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Gift
Annuities
The
charitable gift annuity is among the oldest, simplest, and most popular of
the charitable life-payment plans. In exchange for a transfer of cash,
marketable securities or, in some circumstances, real estate, the charity
contractually guarantees to make specified annuity payments to the donor
and/or another beneficiary. (Note: State law may restrict the types of
property that may be exchanged for a charitable gift annuity.) The payout
rate depends on the age and number of beneficiaries. Please contact us
for information regarding the availability of this program.
The donor can
claim a current charitable deduction for the portion of the transfer that
represents the charitable gift element - the amount by which the value of
the property transferred to the charity exceeds the value of the annuity
received. Another important tax benefit is that, as with other types of
annuities, a portion of each annuity payment is income-tax-free over the
life expectancy of the annuitant. (This portion is treated as a return of
the original investment for tax purposes.)
Example: Mrs.
Love, 70, transfers $20,000 to the Community Foundation in exchange for an
annuity payment of $1,500 a year for life. Of this amount, $779 will be
treated as a tax-free return of principal for the next sixteen years (her
life expectancy) and only $721 will be treated as ordinary income.
Thereafter, the entire $1,500 will be treated as ordinary income. In
addition, Mrs. Love realizes a charitable deduction of $7,632, that, in her
31% generates a net tax savings of $2,366.
Annual
payments may begin immediately or, with a deferred-payment gift annuity, at
a set time in the future - at retirement, for example. This type of annuity
is particularly attractive to donors in the 40- to 60-year age bracket who
have a high current income, who can benefit from a current tax deduction,
and who are interested in augmenting potential retirement income on a
tax-favored basis.
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to Deferred Gifts List
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