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Charitable Remainder Trusts

A Charitable Remainder Trust is a special trust that pays income to you or another person for life (or for a period of years). At the end of that time, the principal comes to the Oakland Museum of California (and other charities you may select) to be used according to your instructions. Charitable Remainder Trusts are highly flexible gift planning tools that have enabled donors to accomplish a variety of important personal financial goals and ultimately provide an important gift to charity.

Charitable remainder trusts can pay either a fixed or variable annual income. Because these trusts are individually managed and invested, a minimum funding amount of at least $250,000 is generally required. Here is an example of how a variable payment remainder trust, the Unitrust, can work:

  • Janice and Bill are 70 years old and in the combined state and federal income tax bracket of 33%. They would like to increase their retirement income and make a gift to the museum. They own $250,000 of shares in a mutual fund which pays a 2% dividend. They purchased the fund many years ago for $40,000.
  • They would like to reinvest for greater income but are reluctant to do so because of the potential capital gains tax of $50,400 (24% combined state and federal rate on the $210,000 appreciation). Instead they decide to transfer their shares to a Unitrust which will pay them 6% income. These are the possible results:
    • Their income immediately increases from $5,000 to $15,000.
    • They receive a charitable income tax deduction of over $90,000.
    • They avoid the $50,400 capital gains tax on the fund’s appreciation.
    • The Oakland Museum of California will ultimately receive the principal.


Deferred Income CRT
A deferred income charitable remainder trust works in the same way as a charitable remainder trust except that payments do not begin until a later date, often upon an individual’s retirement.

The museum does not act as trustee for charitable remainder trusts, but we can provide detailed information about their possible benefits and assist you in identifying appropriate trustee choices. You may find it helpful to consider and complete the Gift Planning form which is provided on this website.

Contact us for more information

The Oakland Museum Pooled Income Fund

The Pooled Income Fund combines the gifts of many donors and manages them together. The donor contributes cash or securities, and the fund pays the beneficiaries income for life. After that, the principal benefits the museum. Our investment goal is to earn as high an income as is reasonable and safe. Payments will vary according to investment return and will generally match the prevailing market conditions and returns. In 2001 the Fund paid income of almost 5.5% to beneficiaries.

Example

George, age 68, has mutual fund shares which have increased substantially in value. Now worth $25,000, they yield no income. He transfers the shares to the Pooled Income Fund and will now receive approximately 5-6% income per year.

These are the possible results of the gift:

  • George’s income increases from nothing to $1,250 per year from that asset.
  • He avoids paying capital gains taxes, which would have been due if he had sold the asset. So, the full amount of his asset can generate lifetime income for him.
  • He receives an immediate charitable income tax deduction of $10,500.

The charitable deduction is based on the fund’s income and the ages and number of beneficiaries who will receive income from the fund. In general, the older the beneficiary, the higher the tax deduction. The minimum initial participation amount is $10,000. Future additions to the fund can be made for $2,000 or more.

The Pooled Income Fund of the museum has professional management and administration from Union Bank of California, a financial institution that specializes in pooled income funds, among other banking and financial activities.

Steps to take to make a pooled income fund gift:

  1. Consider your gift and financial objectives
  2. Contact Linda Larkin, in the Development Office
  3. Review the gift models and fund information that Louise will provide.
  4. Discuss the gift and pooled income fund method with trusted advisors and your family.
  5. Sign the gift agreement forms and arrange the asset transfer.


Charitable Gift Annuities

We are pleased to provide this general information about gift annuities to generous members of our community.

Gift annuities are a service that is offered to members of our community who wish to receive a guaranteed annual income payment, a charitable deduction, and to provide future income to the museum. Because the gift annuity will provide future income to the museum but not principal, we hope that donors will consider supplementing their annuity gift with a bequest to the museum, which will enable the museum to directly underwrite and fund important museum programs and projects. The museum's recommended gift annuity minimum is $10,000.

1. Does the Oakland Museum offer gift annuities?
Our donors who wish to obtain a gift annuity may establish an annuity with the California Community Foundation (CCF) in Los Angeles for the benefit of the Oakland Museum of California Foundation.

2. How does this work?
The CCF sets up the annuity, using the recommended National Committee on Gift Annuities rates in effect at the time the annuity is issued. The annuity payment amount will remain the same for the duration of the annuity. These rates are generally the same among most charitable organizations. Lifetime payments are then made to the beneficiary.

Upon the death of the beneficiary, the remaining annuity funds will become part of an Oakland Museum endowment at the CCF. The museum will receive annual payments from the fund. The CCF deducts 5% of the principal to recoup administrative expenses. During the life of the beneficiary, the CCF deducts the actual costs of investment and administration (generally totaling .9%) from the annuity fund principal. This does not affect the beneficiary’s income payments which are determined based upon age at the outset and do not vary. It is deducted from the annuity principal.

3. Can I defer my income payments?
You can with a deferred gift annuity. A deferred gift annuity works in the same way as a charitable gift annuity except that payments do not begin until a later date, often upon an individual’s retirement. The deferred gift annuity often appeals to the younger donor who has high current income, who would like a current tax deduction, and who is interested in augmenting retirement income.

4. How safe are my annuity payments?
The California State Insurance Commission regulates and supervises gift annuities. Charities that issue gift annuities must meet high standards, have a history of sound financial management, and provide very detailed information about their operations and their staff and boards of directors. The Insurance Commission requires that annuity funds be conservatively invested according to state requirements. Additionally, annuity contracts are backed by the entire assets of the issuing charitable organization and are not dependent upon investment return.

5. Why doesn’t the museum offer gift annuities directly?
We recognize that a number of our donors are interested in gift annuities. However, a gift annuity program is extremely difficult, time consuming, and expensive to establish. Additionally, a significant portion of each gift annuity (the tax exempt portion) is a return to the beneficiary of the annuity principal. Thus, it is possible that the actual gift that will be received by the museum at the end of an annuity term could be very small. The CCF is a much larger organization that has already gone through the process of establishing a program and can offer the gift annuities more efficiently. We decided that it was a prudent way to make annuities available to interested donors without risking museum funds to do so.

6. May I designate my gift for a specific purpose at the museum?
Yes.

7. How often will I receive an income check?
Quarterly

8. How do I set up the annuity?
Request specific gift annuity information from Linda Larkin at 510/238-2918 or lalarkin@museumca.org. Review the gift with trusted advisors and family to make sure that it meets your personal and charitable goals. When you wish to proceed, we will be pleased to meet with you to facilitate the gift. The CCF will prepare an annuity contract for you; you will sign it and transfer the funds according to their instructions.
 

  © 2001 Oakland Museum of California |  Credits |Phone: 510-238-2200