Giving

Charitable Gift Annuity

A Charitable Gift Annuity is a contribution made by a donor to a qualified charity that is part gift and part payment made in exchange for a life income for one or two persons.

Advantages:

  • It provides annuity payments to the donor and up to one other person.
  • The annuity payments are fixed and thus remain constant for the lives involved.
  • A donor can establish more than one Charitable Gift Annuity and have payments coordinated into one quarterly, semi-annual or annual check.
  • A portion of the annuity payment is treated as return of capital and is thus tax-free.
  • Gifts made with appreciated property in exchange for a Charitable Gift Annuity allow the donor to defer capital gains taxes and pay over their life expectancy.
  • As an irrevocable gift, a portion of the assets contributed is treated as a charitable deduction. The exact amount of the deduction depends on the age of the donor and/or annuitant, recommended annuity rates and other factors.
  • Assets contributed to a charity for a Charitable Gift Annuity bypass probate and may help avoid estate taxes.
  • By establishing a Charitable Gift Annuity, the donor is relieved of managing the investment of this asset and receives payments guaranteed by full faith and credit of the charity.

Example:

Mary Jones is an 80 year old alumna of MSSU and wishes to make a gift to the Missouri Southern Foundation and receive an income for life. Currently she has a certificate of deposit valued at $25,000 that is coming up for renewal and she is not satisfied with the rates that are being offered by financial institutions.

Mary decides to transfer the amount of $25,000 to the Missouri Southern Foundation in exchange for a Charitable Gift Annuity. Mary receives payments for her lifetime based on an annuity rate for her age of 7.2 percent, which amounts to annual payments equaling $1,800. She also receives a current income tax deduction of nearly half the contributed amount. By establishing a Charitable Gift Annuity, Mary Jones was able to increase her annual income and ultimately provide a future gift of the annuity remainder to benefit MSSU.

This is only one example of how a Charitable Gift Annuity can be used to meet the needs of a donor. In all cases, donors should consult with their attorney, accountant, or estate planner when considering a charitable gift.

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