Advisor's Corner: Charitable Gift Annuity

GIVE A GIFT and Get Guaranteed Income for Life

“For someone who is looking at leaving a legacy for their favorite cause and wants a fixed income, this has been a great tool.”
Provided by: Todd C. Winnell, CPA, Bunker, Clark, Winnell & Nuorala, P.C.
www.bcwncpa.com
 

If you are you looking to:
• Earn higher payout rates
• Get a fixed income stream for life
• Take a current tax deduction
• Support your favorite cause

Then a Gift Annuity fits your purpose!

Charitable Gift Annuity – What is It?

A Charitable Gift Annuity is a combination of a gift to the Community Foundation and an investment . For senior persons, annuity rates may be 7%, 8% or even higher. Because part of the annuity payment is tax-free return of principal, the gift annuity may provide the annuitant with a substantial income. The combination of partially tax-free income and the initial charitable deduction makes this agreement quite attractive. And, after all payments have been made for the life of the annuitant, a fund that you have designated in the Community Foundation will benefit from the charitable gift.

Partly Tax Free Payments
A gift annuity is a contract between the Community Foundation and the individual. The individual, referred to as the donor, transfers property to the Foundation, and the Foundation promises to pay a given amount at the end of each selected payment period to one annuitant for life, or two annuitants for both lives. Part of the payment is interest earned and is taxable as ordinary income. Part of each payment is return of principal and is tax free. However, if an annuitant survives past his or her life expectancy, all later annuity payments will be ordinary income.

Gifted Property
Either cash or appreciated property may be transferred to the Community Foundation in exchange for a gift annuity. With appreciated property, a portion of the capital gains tax is avoided. Part of the gain is allocated to the charitable gift amount and there is no capital gains tax on that portion. The rest of the gain is allocated to the annuity portion and is taxed each year over the projected life expectancy of the annuitant. Since the tax is spread out over the life of the annuitant, and the annuitant is receiving in part tax free income, the transfer of appreciated property in exchange for a gift annuity can generate very favorable results.

Fixed Payments
Gift annuities are most attractive to senior persons. The annuity amount is fixed and will not change regardless of current investment or market conditions. Because the more senior person is probably more easily able to plan for the future with a fixed payment, the gift annuity seems most appropriate for a senior individual.

Aging has its advantages:
Age Payout - Are you earning this much on your CD or savings account?

70      5.1%
75      5.8%
80      6.8%