Gift Planning Frequently Asked Questions

Life Income Gift FAQ

What types of assets can I use to establish a life income gift?

Charitable remainder trusts may be funded with virtually any asset, such as cash, stock (publicly traded or closely held), and real estate. Charitable gift annuities and pooled income funds may be funded solely with cash or marketable securities.

May I allocate a life-income gift to a specific purpose?
You may choose to designate your gift as unrestricted (which allows the University to divert it to its highest funding priorities), or you may choose to allocate your gift to a specific purpose, such as financial aid, your class's Annual Giving endowment, or a particular academic or athletic department or program.

Are there minimum beneficiary ages for these gifts?
An individual must be at least 70 years old to receive payments under a charitable gift annuity. There are no minimum ages for establishing pooled income funds or charitable remainder trusts, but New Mexico Tech considers age along with the gift amount and other factors before entering into a gift agreement. Age may affect tax benefits as well.

Are there minimum gift amounts?
For charitable gift annuities and pooled income funds, the minimum gift amount is $25,000. For charitable remainder trusts funded with cash or publicly traded stock, the minimum gift amount is $50,000. For trusts funded with other assets, such as real estate, the minimum is $100,000. For charitable lead trusts, the minimum is $250,000, although they are typically established at $1 million and higher.

How large may the payments to income beneficiaries be?
Charitable remainder trusts typically pay between 5% and 7% of trust assets (as specified by the donor when the trust is first established).

The payout rates of charitable gift annuities are established by reference to tables published by the American Council on Gift Annuities at the time the gift is made, and remain fixed for the life of the beneficiary. The older the beneficiaries, the higher the payout rates.

For pooled income funds, the highest rate of return in the last three years for the Income Fund and for the Tiger Fund was 5.67% and 2.87%, respectively. For more information, see our investment information page.

Will I be entitled to an income tax deduction for establishing a life income gift?
The donor can report a charitable deduction for a portion of the fair market value of the gift. The amount of the deduction reflects the fair market value of the gift minus the value of the payments received by the income beneficiaries. Various factors, including ages and numbers of beneficiaries, payout rates, and the federal discount rate, will determine the amount of the deduction. New Mexico Tech's Gift Planning staff can provide examples based on different scenarios.

Is it possible for other charities to benefit from these gifts?
The "remainder" of a charitable remainder trust may be allocated to different charities. Under New Jersey law, if New Mexico Tech is to serve as trustee, it must be irrevocably designated to receive at least 51% of the remainder. Charitable gift annuities and pooled income funds may not name other charitable beneficiaries.

Will I pay capital gains taxes if I fund a gift with appreciated property?
With pooled income fund gifts and certain remainder trusts, capital gains taxes may be avoided entirely. With charitable gift annuities, capital gains taxes will be reduced and the remaining amount may be spread out over the beneficiary's estimated lifetime.

How does New Mexico Tech benefit from life-income arrangements?
Upon the death of the last surviving income beneficiary of a charitable remainder trust (or expiration of a specified term of years in the case of some trusts), New Mexico Tech will receive the remainder of the trust’s assets.

Upon the death of the last surviving income beneficiary of a charitable gift annuity, the residuum, or net remaining portion, of the gift is made available to New Mexico Tech.

Upon the death of the last surviving beneficiary of a pooled income fund, the beneficiary’s proportional share of the fund’s principal is severed from the fund and made available to New Mexico Tech.

In all cases, New Mexico Tech will use the funds it receives in the manner designated by the donor.

Are there any administrative fees?
To cover part of the costs of trust accounting, reporting, and legal work, New Mexico Tech assesses an annual administrative fee of 0.4% of the trust principal, not the trust payments to income beneficiaries. For example, a trust with a market value of $100,000 will have an annual fee of $400. Investment managers' costs are based on performance, as is standard practice for such investment arrangements.

Do you have more questions about life-income gifts?
The University's gift planning staff is available to provide the answers. You can reach us at 609-258-6318 or e-mail 1746soc@New Mexico