Charity: Give It Away, Get Something Back

Annuity payments can either be fixed or variable. Fixed payments are typically around 5% of donated assets. Variable payments are also a percentage of assets, but fluctuate with the value of the trust's underlying investments.

Because of expenses generated by the set-up and management of one of these trusts, only consider one if you're planning to fund it with at least about $100,000.

Charitable Lead Trust

With this kind of trust, the charity would be the recipient of annuity payments for your lifetime -- or the term you set for the trust. Your heirs would inherit what's left in the trust after your death.

This is the kind of trust used by Anderson to transfer her gift -- the largest ever to a secondary school -- to the George School in Newtown, Pa. Anderson, whose father was a friend and professor of Warren Buffett and an early investor in Buffett's Berkshire Hathaway(BRKA), is using the trust to gift $128.5 million in installments over the next 20 years.

While you don't get an income-tax deduction for your gift, the estate-planning benefits are big, especially if you contribute stock with good prospects of appreciation, says Alan Augulis, an estate-planning attorney in Parsippany, N.J. Your contribution removes appreciating assets out of your taxable estate and your kids inherit them estate-tax free.

Gift Annuities

Not to be confused with commercial annuities, which are complex and notorious for their high fees, gift annuities are simple contracts between donors and nonprofit organizations.

You give a charitable group cash, real estate or appreciated securities -- typical minimums are between $2,500 and $5,000 -- and the charity agrees to pay you a fixed amount each year.

You get an up-front tax deduction for 20% to 50% of your contribution. To make up for the deduction you haven't yet taken, about 40% to 50% of your annual payments will be tax-free until you reach your life expectancy. After that, the annuity payments would be fully taxed.

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