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How a Charitable Gift Annuity Works

The concept of a gift annuity is simple and has been around for more than a century. A person makes a gift of cash or marketable property to a charitable organization. The organization then reinvests the assets and agrees to make fixed annual payments to the donor for life (and, if desired, for another beneficiary’s lifetime). Upon the death of the last beneficiary, the funds are available for the charity’s use.

The transaction is partly a charitable gift and partly the purchase of the income interest. The annuity rate is the dollar amount returned to you annually as a percentage of the value of your gift, and these rates are related to the ages of the recipients. A contract specifies the frequency of payments (typically quarterly or semiannual installments) and the date of the first payment.

How you Benefit

In addition, to having the benefit of lifetime payments for yourself and possibly another person, there are tax advantages.

How to Fund a Charitable Gift Annuity

Cash is the most common asset used to fund a charitable gift annuity. If you contribute appreciated securities such as stocks, bonds and municipal bonds, you will need to pay some capital gains taxes on the gain on the portion of the transaction. These capital gains taxes are paid over your life expectancy and they are not all payable in one year. Funding a charitable gift annuity with real estate is another option.

Gift annuities have attractive rates of return
and the older you are the higher the rate!