An agreement between a donor and the Lenawee Community Foundation through which the donor makes an irrevocable gift (preferably cash or marketable securities) and receives fixed payments for one or two lives.
A guarantee by the Foundation that the donor (and the donor’s spouse or named annuitant) will receive fixed payments until the last annuitant passes away. Also, there are tax deductions for the original gift, capital gains savings if the Charitable Gift Annuity is funded with appreciated assets, and usually, only a portion of the distributions is taxable. If payments are made only to the donor and his/her spouse, the Charitable Gift Annuity is removed from one’s estate.
In many cases annuity payments create a greater cash flow than the interest and dividends that donors receive from their assets. Plus, many donors feel more comfortable making a sizeable gift to charity if they know they will receive payments for the rest of their lives.
The American Council on Gift Annuities recommends rates that are used by most charities. For example, as of January 1, 2012 they recommend:
- Age 65 – Single person at 4.7%, or a married couple at 4.2%
- Age 70 – Single person at 5.1% or a married couple at 4.6%
- Age 75 – Single person at 5.8% or a married couple at 5.0%
- Age 80 – Single person at 6.8% or a married couple at 5.7%
- Age 85 – Single person at 7.8% or a married couple at 6.7%
(Note: Married couple rates assume both persons are the age listed.)
No. The rate of payment is set at the time the Charitable Gift Annuity is established & remains the same, even if a person outlives his/her life expectancy.
The individual gives up control of the funds through a gift to charity. The charity guarantees payments to the donor for life, so the charity must have significant assets, which are prudently managed.
A 65-year-old contributing $10,000 could earn 4.7% ($470 per year) when establishing a Charitable Gift Annuity. $2,811 would be a charitable deduction in the year of the gift, and $361 of the annual distribution would be tax-free for 19.9 years. If married to a 65-year-old, two annuitants would earn 4.2% ($420 annually), receiving an initial tax deduction of $1,917 and $324 of the annual distribution would be tax-free for 24.9 years.
Our Lenawee community. At the death of the last annuitant, any amount remaining from the original gift and its earnings belongs to the Lenawee Community Foundation. Donors may create a new fund, named for themselves or their family. The remainder will be permanently invested for good for ever.