Wise Holiday Gift-Giving

Gifts to charities that pay you an income for life. Here's the charity deal: You make a gift — as little as $5,000 but more likely something near $50,000. You get an instant tax deduction. If you donate appreciated stock, you avoid the capital gains tax. The charity pays you an income for life. When you die, the charity gets whatever money is left. The charities do the legal work at no cost to you, and many arrangements are possible. The two most popular are gift annuities and remainder trusts.

A gift annuity pays you a fixed interest rate. Most charities adopt the rates suggested by the American Council on Gift Annuities. At age 60 today, you might get 4.4 percent for life. At 75 you might get 5.8 percent. Generally, the payout is partly taxable and partly tax-free — a pretty good net return compared with other fixed-income investments. Annuities sold by insurance companies pay higher rates, but you wouldn't get the tax break and wouldn't have made a gift.

A charitable remainder trust works a little differently. The charity invests your gift, and you generally receive a fixed percentage of the assets in the trust every year. The payouts will vary, depending on how the investments perform.

Most major nonprofits offer tax-favorable gifting opportunities — churches, schools, hospitals, disease-based organizations and local community foundations (communityfoundations.net) — that disperse money to charities in your immediate area. If your pocketbook can handle your generosity, this is a good time to write a check.

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW. She writes regularly for the Bulletin.

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