What is a charitable gift annuity?
Currently, a charitable gift annuity is one of most popular giving arrangements that exist between charitable institutions and their donors. A charitable gift annuity is a simple contract or agreement between the donor and charity. In exchange for the donor’s contribution, the charity promises to make fixed payments for life to one or two annuitants, who are identified in the gift annuity agreement. The amount of the fixed payments are also specified in the gift annuity agreement and do not vary over the life of the charitable gift annuity. Because a charitable gift is involved, annuity payments made under a charitable gift annuity are lower than annuity payments made under a commercial annuity. A charitable gift annuity is not, and should not be viewed as, an investment. Rather, it is a way to receive annuity payments while making a charitable donation. Because of the charitable donation, the donor will derive tax benefits, including a current income tax charitable deduction (if the d
A. A charitable gift annuity may be the answer for a person who is seeking to gain a high and tax-favored income guaranteed for life, while reducing current income taxes, while at the same time converting highly appreciated assets into a sound income investment without incurring a capital gain tax. This can be accomplished while supporting your favorite charity. As an example, a person age 70 who gifts a $100,000 asset with a tax basis of $5,000 would receive a monthly annuity payment of approximately $625 for life and a charitable deduction of approximately $34,000. The effective rate of return is approximately 8.9% per annum. Considering that long term C.D. rates are averaging less than 5%, it is obvious that the charitable gift annuity may produce an extremely favorable financial result. Since the property, if sold, would give rise to a substantial capital gain tax, the creation of an income stream without the incurrance of capital gain taxes, while at the same time producing a subs
