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Charitable Gifting Part 1
talessi@ariesfoundation.org
Charitable Gift Annuities
This week is all about donors. And today is about charitable gift annuities. if you're thinking that a charitable gift annuity might be right for you, or you’ve been thinking about ways you can make donations, then let’s spend a little time going over the basic of how donors set up charitable gift annuities with non-profit organizations. Why doing so is important, not only for the charity, but also for the donors as well. Charitable gift annuities are really effective planning tools both for non-profit organizations and for donors like you before I get into the details of a charitable gift.
What exactly is a charitable gift annuity?
Basically, it's an agreement between a donor and a non-profit. The donor makes a charitable donation, and in exchange for that donation the nonprofit agrees to send the donor payments for life. Let’s say you set up a charitable gift annuity when you're 65. You will receive regular payments of a fixed amount throughout your entire lifetime. This is an income that you cannot outlive. Donors who set up charitable gift annuities can take an immediate federal tax deduction in the year that the charitable annuity is established. Also, a portion of the payments that you receive from the non-profit organization is tax-free. If you have donated appreciated securities to make the charitable gift agreement then you may also be able to avoid some capital gains tax and defer the remainder of that capital gains tax.
if there's a particular organization that you want to support with a deferred charitable gift annuity we here at ARIES Foundation always recommend that you seek out the help of a professional, whether for legal, tax or investment advice, since there can be many different benefits and possible tax implications, both positive and negative tax depending on your age, the size of the gift, and when you want to start the stream of payments. Specifically, if that stream is going to be for a single life or for 2 individuals. The other concern is the type of assets you put into the charitable annuity.
There are distinct factors that come into play when establishing the annuity; Amount of the gift and Age annuity payments begin. A small gift (say $10,000 -$20,000) established to begin at age 50 will be a lot lower than for donor who is at age 90. How long the payments will go (lifetime expectation) determines the monthly income that is generated. The larger the donated amount then the higher the stream of payments will be. Generally the charity will end up with 40% - 50% of the donated amount once the donor(s) have passed away.
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