The charitable remainder unitrust (CRUT) is far more popular than the charitable remainder annuity trust (CRAT). Annuity trusts make up only about 15% of all charitable remainder trusts in existence. Nonetheless, there are donor situations where the CRAT can be an attractive option. Although we usually think of the gift annuity when a donor desires fixed payments, here is a list of situations where the CRAT beats the gift annuity:
Given unprecedented low interest rates, which shows no signs of material change, we have been asked a common question from our clients, “Should I continue to promote gift annuities?” There appears to be some skepticism and nervousness in the industry on whether it’s a good strategy to continue to market these gifts now because annuity rates are low and donors aren’t interested, and rightly so. With a few exceptions, and those are from organizations who don’t follow the ACGA rates, most charities are experiencing a decline in gifts this year and at best it’s flat compared to last year.
The monthly IRS discount rate dipped to 1.4% for August and has stayed there for September. Although this rate has been at historically low levels since 2008, it hasn’t been this low in over three years. The extremely low IRS discount rate creates opportunities and challenges.
The significance of bequest commitments and the dollars they will ultimately bring to charitable organizations are often ignored or underutilized in financial planning. Yet, bequests are the largest source of planned gift income for most charities with planned giving programs (and in fact are often a large source of income for charities that don’t think they have a planned giving program). A simple analysis of your bequest expectancies can translate donors’ commitments into projected future income streams. This is valuable information for your board and other leadership and should foster a greater appreciation for the role of bequest commitments and the planned giving staff who obtain and track them.
Life income gifts are always deferred gifts. The arrangement is made now, but the charity’s use of the funds is delayed until a future date, normally the death of the donor and any other individual beneficiary of the gift arrangement. Unfortunately, the donor of a life income gift usually does not get to see the gift in action, and the charity is unable to address pressing current needs. Converting a life income gift to a present gift can be both emotionally satisfying to the donor and immensely beneficial to the charity.