that your blue-chip stocks pay.

When you put money into a gift annuity you get to deduct a portion of the gift, and the nonprofit pays you income for life, based on the value of your donation and your age: The older you are, the higher the payout rate.

Today a 65-year-old who donates $25,000 in cash to set up a gift annuity, for example, could earn 5.5%, or $1,375 a year for life, while a 75-year-old could earn 6.4%, or $1,600.

You can also choose to defer the income, taking the big upfront deduction during your working years and the payouts later on, when they'll probably be more useful to you.

Since the payout rates for gift annuities aren't tied solely to current interest rates, the income you'd get from them might be even better than what you'd earn if you kept a chunk of money in bonds or CDs, says Denver financial planner Ray Benton.

A portion of your gift annuity income will be tax-free for several years (payouts from stock or other appreciated assets are taxed differently).

If you're giving away serious money -- at least $250,000 -- get a more expensive charitable remainder trust, which is similar to a gift annuity but gives you more control and flexibility in determining how much income to take out. Expect to pay about $1,500 to set up such a trust, and $1,000 a year to run one.

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