Gifts of Real Estate with Retained Life Estate
You can give your estate and live there, too! Just transfer your ownership of a residence or farm to DUMC, and you may continue to live there for your lifetime. This arrangement can qualify you for a charitable income tax deduction equal to your property's value, minus the value of the retained life estate.
Life Income Gifts
So, you want to donate to DUMC to support vital medical research or education, but you need your steady income for life? We offer several plans that combine the best of three worlds—important philanthropy, lifetime income, and major tax benefits.
Charitable Remainder Trusts
If you give assets such as appreciated stock or real estate to DUMC now, you can receive income for as long as you live. Upon your death, these assets will revert totally to DUMC, to be used according to your wishes. The income can be paid out for a period of up to 20 years. Help pay for a child's college education, help support an elderly loved one, or—if you own appreciated, low-yielding, high concentrated stocks—a charitable remainder trust can convert these into a high-yielding, diversified portfolio that can give you a handsome retirement income, without incurring capital gains taxes! We offer three types of charitable remainder trusts.
Charitable Remainder Unitrust
- Pays you income based on the market value of your assets each year.
- Provides an excellent hedge against inflation because if the market value of the trust increases, so will your income.
Charitable Remainder "Flip Trust"
- Can convert your non-income generating assets into cash or other liquid assets.
- Provides you an opportunity to defer income.
Charitable Remainder Annuity Trust
- Pays you income based on a fixed percentage of the initial value of the trust and never changes.
- Provides you with the security of a fixed income despite stock market fluctuations.
Pooled Income Fund Gifts
Just as a mutual fund combines investments from many people, a pooled income fund combines gifts from many donors into a common investment pool. DUMC then invests this pool, and the income it generates is distributed to each donor and/or a designated beneficiary. We offer two pooled income funds.
- The Tower Fund seeks to achieve a high income with minimum risk to the principal.
- The Quadrangle Fund seeks appreciation in value and increased income and usually yields a higher income tax charitable deduction than a gift to the Tower Fund.
Charitable Gift Annuity
This is a simple agreement between you and DUMC, whereby we pay you a lifetime annuity in exchange for a charitable gift. The amount of this annuity depends on market interest rates and the age of the beneficiary. Under certain circumstances, a large portion of the income from the annuity can be tax-free or taxed at lower capital gains rates.
Charitable Lead Trust
A charitable lead trust is the reverse of a charitable remainder trust. Assets are transferred to the trust, which then usually pays income to DUMC for a fixed number of years. At the end of the fixed term, the trust assets are transferred to individuals you name, such as children or grandchildren. A lead trust can be a useful tool in charitable gift and family wealth-transfer planning, because it can reduce gift and estate taxes.
Some of DUMC's largest gifts have come to us under the terms of a donor's will. Today's federal estate tax laws favor charitable bequests. Like other gifts, bequests can be given without restriction or designated for specific purposes or special areas of research.
- Specific bequests provide for a specific dollar gift or specific assets to be given to DUMC.
- Residuary bequests provide for a gift to DUMC of the remaining assets of your estate after all specific bequests have been paid.
Changing an Existing Will or Living Trust
If you already have a current will or trust and would like to include a gift to DUMC without rewriting it, your attorney can add an amendment to your living trust or a codicil to your will.
Life Income Gifts or Charitable Lead Trusts through Your Will or Living Trust
You can establish a charitable remainder trust, pooled income fund gift, or charitable gift annuity through your will or living trust. This will not provide you with tax savings in your lifetime, however you may reduce your estate taxes, provide a lifetime trust income to a loved one, or create new estate planning options. You may also reap estate tax savings by creating a lead trust through your will or living trust.
IRAs, tax-sheltered annuities, Keogh plans, self-employed plans (SEPs), 401(k), 403(b), and other qualified pension/profit-sharing plans can be an ideal gift source for DUMC. Usually, retirement plans are subject to both income and estate taxes at your death -- at rates that can be as high as 70 percent! If you arrange to make a gift to DUMC from your retirement plan assets at your death, the result may be significant tax savings for you. We can work with you and your plan administrator to carry out your wishes.
Joseph W. Tynan
Executive Director of Gift Planning at Duke Medicine Development and Alumni Affairs
710 West Main St., Suite 200, Durham, NC 27701