The Basics of Charitable Gift Annuities: Support What Matters and Receive Payments for Life
A charitable gift annuity (CGA) can help you make a meaningful gift to The Associated while receiving fixed payments for life. It may also provide tax benefits, making it a useful option if you want to support the community and strengthen your long-term financial plan.
Here are the BASICS to help you decide whether a CGA may be right for you:
B – Benefits for You and The Associated
- Why consider a CGA? If you want to support The Associated and receive dependable payments, a CGA can accomplish both goals through one gift.
- A gift with lasting impact. A CGA allows you to experience the satisfaction of giving now while creating a future resource for The Associated. Your charitable goals should be the starting point for deciding whether this option fits your plans.
- How it works. You make an irrevocable gift to The Associated. In return, The Associated agrees to make fixed payments for life to you, another person or both of you. The payment rate is based primarily on the annuitant’s age when payments begin. When the annuity ends, the remaining funds support The Associated’s endowment or another purpose you have designated.
- Potential financial benefits. In addition to fixed lifetime payments, you may qualify for an immediate charitable income tax deduction. Depending on how you fund the gift and your individual circumstances, part of your payments may also be tax-free for a period of time.
A – Annuity Rates and Eligibility
- Your payment rate. The Associated generally follows rates recommended by the American Council on Gift Annuities. Your rate is fixed when you establish the gift and depends on factors such as the number and ages of the annuitants and when payments begin. Because a CGA includes a charitable gift, its rate is generally lower than the rate for a commercial annuity.
- Age requirements. For an immediate-payment CGA with The Associated, each income beneficiary must generally be at least age 75 when payments begin. For a deferred-payment CGA, each beneficiary must generally be at least age 65 when the gift is made, with payments beginning at age 75 or later. In general, beginning payments at an older age results in a higher payment rate.
S – Simple Agreement
- A straightforward written agreement. You transfer cash or publicly traded securities to The Associated. In return, The Associated promises to make fixed payments for life to you, another person or both of you. Because the gift is irrevocable, it is important to consider the decision carefully.
- Your charitable legacy. The agreement explains how the funds remaining after the annuity ends will support The Associated and, when applicable, the purpose you have chosen.
- Immediate or deferred payments. You may be able to begin payments soon after making your gift or defer them for at least one year. The Associated can prepare a personalized illustration comparing available options.
I – Income You Can Count On
- Fixed payments for life. Your payment amount does not change with investment markets. The Associated can provide a personalized illustration showing your estimated annual payment, charitable deduction and projected tax treatment based on current rates and your circumstances.
- Immediate-payment CGA. Payments begin shortly after your gift, subject to The Associated’s age requirements.
- Deferred-payment CGA. Payments begin on a future date you select. Deferring payments generally results in a higher fixed payment rate.
- A steady payment option. If predictable lifetime payments are important to you, a CGA may complement other sources of retirement income. It is a charitable arrangement, not a replacement for a diversified investment plan.
C – Charitable Tax Benefits
- Your charitable deduction. You may qualify for an income tax charitable deduction in the year you establish the CGA. The deductible amount is based on the value of your gift minus the estimated value of the lifetime payments you will receive.
- Deduction limits. The amount you can deduct in a given year depends on your adjusted gross income, the asset used to fund the gift and applicable tax law. If you cannot use the full deduction in the year of the gift, you may be able to carry forward the unused amount for up to five additional years.
- Tax treatment of payments. Depending on the asset you contribute and your circumstances, each payment may include a combination of ordinary income, tax-free return of principal and capital gain. If you contribute appreciated securities and are an annuitant, a portion of the capital gain may generally be recognized over time rather than entirely in the year of the gift.
S – Securities or Cash
- Ways to fund your CGA. The Associated accepts cash and publicly traded securities. Using appreciated securities may provide additional tax advantages, depending on your circumstances.
- Minimum gift. The minimum amount required to establish a CGA with The Associated is $10,000.
Could a charitable gift annuity fit your goals? The Associated’s planned giving professionals can prepare a personalized, no-obligation illustration to help you explore payment options and the potential charitable and tax benefits. For more information, contact Jackie Yahr at 410-369-9248 or jyahr@associated.org.
This information is provided for educational purposes only and is not legal, tax or financial advice. Please consult your own legal, tax and financial advisors before establishing a charitable gift annuity.
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