Trusts

A trust is a legal instrument by which property is transferred by its owner(s) to a trustee to be managed for the owner(s) and/or beneficiaries according to instruction. There are many kinds of trusts. They can be revocable or irrevocable, simple or complex, immediate or conditional, testamentary (established by a will) or inter-vivos ("living trusts" made while the trustor is still living.).

Our concern at the Georgia Baptist Foundation is primarily with the use of four living trusts for family and financial planning and for more effective charitable giving:

The Charitable Gift Annuity:
The Charitable Gift Annuity is a combination of a gift to charity and an annuity.
For senior persons, annuity rates may be 8%, 9% or even higher. Since part of the annuity payment is tax-free return of principal, the gift annuity may provide the donor with a very substantial income. The combination of partially tax-free income and the initial charitable deduction makes the agreement quite attractive. After all payments have been made for the life of the annuitant, a favorite charity will benefit from the charitable gift.

The Charitable Remainder Annuity Trust:

An irrevocable trust generating a deductible charitable gift and providing the donor a fixed income. Income is fixed, not variable. It is a stipulated, unchanged income for life-a fixed percentage of the fair market value of the assets on the day the trust was created. The minimum annual payment is, by law, at least 5% of the initial net fair market value of the trust property. The donor may avoid capital gains tax if he or she uses appreciated property that he or she has held 12 months or longer to fund the trust. The donor is allowed a current income tax deduction and the charitable institution receives whatever remains at the trustor's death.

The Life Insurance Trust:
A living trust funded by life insurance on the life of the trustor or another.
This trust can be set up to bring various policies under one agreement, or it may be a "dry trust" (unfunded during the life of the grantor). It is often set up in order to secure trust management and save money on taxes. Life insurance payable to the estate is subject to probate, but the same life insurance payable to the trust is not. Another advantage is that a life insurance trust can be a receptacle for other assets of the estate via the provisions of the "pour-over" will.

Other Trusts:
Various other types of trust arrangements are available to help you reach your estate planning goals.