Life Income Gifts

It is often difficult to consider making a substantial gift during your lifetime and still handle family obligations and provide for your retirement. A life income gift allows you to make a lifetime gift without sacrificing your family's current financial situation. You irrevocably transfer assets to Lake Erie College and we agree to provide you (and a survivor of your choice) with a fixed amount of income annually for your lifetime.

In addition to knowing how much your gift makes a difference in the lives of many, you will also receive the following benefits:

• A charitable deduction in the year you make your gift for the present value of Lake Erie's rights to eventually receive the assets.
• Your effective yield is increased by substantial income tax savings.
• Income can be taxed more favorably in some plans.
• Your probate and estate administration costs may be reduced.

Charitable Gift Annuity

In exchange for your gift of cash or marketable securities, Lake Erie College agrees to provide you (and perhaps a survivor or beneficiary) a fixed amount annually for your lifetime. These payments are guaranteed for life. Rates, based on age, are established by the American Council on Gift Annuities.

For example, Ms. Bates, age 73, transfers $20,000 to Lake Erie College as a gift annuity. She will receive a guaranteed annual income of $1,360 ($20,000 x 6.8% -- the annuity rate for her age).

The rates are different for an annuity for two lives. These rates are less than rates for one life because the period of payment may be longer.

For example, Mr. Jones is 80 and his wife is 75. They transfer $30,000 to Lake Erie College as a gift annuity and receive $1,980 annually for life ($30,000 x 6.6% -- the annuity rate for their combined ages). The full guaranteed payments continue for the survivor's life.

You may also choose to defer the charitable gift annuity. You can make the gift now, and Lake Erie will pay you (and another beneficiary, if you wish) life income starting at any date you specify. This is a great option if you are concerned about retirement income. As an added benefit, you receive the income tax deduction in the year you make the gift. The amount you receive each year depends on the amount transferred, your age now, and your age when the payments are to start.

Charitable Remainder Trust

This plan is created by transferring assets to a trust. This trust then pays you (and another beneficiary, if you wish) income for life. At the end of the trust, the remaining trust assets are transferred to Lake Erie College. A bank or other advisor can serve as trustee.

The type of charitable remainder trust you choose determines your annual payments:

Charitable Remainder Annuity Trust

The charitable remainder annuity trust pays you a fixed annual amount for life. The payments are determined by the payout percentage selected at the beginning of the trust. You can claim a charitable deduction on your income tax form the year that the trust is created. The payments received are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.

For example: Mrs. Clark irrevocably transfers $100,000 and creates a charitable remainder annuity trust to provide her with life income payments. Included in the agreement is the stated payout percentage of 7. She will receive $7,000 annually for life ($100,000 x 7%). If income earned by the trust exceeds the fixed payment of $7,000, the excess is reinvested.

Charitable Remainder Unitrust

The charitable remainder unitrust pays you a fixed percentage of the fair market value of the trust assets, and are revalued each year. Like the annuity trust, you can claim a charitable deduction on your income tax the year that you create the trust. The payments received are taxed as ordinary income, and in some cases as capital gain or tax-free return of principal.

For example, Mr. Jones irrevocably transfers $100,000 to create a charitable remainder unitrust that will provide him with life income payments. The trust agreement provides that he will receive 6 percent of the fair market value of the assets each year. The first year he receives $6,000 (100,000 x 6%). One year later the trust assets are valued at $120,000, so he is paid $7,200 ($120,000 x 6%). If the trust assets are worth $110,000 at the beginning of the next year, he will receive $6,600 ($110,000 x 6%). And so on each year. If trust income exceeds the stated payout percentage, the excess is added to the unitrust assets and reinvested.