Charitable Gift Types

A balloon charitable lead annuity trust is a type of charitable lead annuity trust. Sometimes called a “shark fin” trust, it shares all characteristics of a standard charitable lead annuity trust except that its payments to charity are not the same fixed amount every year. Instead, the payments are a relatively small amount during all but the final year or final few years of the trust, then increase dramatically to a large “balloon” amount to be paid in the final year or final few years of the trust.

The deduction for a gift to most pooled income funds must be computed using the fund's highest yearly rate of return of the past three years. The fund must have three or more taxable years of experience for this rule to apply. Deduction calculations for gifts to young funds that have less than three taxable years of experience use a rate mandated by the IRS.

The exclusion ratio is the portion of the payments made to a gift annuitant that will not be reportable as ordinary income on the annuitant's income tax return.

If the gift annuity was funded with cash, the excluded portion of the annuity will all be tax-free income. If the gift annuity was funded with appreciated property, typically part of the excluded portion will be reportable as tax-free income and part of it as capital gain income.

A step charitable lead annuity trust is a type of charitable lead annuity trust. Sometimes called an escalating payment lead trust, it shares all characteristics of a standard charitable lead annuity trust except that its payments to charity are not the same fixed amount every year. Instead, the payments increase during the term of the trust according to a pre-determined schedule that is included with the lead trust instrument.

The valuation rate is the interest rate used to determine the charitable deduction available for gifts to a pooled income fund in a particular year.

A grantor retained unitrust (GRUT) is a form of irrevocable non-charitable trust. During its term, the trust makes payments to the donor of the trust (the grantor) that are equal to a fixed percentage of the trust's value, as determined on a specified day of the year. When the trust terminates, its remaining principal passes to remainder beneficiaries named by the grantor, typically children or grandchildren.

A grantor retained annuity trust (GRAT) is a form of irrevocable non-charitable trust. During its term, the trust makes fixed payments to the donor of the trust (the grantor). When the trust terminates, its remaining principal passes to remainder beneficiaries named by the grantor, typically children or grandchildren.

A grantor lead trust is a form of charitable lead trust in which the donor of the trust is considered the owner of the trust's assets for tax purposes. The most common reason for a charitable lead trust being treated as a grantor trust is that the donor of the trust will receive the trust principal when the trust terminates.

The American Council on Gift Annuities – ACGA – is a national organization of charities that promotes charitable gift annuities. One of its functions is that it issues tables of suggested maximum annuity rates that member charities should offer to their donors. The rates vary with age: the older the annuitant or annuitants, the higher the suggested maximum annuity rate.

A charitable gift annuity is a simple contract between the donor and the charity.

In exchange for an irrevocable gift of cash, securities, or other assets, the charity agrees to pay one or two annuitants a fixed sum each year for life.