A Gift That Lives With You
More and more people are discovering the benefits of charitable gift annuities. A gift annuity allows you to make a meaningful gift while receiving one or more of the following:
- Lifetime payments that may be partially tax-free or taxed at lower rates than other income.
- The possibility of income, gift and estate tax savings.
- Favorable tax treatment for capital gains.
Gift annuities enable you to give while first providing for your own financial needs and those of your loved ones. Read on for answers to some of the most frequently asked questions about gift annuities.
Answers to Frequently Asked Questions
Q. What is a gift annuity?
A. A gift annuity is an agreement between an individual and a charity. The donor transfers cash or other appropriate assets and receives fixed payments for the rest of their lifetime and/or the lifetime of another person.
Q. Are there tax benefits?
A. Yes. A combination of income, capital gains and estate tax savings is possible. We will be happy to provide a complementary illustration.
Q. What determines the size of each payment?
A. A number of factors determine the payment size, including the amount you give and your age when your gift annuity is funded.
Q. Why does my age affect the rate of payment I receive?
A. Generally, the older you are when your gift annuity begins, the higher your rate of payment. This is because your payments include the return over your life expectancy of a larger portion of the amount you transferred for your gift annuity.
Q. Does that mean my payments change from year to year?
A. No, your rate of payment is set when your annuity begins. If you fund additional gift annuities, as many people do, the rate will generally be higher the older your are.
Q. What if I outlive my life expectancy?
A. Your gift annuity agreement requires that payments will be made for as long as you live.
Q. Are the payments affected by interest rates or economic fluctuations?
A. No. Payments are never lowered or raised, regardless of changes in interest rates or the national economy. All net assets of the charity stand behind your payments.
Q. Exactly how can another person benefit through my gift annuity?
A. You can name one or two others to receive payments either with you, instead of you or only following your death. This can result in a double gift—one to charity and another to a relative or special friend.
Q. Can I fund my gift annuity with stocks, bonds or other securities rather than cash?
A. Yes. If you give a low-yielding asset, you may also be able to increase your income since a gift annuity may pay more and be taxed more favorably than other income. There can be additional tax benefits if the securities have increased in value because you avoid the tax on a portion of the capital gain that would be due on a sale. Any remaining tax can be spread out over a number of years if you and/or your spouse are receiving payments.
Q. Will a gift annuity be part of my estate?
A. Not generally. If payments are made to you only, the gift portion goes directly to charity,thus avoiding the expense and delay of probate and eliminating estate taxes that could otherwise be due. Some gift or estate tax may be due if payments are made to a person other than a spouse.
Q. How can I begin a gift annuity?
A. A gift annuity can be created with a minimum of effort. Contact us to learn more.