A Charitable Gift Annuity is a contract between an individual and a qualified charity which exchanges a gift to charity for an annuity (guaranteed lifelong income) to the individual.
How much will my guaranteed income be?
It depends entirely on your age. The older you are when you begin a Charitable Gift Annuity, the higher the payment will be. For example, a person who is 70 receives a rate of 6.5%. The rate for an 80 year old is 8.0%. Most charities that issue Gift Annuities, follow the recommended rates set by the American Council on Gift Annuities. (For a personalized presentation with your own information go to www.barnabasfoundation.com and click on Donor Resources)
Will this rate of return ever change?
No. Once you take out a Charitable Gift Annuity, your payment amount is guaranteed for life, regardless of what happens to the economy or stock market.
Do Gift Annuities provide any tax advantages?
Yes. There are several of them. First, you receive an immediate income tax deduction for a portion of the gift annuity value at the time you create the Charitable Gift Annuity. Second, a portion of the annual payment you receive is tax free, resulting in a higher effective rate of return. Also, funds in a Charitable Gift Annuity generally are not included in your estate for estate and inheritance tax purposes.
How secure is a Charitable Gift Annuity?
It is as secure as the organization that issues the Charitable Gift Annuity. The amount you contribute is normally placed in a Charitable Gift Annuity reserve fund. Additionally, all of the assets of the charity stand behind the contract.
Will a Charitable Gift Annuity work for a married Couple?
Yes, in fact many Charitable Gift Annuities are "two-life" contracts, designed to make payments for the lives of both a husband and wife. The Annuity rate is somewhat lower, however, than the rate for a single person.
Can a Charitable Gift Annuity be bought with stock instead of cash?
Yes, and it may be especially advantageous if the stock has appreciated in value. The capital gains tax which you would have owed for the year the stock was sold is spread out over your life expectancy.
How does a Charitable Gift Annuity benefit kingdom causes close to my heart?
Your gift, along with all gift annuity funds, is placed in a reserve fund to make annuity payments as long as you are alive. Upon your death, the charities you have chosen will receive the fund balance in the matured Charitable Gift Annuity.
Can I defer my Annuity payments?
Yes, and it will increase your annual payment. The longer the deferral, the higher the annual annuity rate. For example, a Charitable Gift Annuity contracted for at age 65 with annuity payments deferred until age 70 results in an 8.3% payout beginning with the first payment; if deferred until age 74 the payout rate is 10.7% and it's guaranteed for your lifetime. You are also entitled to an income tax deduction, for a portion of the gift annuity value, immediately upon establishing the Charitable Gift Annuity.
Calvin Theological Seminary is a member of Barnabas Foundation. Their goal is to help caring Christians make tax-wise decisions and strengthen support for ministries close to their hearts.
This is general information and is not intended to be tax or legal advice. Please consult your own advisors.
