Giving Back to Donors

When you give money or stock to a charity to establish a charitable gift annuity, the charity must give you back annual payments for the rest of your life.

Too good to be true? Seems like it, but true nonetheless. Many people take advantage of this opportunity, particularly those who appreciate additional retirement income. Here’s how it works:

Mr. and Mrs. Smiley give $25,000 to a trusted charity to establish a charitable gift annuity. The annuity contract obligates the charity to pay them a set amount every year. The amount the Smileys receive is determined by their ages. Ordinarily, part of the payment is tax-free.

Since the Smileys are both 75 years old when they establish the annuity, their annuity rate is five percent. The payment will continue to the survivor even after one of them is gone. Upon their joint demise, the charitable portion of their gift is treated by the charity like a bequest.

Why would a charity provide gift annuities? To help donors who want to make larger gifts, but cannot afford to reduce their cash flow. Also, it helps donors who are planning to provide a bequest make the gift now so they can take advantage of the income tax charitable deduction. And for older donors, a charitable gift annuity may actually provide a larger payout from the asset than they might otherwise receive.

A deferred payment charitable gift annuity works well for younger donors who want to give to a favored charity and, at the same time, supplement their retirement income. For example, the donor would designate a gift, say $5,000, for a gift annuity which would be “programmed” to begin payments at retirement age. The longer the deferral period, the higher the annual payment. And even though the donor will not receive payments from the annuity for several years, an income tax charitable deduction is available for the year in which the gift is made.

In addition to an immediate tax deduction and high payout rates, charitable gift annuities have many other benefits that you should know about. Feel free to contact me at 614-338-2365 or jjacobs@tcjf.org. I would be happy to send you a confidential illustration showing you how a gift annuity can benefit you.

Article appears as originally published in the Ohio Jewish Chronicle, November 19, 2015.

Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.

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