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Giving to Lehigh > Planned Giving > Income for Life > Life Income Vehicles

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Charitable Gift Annuity
Deferred Charitable Gift Annuity
Pooled Income Fund
Charitable Remainder Trusts
Charitable Lead Trusts
Donor Advised Funds and Supporting Organizations
Donor Advised Funds
Supporting Organizations
Gifts with Retained Life Estate

The Charitable Gift Annuity
This life income plan is a very simple arrangement between you and Lehigh guaranteeing a monthly payment of lifetime income at a fixed rate. Annunity payments are determined by the annuitants' ages and the amount of the gift. Single or two-life annuities are available.
     
A gift annuity qualifies for a charitable income tax deduction the year it is established with Lehigh. It also offers an attractive provision for the taxation of income: a portion of each payment is treated by the IRS as the non-taxable return of your principal, if cash or assets with minimal appreciation are contributed. The balance is taxed as ordinary income and/or capital gains.
      
The annuity can be contracted through a minimum contribution of $10,000 in cash or marketable securities. The amount of the gift that remains at the termination of the agreement may be restricted for endowment or spent outright by the university as specified in the annuity contract.
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The Deferred Charitable Gift Annuity
This is a special variation of a charitable gift annuity, one that provides increased tax benefits for younger donors. A deferred gift annuity provides all the features of a regular gift annuity. However, income payments do not begin until a future date, chosen by you at the time you make the gift. The longer the delay between the creation of the deferred gift annuity and the commencement of payments, the larger the up-front charitable tax deduction, and the higher the eventual annuity rate.
     
You may use deferred payment gift annuities to supplement IRA's and other retirement plans.     
You may establish sequential deferred gift annuities in each year up to your retirement and then draw combined income from the total gifts contributed.
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The Pooled Income Fund
Lehigh's pooled income fund is an irrevocable trust fund which operates similarly to a mutual fund. Your contributions are pooled under the trusteeship of Lehigh. All income earned by the fund in each quarter is paid out to the participants in pro rata shares. All dividends and interest must be paid out to life beneficiaries. The terms of the gift are irrevocable and Lehigh ultimately receives the principal.

As with all life income gifts to Lehigh, your deduction for a pooled income fund gift is a function of the ages of the beneficiaries and the fund's rate of return.

The high yield pooled income fund is invested in a portfolio mix aimed for a high level of income and small amount of long term capital appreciation. The minimum initial contribution is $5,000 in cash or marketable securities. Additions of $1,000 or more may be made at anytime.

The balanced pooled income fund is invested in a portfolio mix aimed for a modest initial level of income, balanced by long-term capital appreciation and growth of income. The minimum initial contribution is $5,000 in cash or marketable securities. Additions of $1,000 or more may be made at anytime.
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Charitable Remainder Trusts
These gift vehicles have separate portfolios, each of which is individually managed by Lehigh or by a trustee chosen by you.
     
A Charitable Remainder Unitrust pays the life income beneficiary a percentage of the fair market value of the trust assets, as revalued annually. This fixed percentage, no less than five percent (as dictated by the IRS), is determined jointly by you and the Lehigh University Treasurer's Office at the time that the trust agreement is prepared. Income is paid on a quarterly basis. As with other life income gifts, however, a higher income rate for the unitrust will lower the charitable deduction and provide for a smaller growth of the principal which ultimately goes to Lehigh. A high payout rate for the unitrust also weakens its ability to pay out more income as the principal grows.

Because the unitrust requires individual financial management by the University, Lehigh sets a minimum contribution level of $100,000. Additional contributions can be made to the trust in any amount.

Unitrust income is taxed to you based upon the trust investments and, therefore, may be created with, or invested in, tax-exempt securities that will provide tax-free income for the trust beneficiaries.

A variation of the unitrust permits Lehigh to accept illiquid assets, such as real estate, into the trust. This is known as an "income only" unitrust, and it provides Lehigh with sufficient time to liquidate the property and to reinvest in income-producing assets.

As trustee, Lehigh can later distribute income in excess of the specified rate to make up for the earlier deficiencies. Such flexibility can enable the beneficiary to receive a higher yield during retirement years when he or she is likely to be in a lower tax bracket.

A Charitable Remainder Annuity Trust is the same type of gift vehicle as the unitrust, except that the income payment is a fixed dollar amount established at the time of agreement. This amount must reflect at least five percent of the initial market value of the assets of the trust. Unlike the unitrust, however, the annuity trust provides you with a predictable income each year regardless of fluctuations in earnings or value of the portfolio. It cannot accept additional assets after the trust has been established.
     
A Charitable Remainder Term Trust is a variation of the unitrust and annuity trust in that it pays beneficiaries for a term of years (not exceeding 20) rather than for a lifetime.

This vehicle is particularly interesting for those who want to provide tuition support to a child or grandchild attending college (hopefully Lehigh). By making a college student (or other low-bracket-taxpayer) beneficiary of a short-term trust, the income payments will most likely have a negligible tax consequence on him or her, and you will receive (because of the limited payout period) a very substantial charitable deduction. At the end of that period, the assets of the trust will revert to Lehigh.
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Charitable Lead Trusts
The lead trusts are mirror images of the charitable remainder trusts. They are methods of transferring assets to your heirs with minimum gift and estate taxes, while contributing to the support of Lehigh during or after your lifetime.

The lead trust pays a fixed annual percentage (Charitable Lead Unitrust) or fixed dollar amount (Charitable Lead Annuity Trust) to Lehigh for the duration of the trust. When the trust terminates, the principal plus any excess income (over and above the annual payment to Lehigh) is transferred to the trust beneficiaries, typically your children or grandchildren.

A generous gift tax charitable deduction can be realized for the "present value" of the annual trust payments to Lehigh. This deduction can be used to reduce your gift and estate tax liability.
     
Although a gift tax may be due on the transfer of assets to your beneficiaries, the tax is based on the current market value of the assets, less the value of Lehigh's interest; the assets are subsequently removed from your estate

One of the most attractive aspects of a lead trust is that the appreciation of the assets during the term of the trust is not subject to additional gift or estate taxation. As a result, it is sometimes possible to pass on to heirs a larger estate after taxes.
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Donor Advised Funds and Supporting Organizations
A popular way to make a gift now, while deferring which charities will receive your gift and in what year they will receive it, is through a Donor Advised Fund or Supporting Organization.

The rise of charitable funds managed by for-profit investment managers such as Fidelity and Vanguard, suggests that more and more individuals wish to make substantial charitable gifts, but also want to control the timing of the gift, as well as to maintain the flexibility to spread its benefits over multiple charities.
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Donor Advised Funds
This plan allows you to make a significant charitable gift today and have your gift benefit from being invested with the endowment fund of the University. Annually, you and/or your spouse make recommendations as to which charities you would like to be recipients of the income generated by your fund. While some restrictions apply, your fund continues for 30 years and at the conclusion, your fund becomes a permanent unrestricted endowment of the University and carries your name or that of someone you wish to honor in perpetuity. The minimum gift to establish a donor advised fund is $250,000.
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Supporting Organizations
This arrangement mirrors a private foundation, while providing you with the tax benefits of a public charity. As part of a public charity, you are relieved of the burdensome regulations and restrictions imposed on private foundations, and the associated costs of complying with those regulations. In addition, you retain the opportunity for family and trusted advisors to share in the management of your philanthropy through service on a board which you assist in appointing.

This type of plan may be particularly helpful if you are the owner of a closely held business and wish to benefit both your heirs and charity - while improving control over the ownership of your business. You may also find this plan attractive if you wish to introduce a younger generation of your family to the responsibilities of community service and philanthropy.

As with donor advised funds, you and your board formally recommend which charitable organizations, in addition to Lehigh, you would like to support annually and in what amounts. The suggested minimum to establish a supporting organization is $5,000,000.
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Gifts with Retained Life Estate
If you do not wish to part with real estate during your lifetime, you may be able to make a gift of your home, farm or even a vacation home, receive an immediate income tax deduction and still continue to use the property for as long as you wish.
     
By setting up a gift of your property now, rather than in your will, you receive an immediate income tax deduction for the present.
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