HOW A GIFT ANNUITY WORKS

The concept of a gift annuity is simple. A person wishing to support our museums or programs makes a gift of cash or marketable securities to the Smithsonian Institution. The Smithsonian reinvests the assets and pays your designated beneficiary/beneficiaries a fixed income for life. Upon the death of the last beneficiary, the remaining funds are deposited into the Smithsonian's endowment.

The transaction is partly a charitable gift and partly a purchase of the income interest. Annuity payments are determined by the age or ages of the beneficiaries.

Gifts typically range from $10,000 to $200,000, some individuals and couples have established gift annuities for as many as $1 million with the Smithsonian.

Example: A gift of $30,000 to establish an annuity for a 75-year-old would generate $2,130 per year for life. For each of the first 12 years, $1,257 of the annuity would be tax-free income. The donor would also qualify for a charitable income tax deduction of $14,425 in the year of the gift.

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For the most current rates and information, please contact our Planned Giving staff toll free at 1-888-419-7584 or via e-mail.

HOW A CHARITABLE REMAINDER UNITRUST WORKS

A charitable remainder unitrust allows you to make a significant gift while retaining income from the property for yourself or another designee. The amount you receive as a life income is a fixed percentage of the trust's market value each year.

You fund a unitrust with assets (appreciated property or stocks generate the greatest net savings for you). You are allowed an income tax deduction upon establishing the trust, based on the actuarially determined value of the charity's remainder interest. After your lifetime (and, if you wish, that of a survivor), the principal of your trust is turned over to the Smithsonian for use as you specified. A unitrust is a useful way to generate tax savings during your income-earning years and supplemental income after retirement.

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YOUR ANNUAL INCOME FROM A
CHARITABLE REMAINDER ANNUITY TRUST NEVER VARIES

This trust is similar to the charitable remainder unitrust, with the exception that this plan will pay you a fixed dollar amount each year for the rest of your life. At the outset, you decide the amount to be paid to you each year from the trust. You will receive payments from the trust assets, and it will be the same amount each year, regardless of changing interest rates and stock market fluctuations.

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Because it is a qualified charity, the Smithsonian as beneficiary can receive all proceeds from such retirement plans without having to pay any income tax. If the beneficiary is an individual, that individual must pay income tax on the funds received from the plan. When the Smithsonian is named as a beneficiary, the donor may also qualify for a reduction in estate taxes (depending on the size of the total estate assets).

OTHER POSSIBILITIES

Designate a specific amount to the Smithsonian before the division of the remainder among family beneficiaries.

Name the Smithsonian the beneficiary of all or part of the balance remaining after your spouse's or another beneficiary's lifetime.

Donors should note that any distribution from these plans during their lifetimes will result in taxable income to the donor, even if the distribution is to a qualified charity. Likewise, the donor will not avoid income tax by transferring the entire plan to charity during his or her lifetime. The income tax avoidance only occurs if the plan is distributed to a charity after the donor's lifetime through beneficiary designation or through a specific bequest in the donor's estate plans.

If you would like more information on gifts of pension plans or would like to discuss options in more detail, please contact our Planned Giving Professionals or call 1-888-419-7584.

The value of a gift by bequest is deductible from the value of the estate that is subject to estate tax. Bequests may be unrestricted or designated to a particular purpose, such as one of our museums or programs. It may consist of a specific dollar amount or the residue remaining after all other obligations are met. Bequests may also be made contingent upon another event occurring -- such as a spouse or another beneficiary predeceasing you. Request sample language* that you can review with your attorney.

BENEFITS TO HEIRS

Charitable giving, as part of informed estate planning, can benefit your heirs as well. A charitable gift is deductible from the total value of your estate. This may reduce the rate at which the remainder of your estate is taxed, thereby preserving the value of the estate passed to heirs. The assets you select to give-- cash, securities, insurance, real estate or personal property-- may also affect the value of the estate passed to heirs.

IF YOU ALREADY HAVE A WILL...

The easiest way to make a charitable gift through a bequest is by adding a codicil-- a simple statement spelling out the beneficiary organization and the gift. You do not need to change the body of your will. The codicil is executed with the same formalities as a will.

We advise you to work with your attorney and financial advisors to plan the charitable arrangement which is most advantageous to your estate. While drafting your will, we also suggest that you talk with our planned giving professionals to ensure that the Smithsonian can fulfill your goals. Smithsonian representatives can provide sample language which you can share with your attorney.

>If you have already included the Smithsonian as a beneficiary of your will, please let us know so that we can recognize your generosity.

* The Smithsonian Institution is not engaged in rendering legal or tax advisory services. The sample language is intended solely for general informational purposes. For advice and assistance in specific cases, the services of legal counsel should be obtained.

If you would like more information on gifts of life insurance or would like to discuss options in more detail, please contact our Planned Giving Professionals.