Worried About Fiscal Cliffs, Taxmageddon, and Stock Market Volatility?

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Tax (Photo credit: 401(K) 2012)

With the potential of a ten-fold increase in estate taxes for many couples if the Bush Tax Cuts expire on December 31, 2012, a gift of cash or appreciated stock in the form of a Charitable Gift Annuity will offer a fixed, guaranteed, partially tax free income stream with payout rates as high as 9%. The payout rates and lifetime income benefits are contingent upon age and can provide a loving legacy to a college, university, or non-profit organization. Charitable Gift Annuities, Charitable Remainder Trusts  can provide a tax advantaged or even tax free income that does not fluctuate with market conditions or other changes in the economic environment. Charitable Gift Annuities are typically secured by the asset base of the donee organization and the creditworthiness of the insurer if a commercial annuity or life insurance contract is utilized. According to the National Association of Insurance Companies in a recent study on increased federalization of the insurance industry recently touted the reputable solvency of a majority of insurance carriers. Only 20 carriers have had to seek relief from other carriers in the last 30 years.

 

In addition to this lifetime income stream for one or two individuals, gift annuities also provide immediate income, capital gain and estate tax savings including wealth replacement. Some of the sample one-life annuity payout rates include an actual payout rate at age 75 of 5.8% or an effective rate of 7.66%. At age 80, the payout rate is 6.8% or an effective rate  of 9.17%. Finally at age 90, a donor can receive as much as 9.0% or an effective rate of 12.83% based on a 28% marginal tax rate.. The effective payout is based upon the impact of tax free or tax deferred income and up-front charitable deductions.

 

With the potential of a 33% jump in capital gains in 2013 after a doubling of stock market gains, many investors can sell highly appreciated assets, avoid capital gains taxes, reduce a concentration of assets, increase safety and receive a lifetime of retirement income while providing a lasting legacy that can help provide aneducation, goodwill, or help to a student or needy individual.

 

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