A charitable Gift Annuity (CGA) is an irrevocable charitable gift that pays you and/or someone you choose a fixed income, part of which may be tax-free. It is guaranteed income for life. After the passing of the donor(s), the remainder of the CGA goes to the charity.
A CGA may be structured as either a one-life gift annuity, in which you or your designated beneficiary receive the income for life; or, as a two-life gift annuity that provides income to you and another beneficiary, such as your spouse.
How much do CGAs pay?
CGAs pay donors at rates set by the American Council on Gift Annuities. The rates are usually very attractive compared to many other income sources, but are less than commercial annuities (hence the “charitable” nature of the transaction). The older you are, the higher the annuity rate you will receive. Historically, rates have ranged approximately from 4% to 9%. Rates are fixed for life, and depend on the age of the donor(s) at the time of the gift.
Is there a minimum amount or age?
For Masonic Charities, there is a $5,000 minimum contribution. There is no maximum, and donors have completed CGAs in excess of $1 million. The minimum age for a single beneficiary is 60, and for a couple, ages 60 or older.
How can I fund a Charitable Gift Annuity?
A CGA may be established using cash or appreciated securities. If you use securities, you may considerably reduce your capital gains tax liability.
Are there any tax benefits?
You are entitled to claim a charitable deduction on your income taxes in the year you establish a CGA. The amount of your deduction is the present value of the charitable portion of your gift, determined by your age(s) and the federal discount rate in effect at the time you make your gift.
Who can benefit from a CGA?
Usually the donor(s) themselves are the beneficiaries. However donors can choose to benefit another person(s), such as a family member(s). Up to two people can be beneficiaries.
For more information…
For a confidential illustration showing potential income and tax benefits from a CGA, please contact us.
Deferred Charitable Gift Annuities
Like a regular CGA, a deferred CGA will pay you, you and your spouse, or another individual you designate a fixed income on a future date which the donor chooses. The longer the delay between the creation of the deferred CGA and the start of payments, the larger the income tax charitable deduction resulting from the gift and the higher the annuity rate. Deferred CGAs can supplement IRAs, 401(k)s, 403(b)s or Keogh plans. And, if you donate appreciated securities, you may be able to reduce your capital gains tax liability, as well.