Conflicting Advice? Not
Question: A couple of days ago, in response to a questioner’s inquiry about some ideas which had been presented to his mother at a seminar, you dismissed charitable remainder trusts as one of several risky and wacko investing ideas. Yesterday, you suggested that they were a legit combination of charity and retirement planning. A number of years ago I purchased an annuity which combined life insurance with a traditional annuity, which I don’t believe can be gotten today. After several years (required to hold for at least 7 years), I cashed it in, taking a 20 year payout at guaranteed interest, eventual payout to exceed my then current value of 25% appreciation, with the balance to be paid to my beneficiary. It seems that a charitable remainder trust combines this sort of annuity with a donation. Why is it not a good idea? Your advice seems conflicted. I had been considering changing my will to create a CRT for the small amount of giving which I feel I can afford, as it seemed to be a valid combination of giving and investment. Nick, Glover, VT
Answer: I’m a fan of charitable remainder trusts. The same goes for charitable gift annuities. In both cases, you support a charity. You get some nice tax breaks. And you can set up a steady stream of income for life. In answering the question where I made some negative remarks it was about the kind of financial conference where lots of high-fee high-cost peddlers of products get together to hawk their wares to unsuspecting and unsophisticated families. .
So, to be clear, products like charitable gift annuities can be a critical part of smart estate planning. However, there are a number of financial and emotional factors to consider before buying a charitable gift annuity and similar financial arrangements (such as a charitable remainder trust and a charitable lead trust). Top of the list are the many estate planning issues to think through, from your income stream to your children’s inheritance. It’s also important to realize that the decision is irrevocable. You can’t wake up one morning and say to yourself, oops, I made a mistake. That’s why in most cases sensible philanthropic financial planning requires professional guidance.
Still, the time spent researching the product and seeking out professional advice can be worth it. Seems to me you made a good move.
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