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One of the simplest and most popular charitable gifts is a charitable gift annuity. This gift option is a combination of an investment and a gift and provides life income to the donor (and another recipient if desired - the annuitants). The designated charity accepts the gift and in return obligates itself to pay a fixed and specified dollar amount to the annuitant(s) for life. To look at some specific rates on current gift annuities, click here. A generic example of a charitable gift annuity is available as well as a graphic example.
A charitable gift annuity immediately becomes the property of the charity and is an irrevocable gift. The charity is legally bound to fulfill its commitment to pay the annuitant(s) for life. Some states have regulations regarding the issuance of charitable gift annuities. Please contact us regarding any questions.
There are two types of charitable gift annuities - immediate and deferred. An immediate annuity begins paying income immediately after the annuity agreement is signed.
A deferred charitable gift annuity is a variation on a charitable gift annuity. A gift is made and the charitable organization promises in return to pay you an income stream that begins on a future date you specify. The annuity rate is calculated based on your age when the payments begin and will be greater than an immediate annuity based on your current age. The charitable deduction, which you get to take in the year of the gift (subject to your tax circumstances), will also be based on when the payments begin and will also be greater than if it was an immediate annuity.
A flexible deferred gift annuity allows you to pick a range of dates when the annuity payments will begin. For example, you might choose to begin quarterly payments on March 31st of any year not earlier than 2013 or later than 2018. The payment amount will be based on the year you choose in the future to have payments begin. The charitable gift deduction is based on the earliest possible beginning date (2013 in this case) and is taken in the year of the gift, subject to your tax circumstances.
An attractive benefit of deferred gift annuities is that they enable a donor to make a gift now and take a charitable income tax deduction now while in a high tax bracket. Income may be deferred, for instance, until after retirement, when the rate of tax will presumably be lower. Deferred gift annuities are creative ways to delay income to pay for children's or grandchildren's college expenses, supplement your retirement income, or assist with assisted-care living arrangements that may be inevitable.
Gift Annuity Benefits
- As a portion of the annuity is a gift, you'll receive an income tax deduction for the gift.
- A portion of the annual annuity income is exempt from Federal taxes.
- You may save tax on the capital gain (profit from an investment).
- You avoid estate taxes, probate, and costs on the amount involved.
- The charity will have immediate use of some of the funds you pay them for your annuity.
- Your annuity is as safe as the organization you invest with, for the total assets of the organization stand behind their agreement to make payments to you.
NOTE: The gift annuity is irrevocable, so once you have parted with your money pursuant to the annuity contract, you can't get it back if you need it.
return to Charitable Gift Annuities or to the glossary
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