One of my duties, here at the Trust Company, is the administration of charitable gift annuities. This is a planned giving technique that can be a "win-win" if the circumstances fit. 

What is a Gift annuity?

A charitable gift annuity is a contract in which you exchange a gift of cash or securities for a guaranteed, fixed income each year for the rest of your life or a period of years. Your gift annuity offers five distinct advantages:

1. Income for Life—at attractive payout rates for one or two lives.

2. Tax Deduction Savings—a large part of what you transfer is deductible as a charitable gift.

3. Tax Free Income—a part of your annual income may be considered tax-free return of principal.

4. Capital Gains Tax Savings—when you contribute securities for a gift annuity, you minimize any taxes on your “paper profit.”

5. Personal Satisfaction—from making a gift of lasting significance to benefit a charitable cause.

A charitable gift annuity is an extraordinary way to make a gift, increase your current income, and reduce your tax bill—all in one transaction. A charitable gift annuity is a technique that may be suitable for those who have expressed a desire to make a gift to charity and still retain income from the gift property during their lifetime.

Transform Fixed Investments into Gift Annuities

Do you have certificates of deposit that are nearing maturity? Consider converting your CD funds to a gift annuity. Take the case of Mary, age 75, who has $10,000 in a CD that will mature next month. She thinks she can get 1.5% interest on a new CD. But Mary had been thinking of leaving her church $10,000 in her will. She might be a candidate for a charitable gift annuity. 

For example, if Mary made a gift of $10,000 to fund a charitable gift annuity, she would receive 1) an annual income of $580 (rate varies according to age and current interest rates) of which $449.50 will be tax free; 2) an income tax deduction of $4,426; and 3) the immediate satisfaction of making a gift to her church. This technique will work with any charity as long as it is a qualified (501(c)3 organization and is willing to accept a gift of this nature.

Gifts of Securities Save Twice

A gift annuity funded with appreciated securities may hold special tax advantages. If you have $10,000 worth of stock in which you have a $4,000 long-term capital gain, you can avoid some of the tax that you would owe if you were to sell the stock outright.  The charity can sell the stock and does not pay capital gain tax. In this case, a portion of your income distribution would be taxed at capital gain tax rates. You also receive an immediate income tax deduction in the amount of $4,426 in this example.

So, if you have a desire to support charity, this can be a “win-win” for the donor and the charity.

Give me a call at 800-285-7878 if you'd like to explore your charitable giving options!