Split Interest Gifts can be structured to split the interests in the property between a present and a future interest. This is most advantageous to a donor who wants to benefit the Foundation, but who needs to retain either the income from the property or the use of the property for some period of time, or for the rest of their life and the life of a spouse or child. We recommend you speak with your tax professional if you are considering these options. The following are some of the types of split interest gifts that you might consider as part of your legacy:
Charitable Remainder Trusts (CRTs) provide payments for your lifetime or for you and your spouse or other non-charitable beneficiaries (such as the donor’s children) lifetimes, or for a specified term of years, not exceeding 20 years, with the remaining corpus (the “remainder”) then passing to the Illinois Bar Foundation when the stated term expires. CRTs may be set up to pay a set percentage of the annually determined market value of the trust holdings (a unitrust), or a fixed dollar amount not less than 5% of the initial trust corpus (an annuity trust). You (the donor) obtain a charitable income tax deduction for the value of the remainder interest (subject to limits imposed by law). Please note that the Foundation will not serve as trustee of a CRT, though there are institutions who will serve as the trustee, including community foundations and many commercial institutions.
With a Charitable Lead Trust (“CLT”), you transfer cash and/or income producing assets into a trust, generally for a specific period of years, and direct that the income from the trust property be paid out to the Illinois Bar Foundation. At the expiration of the trust, the property returns to you or to whomever other non-charitable remainderman that you have designated. A CLT can be drafted as either a grantor trust or as a nongrantor trust. If it is structured as a grantor trust, the donor receives an upfront charitable income tax deduction on formation of the trust and is then responsible for income taxes on future trust income. If it is structured as a nongrantor trust, a separate taxpaying trust is created and allowed an unlimited charitable income tax deduction for the income paid to the Foundation. Utilizing this estate planning technique may allow you to reduce potential transfer taxes (gift and estate) while conserving assets for desired beneficiaries. Also, any future appreciation in trust principal inures to the benefit of the remaindermen, and that enhancement is not taxed in your estate upon your death. The two primary forms of CLTs are the Charitable Lead Annuity Trust and the Charitable Lead Unitrust. Please note that the Foundation will not serve as trustee of a CLT, though there are institutions who will serve as the trustee, including community foundations and many commercial institutions.
A Charitable Gift Annuity (“CGA”) is a contractual agreement between you and the Illinois Bar Foundation wherein the Foundation agrees to pay you a fixed dollar amount for your lifetime and the lifetime of up to one additional person, determined by the size of the donation. The CGA could begin payments immediately or at an agreed upon fixed date in the future. You, as the donor, obtain a charitable income tax deduction for the value of the remainder interest (subject to limits imposed by law). Upon the death of the individual beneficiaries, all assets reserved for the payment of the CGA pass to the Foundation. The Foundation works with third-party financial institutions to issue CGAs. Consequently, please check with the Foundation to determine up-to-date guidelines for the minimum size, minimum age for the youngest beneficiary, and other rules that will apply to a CGA.
You could choose to participate in a Pooled Income Fund (“PIF”) offered by a third-party financial institution, wherein your transfer assets to the PIF and in exchange the Illinois Bar Foundation agrees to pay you a specified unitrust percentage of the fund corpus for your lifetime and the lifetime of up to one additional person, with balance of the fund property designated for the Foundation being distributed out to the Foundation upon termination of the income interest. You should receive a charitable income tax deduction for the value of the remainder interest (subject to limits imposed by law).