Life Income Gifts

How it works:

1. You transfer cash or securities to HMC.
2. Beginning on a specified date in the future, HMC begins to pay you, or up to two annuitants you name, fixed annuity payments for life.
3. The principal passes to HMC when the contract ends.

Benefits:

• Deferral of payments permits a higher annuity rate and generates a larger charitable deduction.
• The longer you defer payments, the higher the effective rate you will receive.
• You can target your annuity payments to begin when you need them, such as retirement or when a grandchild needs help with tuition payments. Many donors use a deferred gift annuity to help plan for retirement, establishing a series of deferred annuities over several years using funds they had already set aside for retirement saving. They set the commencement date for payments from these annuities to coincide with their or their spouse''s retirement.
• You have the satisfaction of making a significant gift now that benefits both you and HMC.

Planning points:

• A deferred charitable gift annuity at HMC can be created with a gift of $50,000 or more.
• Your deferred annuity is a contract between HMC and you, and your annuity payments are an obligation backed by the assets of the College;
• You secure a charitable income tax deduction based on the market value of the assets you contributed, minus the present value of the life-income interest you retained;
• No up-front capital gains tax is payable if you fund your deferred gift annuity with appreciated securities; only a portion of your gain is recognized, with the tax spread over your annuity payments;
• Part of each annuity payment to you comes tax-free as the return of principal;
• The balance remaining in your deferred annuity after the death of the beneficiaries will be used by HMC for the purpose you designated when you created the gift annuity.

How it works:

• You transfer cash, securities or other appreciated property into a trust.
• The trustee makes fixed annual payments to you or beneficiaries you name.
• When the trust terminates, the remainder passes to HMC.

Benefits:

• You receive an immediate income tax deduction for a portion of your contribution to the annuity trust.
• You pay no upfront capital gains tax on any appreciated asset you donate.
• You or your designated income beneficiaries receive stable, predictable income for life or a term of years.
• You have the satisfaction of making a significant gift that benefits you now and HMC later.

Planning points:

• Because they pay fixed income, annuity trusts cannot accept gifts of illiquid assets or pay out net-income only, as a unitrust can.
• Annuity trusts are well suited to accept gifts of long-term tax-free bonds, generate a tax deduction, and pass tax-exempt income through to you and your beneficiaries.
• As a general rule, the College will consider serving as trustee of a charitable remainder unitrust with assets of at least $250,000 if the annuity or unitrust percentage does not exceed 6%, and the trust names HMC irrevocably as a beneficiary of at least 50% of the remainder.
• Setting up a charitable remainder annuity trust is not particularly difficult, but we encourage all donors to seek the advice of an attorney with expertise in the area of charitable trusts and estate planning.

How it works:

• You transfer cash, securities or other appreciated property into a trust.
• The trust pays a percentage of the value of its principal, which is re-valued annually, to you or to beneficiaries you name.
• When the trust terminates, the remainder passes to HMC.

Benefits:

• You receive an immediate income tax deduction for a portion of your contribution to the unitrust.
• You pay no upfront capital gains tax on appreciated assets you donate.
• You or your designated beneficiaries receive income for life or a term of years.
• You can make additional gifts to the trust as your circumstances allow and qualify for additional tax deductions.
• You have the satisfaction of making a significant gift that benefits you now and HMC later.

A unitrust is might be right for you if:

• You want to make a major gift to HMC while retaining or increasing your income from the assets you contribute.
• You hold appreciated assets (e.g., securities, a business, or investment real estate), and want to avoid the capital gains cost of a sale.
• You want the income from your gift to be able to grow over time.
• You desire maximum flexibility in the operation of your gift:
  • You want income paid to your beneficiary for a term of years instead of their lifetime.
  • You want income to go to more than one beneficiary.
  • You want the option of choosing the trustees of your gift plan.
  • You want to donate an appreciating but temporarily illiquid asset to HMC.

Planning Point:

• As with charitable remainder annuity trusts, as a general rule, the College will consider serving as trustee of a unitrust with assets of at least $250,000 if the unitrust percentage does not exceed 6%, and the trust names HMC irrevocably as a beneficiary of at least 50% of the remainder.