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Don Williams, Assistant Treasurer

Q: What is a charitable trust? How can it help you? How can it help the Chapel of the Cross?
A: With a charitable trust, you give investments or other property to a trustee (you can be the trustee). The trustee pays you income for life, or pays a percentage of the trust annually for life. When you die, the trust goes to the church.

Q: Do I get a charitable deduction for income tax?
A: Yes. You get an income tax deduction for the year in which you set up the trust. If you don't use all the deduction, it carries over for five years. For example: you are 75; in 2002 you put into the trust $100,000 in stock; you elect to receive 6% a year income. Your charitable deduction for 2002 is $56,000 and carries over if you don't use it all in 2002.

Q: If I put in appreciated stock and the trustee sells it, must a tax be paid on the capital gain?
A: No. You avoid the capital gains tax. The trust is a qualified charity; it does not pay tax.

Q: Can I have the income paid to others?
A: Yes. For example, the income can be paid to you and your spouse until you both die.

Q: Can I change the charity that receives the trust when I die?
A: Yes, you can.

Q: Can I add to the trust after it is set up?
A: Yes, and you receive an additional income tax deduction for the year in which you add to the trust.

Q: What does it cost?
A: You can expect to pay $800-$1200 for legal work setting up the trust. These fees may also be income tax deductions.

Q: Are there fees for managing the trust?
A: If you manage it yourself, there are none. If you hire a bank or a financial professional, fees will be about 1-1.5% of the trust each year. Some brokers will manage a trust without charge.

Q: Can I cancel the trust and get my money back?
A: No. The trust is irrevocable. You or the persons you select can have only the life income. The trust must go to charity when the income beneficiary dies.

R: Q: How do I set up a charitable trust?
A: It is best to have an attorney who is experienced in trust work. When the Chapel of the Cross is named as the charitable beneficiary, you may find an attorney who will do the work for less than the normal charge. Attorneys will probably discuss the matter with you without charge.

Q: If I do not wish to set up, or cannot afford to set up, an individual charitable trust, are there other options?
A: Yes. The Episcopal Church Foundation has a "gift annuity" plan for those who wish to give lesser amounts to the church, but still wish to retain the income from the amount of stock given.

Q: How is this done?
A: The gifts of many people are combined and managed as one investment account. For example, a person 70 years old makes a gift of $5000, in stock or otherwise, which goes into the annuity fund. The donor will receive annual payments of about $360, some of which will be tax-exempt. Also, the donor will have a charitable income tax deduction of about $1787 to use for the year of the donation.

Q: So the gift annuity is similar to the charitable trust?
A: Yes. The same rules apply. However, with the gift annuity no legal work is required and no trust fees are paid.

Q: How do I do this?
A: Let the treasurer, Ed Holland; assistant treasurer, Don Williams; or the parish accountant, Debby Kulik, know of your interest. You will be referred to someone to help you with details. There is no charge. It is important to note that the return on a gift annuity is generally higher that bank interest or stock dividends.

© 2002: Chapel of the Cross