Many friends of the Pritzker Military Library who would like to make a major contribution to the Library during their lifetime, are often unable to do so because they depend upon the income earned on their investments. Many assets produce a relatively low rate of return, but if sold and reinvested in higher yielding securities, would be subject to a capital gains tax on the appreciation in the asset.

Tax and Other Advantages of Life Income Gifts
You may make a life income gift to the Pritzker Military Library by irrevocably transferring the asset to the Pritzker Military Library and you or your beneficiary retain the income from such an asset. The Pritzker Military Library reinvests the assets to produce a significantly higher rate of return. You gain an income tax deductions for the gift, are no longer subject to an immediate capital gains tax, and you reduce the amount of your taxable estate by the value of the donated asset. When you no longer need the income from the asset, or you pass away, the remaining principal of the asset will pass to the Pritzker Military Library to support the programs of your choice.

Choosing How Your Life Income Gift Will be Used
Unrestricted gifts are, in a sense, most valuable, as they allow the Library to cope flexibly and imaginatively with future needs and organziational changes. Restricted gifts support ongoing needs such as acquisitions and programs. They can also be used to build and maintain an endowment or expand facilities. And endowment funds provide income every year in perpetuity to carry out the designated purpose of the gift. These gifts must be funded at a minimum value $50,000. Funds at level may be named for the donor or to memorialize others.

Types of Life Income Gifts
There are several principal types of life income gifts which give you a range of choice in your investment and estate planning. One of these options may be ideally suited to your particular circumstances. These gifts are described briefly below. If you have any questions or would like more information, please contact your investment advisor, tax accountant or attorney to determine which options might be best for you.

Charitable Gift Annuities
A charitable gift annuity combines both charitable giving and financial investing. In exchange for an irrevocable gift of cash, securities, or another marketable asset to the Library, the Pritzker Military Library agrees to pay you and, if you wish, a second beneficiary ("annuitant"), a guaranteed income for life. The rate of annual income payout is determined when the annuity is created based on the annuitants' ages and the economic environment. The rate is based on the recommendation of the American Council of Gift Annuities (ACGA) and is the rate used by most charitable organizations.

By transferring low-yielding appreciated securities, you may increase your annual income significantly while obtaining other tax advantages, including a current income tax deduction and a reduction in capital gains liability. Unlike life insurance annuities, the annual income of a gift annuity is locked in at a fixed rate of return. This allows you to receive a guaranteed income without being subject to market volatility. Also, unlike an insurance annuity, no management fees are levied on the principal of your investment and thus you are guaranteed to receive the entire income each year.

Depending on your financial circumstances, you may prefer to delay receiving any annual income, perhaps until your retirement. By deferring payment of annual income, you will increase the annuity payments you will eventually receive, as well as increase your immediate charitable tax deduction.

We suggest that you consult with your investment advisor, tax accountant or attorney regarding the benefits of a charitable gift annuity. They will be able to provide gift benefit summaries, annuity examples, and an annuity agreement for your review. We will be happy to work directly with your and your advisors to provide you with the necessary tax reporting documents so that you may receive the full tax benefits of your gift.

Charitable Remainder Trusts
A charitable remainder trust offers yet another way to retain or assign income from an asset, while making a larger gift to Pritzker Military Library than might otherwise be possible. You donate an asset, whether cash or appreciated securities or other property that can be sold, to create an irrevocable trust fund. You, or a beneficiary you name, receive a fixed income for life or for a specified period, up to 20 years. When these payment obligations have been fulfilled, the "remainder" of the trust fund passes to the Pritzker Military Library.

As with other life income gifts, you receive an immediate income tax deduction, eliminate any capital gains tax if the asset is sold and reinvested, and reduce your taxable estate, while generating income for yourself, your spouse, or another named beneficiary.

The Charitable Remainder Trust differs from other life income gift vehicles in that you can specify the type and size of payment made to you as well as who will manage the trust.

A Charitable Remainder Annuity Trust pays a fixed dollar amount annually. At the time the trust is created, you specify the annual dollar amount to be paid regardless of the investment performance in any given year.

A Charitable Remainder Unitrust pays a fixed percentage income, based on the value of the trust assets each year. You specify the percentage rate when you set up the trust fund and that rate of return remains set for the duration of the trust.

A Charitable Remainder Net Income Unitrust pays the lesser of (1) the trust's total dollar income earned each year, or (2) a specified percentage of the principal regardless of actual earnings. This type of trust allows for growth in years of high performance and protects against depletion of principal in years of modest performance.

Net Income Unitrust With Make-up Provision is a unitrust distinguished by the added provision that allows it to recoup the income lost in years due to a lower than expected investment return. This is done by increasing the income paid out in subsequent years, when the investment performance exceeds expectations. If the trust earns less than the set percentage payout in one year, the net income is paid. At some future point, when the trust earns more than the stated percentage, the trust will pay the beneficiary as much income as is necessary to bring all prior payments up to the full amount specified, had the annual percentage return met its target.

Charitable Lead Trusts
Unrestricted gifts are, in a sense, most valuable, as they allow the Library to cope flexibly and imaginatively with future needs and organziational changes. Restricted gifts support ongoing needs such as acquisitions and programs. They can also be used to build and maintain an endowment or expand facilities. And endowment funds provide income every year in perpetuity to carry out the designated purpose of the gift. These gifts must be funded at a minimum value $50,000. Funds at level may be named for the donor or to memorialize others.

A net income unitrust with make-up provision is excellent for donors who wish to prevent erosion of principal during lean years, or who are contributing property that is not readily convertible into income-producing investments. The make-up provision also allows the donor to plan for the future in a more strategic manner.

A charitable lead trust is the opposite of a charitable remainder trust. In a charitable lead trust, the Pritzker Military Library receives the income (or "lead" interest) produced by the trust for a fixed period of time, typically 10 to 20 years. After that payout obligation is fulfilled, the principal (or "remainder" interest) passes to the beneficiaries chosen by the donor (possibly one's grandchildren) or reverts to the donor.

There are three types or lead trusts:

• A Regular or Statutory Lead Trust is created to pass property on to the donor's named beneficiaries at a reduced gift or estate tax cost;
• A Grantor Lead Trust is applicable to a donor who wishes to receive an immediate income tax deduction; and
• A Common Law Lead Trust is designed to remove an income stream from the donor's tax return for the duration of the trust but have the asset return to the donor's beneficiaries.

The tax treatment and financial planning implications are quite different for each type of lead trust, so it is important to obtain counsel in reviewing and creating such a gift vehicle.