Giving Back to Donors
By Jackie Jacobs
When you give money or stock for a charitable gift annuity, the charity gives you back annual payments for the rest of your life. People have been availing themselves of charitable gift annuities for years. The American Bible Society, a large New York City religious publisher, has been offering them (and also “Sharing God’s Word with the World”) since 1843.
Most charities use payout rates defined by the American Council on Gift Annuities. Here is how they work.
Mr. and Mrs. Stein give $10,000 to a qualified charity for a charitable gift annuity. The annuity contract obligates the charity to pay them a set amount, usually in semi-annual or annual installments. The amount received is determined by the Steins’ ages. Ordinarily, part of the payment is tax-free.
Since the Steins are both 75 years old when they establish the annuity, their annuity rate is 5%. This means they will receive a fixed amount every year of $500. And these payments will continue to the survivor for life even after one of them is gone.
Why do charities offer gift annuities? To help donors who would like to make larger gifts, but who do not wish to reduce their cash flow. Charitable Gift Annuities are also ideal for donors who are planning to provide a bequest; making the gift now in the form of a charitable gift annuity enables the donor to claim an income tax charitable deduction. And for older donors, an 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 the a charity and, at the same time, supplement their retirement programs. For example, the donor would designate a gift, say $5,000, for a gift annuity which would be “programmed” to being 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. Among the ways that some people prepare for retirement is to set up a charitable gift annuity every year and deferring the income on each one until their age of retirement.
By careful management of the gift annuity, the charity should be able to make its scheduled annuity payments and have enough left over to carry forward its mission. The charity is legally obliged to make the annuity payments no matter what its future financial situation may be.
Should you wish to know more about charitable gift annuities, including the payout rates based on your age, the tax deduction to which you are entitled, or the scope of the Columbus Jewish Foundation’s program, feel free to contact me at firstname.lastname@example.org or 614-338-2365. I will be happy to send you a confidential illustration showing you how a charitable gift annuity can benefit you.
Article appears as originally published in the Ohio Jewish Chronicle, April 30, 2015.
Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.