Charitable Gift Annuities

Charitable gifts annuities are yet another way for donors to receive a fixed income stream while transferring property to charitable entities. Rather than being in the legal form of a trust, a gift annuity is a contract between the donor and the charity of his choice. In exchange for property transferred by the donor, the charity agrees to pay the donor a fixed sum of money (an annuity) at least annually for the remainder of the donor's life (or for the lives of the donor and his spouse). The annuity may begin immediately or be deferred for a period of years

In these arrangements, the present value of the future annuity payments is less than the present value of the property transferred to the charity. This difference produces a current federal income and gift tax deduction. In addition, the value of the property is removed from the donor's taxable estate thereby producing estate tax savings.

Charitable gift annuities are appropriate for individuals with a charitable motivation, who have more property than they can use or manage, but who have a need for a reliable income stream for the remainder of their lives. Charitable gift annuities may be funded with cash, appreciated securities, land, rental property, or, in some cases, the donor's principal residence. Organizations seeking charitable gift annuities must meet certain legal requirements in each state in which it solicits this type of gift.

©2008 Ronnie C. McClure, PhD, CPA