The Upside of Low Interest Rates

We are experiencing a relatively unique period in American history - that of almost unprecedented low interest rates. If you are buying a house, low rates are wonderful, but if you are depending on interest earnings, these times can be tough.

Low and declining interest rates may have hurt renewal rates on CDs, as well as returns on many other investments, but this has made the high and stable rates of charitable gift annuities offered by the Rehab’s Foundation all the more attractive. A charitable gift annuity is a simple contract between the donor and the Foundation. In exchange for an irrevocable gift of cash, securities, or other assets, the Foundation agrees to pay one or two annuitants a fixed sum each year for life. The older the annuitants are at the time of the gift, the greater the fixed income the Rehab can agree to pay. As an example, the payout for a 75 year old would be 7.1% for life, 80 year old, 8.0%, 90 year old, 11.3%; a couple 75 and 75, 6.3%, or 85 and 80, 7.3%. In most cases, a significant part of each payment is tax-free, increasing each payment's after-tax value. Minimum gift is $5,000.

For those with considerable wealth, a strong desire to benefit the Rehab and perhaps other charities, and heirs to whom they would like to transfer wealth in a highly tax-advantaged manner, the opportunities through a charitable lead trust are unprecedented. Simply stated, a charitable lead trust manages assets for a number of years, makes defined payments to charity each year, and then passes those assets on to heirs. They are sophisticated, require good management, but can offer great opportunities to reduce or completely avoid estate and gift taxes. Periods of low interest rates create the best opportunities for “making the numbers work” on these gifts.

For those who might wish to eventually leave their home to the Rehab, yet continue to live in it for the rest of life, a retained life estate is always attractive. In times of low interest rates, the generous income tax deductions for making the gift now, rather than waiting until death, can be an especially attractive bonus. Retained life estates are not for everyone, but in the right circumstances, they are an excellent way to benefit yourself and the work of the Rehab.

Whatever your interest, now is an excellent time to consider how the Rehab might help find the upside in these times of very low interest rates.

Contact us at 888-861-6385 for more information. We work as a team to provide gift and estate planning services on a no cost, no obligation basis. We would be pleased to be of assistance.