Making an Estate Plan That Pays You Today

Making an Estate Plan That Pays You Today

Estate planning is an important, but often overlooked, part of being a responsible spouse, parent, sibling, and philanthropist. Such plans usually start with the details of your will, but the most successful and comprehensive plans expand beyond the basics to address the current and future financial needs of you and your loved ones, as well as your desire to support institutions and organizations that are important to you.

A great way to balance current income needs and your philanthropic goals is to create a charitable gift annuity (CGA). And it could come with substantial tax advantages in the year you create the annuity.

CGAs involve transferring a gift of cash or property to a charitable organization—such as the University of Pittsburgh—in exchange for a fixed income stream for the life of one or two beneficiaries of your choosing. The payout rate is based on the age of the beneficiary(s) at the time they begin receiving payments. Those rates were recently increased by, in some cases, nearly 10%.

“You can elect to start taking the payments any time after your 55th birthday,” Danni Piccolo, Assistant Vice Chancellor, Schools and Centers Individual Giving said. “The older you are, the higher the payout rate.”

For example, a 70-year-old creating a $100,000 CGA benefiting Pitt would see an annual payment of $5,600 (5.6% annual annuity rate) and realize a tax deduction of $41,075 in the year the annuity is created. If you choose to fund a CGA with appreciated assets, such as stock, you can also reduce capital gains taxation on the gifted asset. On top of that, more than half of the income received in the first year may be nontaxable. You can find a full listing of rates by age from 55 to 90 years here.

Despite the volatility in the markets, CGAs continue to be a reliable investment that create a fixed income for whomever you choose.

“Many donors opt for what’s called a joint-and-survivor annuity where the payout continues to a surviving spouse or another loved one,” Danni said. “You can also create an annuity that pays a sibling, child, or family friend as long as they are at least 55 years old. They can even be as young as 40 years old if income payments are deferred until age 55.”

In 2011, Marlin Mickle (ENG ’61, G ’64, G ’67) created a CGA with the University. Sadly, Dr. Mickle passed away in 2015, but his annuity is now supporting three different initiatives: the Marlin Mickle Celebration of Innovation, the Marlin Mickle Technical Innovation Lecture, and the Mickle Undergraduate Award in Entrepreneurial Excellence.

“Marlin was a visionary and left his mark via teaching, patents, and contributions to the Pitt community,” James R. Martin III, Dean, University of Pittsburgh Swanson School of Engineering said. “Through his generosity, future generations of engineering students will find motivation and reward in their studies.”

Gift annuities can be structured to support any number of schools and programs. You can find information about making planned gifts to the University of Pittsburgh at our website and more about charitable gift annuities here. If you have any questions about charitable gift annuities or other planned giving options, do not hesitate to contact Shannon Christof at schristof@pitt.edu or 412-383-0480. For planned gifts to the University’s Schools of the Health Sciences, please contact Cynthia Caldwell at ccyndi@pmhsf.org or 412-647-0515.

Follow this link to read more stories from this issue of the Chancellor's Circle Update.