What is a Charitable Gift Annuity (CGA)?
To create a CGA, a giver agrees to donate cash, stock, or other assets—usually at least $5,000 to $10,000 worth—to a charity. In return, the donor receives a fixed payment, called an annuity, for life plus tax benefits. Caution: The donation is irreversible and can never be retrieved from the charity, even if there’s a personal emergency or the charity goes bankrupt. Also, if the giver dies, his or her heirs have no claim to the donation. While some people consider CGAs to be investments, they aren’t. Annuity payments are tax-free partial returns of the donor’s gift based on actuarial tables of life expectancy. The older the donor, the higher the annuity payment the donor can lock in: the American Council on Gift Annuities suggests yearly annuity payments that range from 5.3 percent of the donation at age 50 to 11.3 percent at age 90 and over. Most charities follow the council’s schedule of uniform gift annuity rates. These rates generally are lower than what a person could receive by
