A charitable gift annuity is an extremely flexible way to make a gift. It can be designed to provide a fixed income for life for you and/or others you choose and can be created with gifts of relatively modest amounts.
For example, you can make a gift through a charitable gift annuity agreement for as little as $10,000. Here’s how a charitable gift annuity works:
- You transfer cash or other assets to Annandale Village to fund your gift annuity agreement. This involves completion of a simple agreement and can be handled conveniently by mail, if you wish.
- You’ll receive generous fixed payments annually (or more frequently if desired) that will never vary in amount. The amount of your payment is a percentage of your gift determined by your age and other factors at the time your gift is funded.
- You will be entitled to an immediate income tax charitable deduction. In addition, part of each annual payment is tax-free for the period of time equal to your life expectancy.
- If desired, you can also choose to name another person (typically a spouse, parent, or sibling) to receive payments with you, instead of you, or following your lifetime for the remainder of his or her life. (All annuitants must be at least 65 for immediate payment gift annuities.)
- The assets used to fund your gift annuity will generally be removed from your estate for tax purposes.
- You make a significant gift to Annandale Village for a portion of the amount used to establish your gift annuity agreement.
Some may choose to fund a new gift annuity agreement with Annandale Village each year. Since payment rates increase with age, each gift annuity generally brings larger annual payments.
When property, such as stock, that has increased in value is given for a gift annuity, part of the capital gains tax that would normally be due on its sale can be avoided at the time of the gift, and a portion of the gain can be reported over the annuitant’s life expectancy. The charitable deduction is typically based on the current value of the property, not its lower original cost. The use of appreciated, low-yielding assets to fund a gift annuity can thus be an excellent way to completely bypass capital gains tax at the time of your gift, enjoy a current income tax charitable deduction, and gain the advantage of reporting a portion of each payment at lower, more favorable capital gains tax rates for a number of years.
As rate charts reveal, gift annuity rates are higher for older individuals. As a result, gift annuities are generally most attractive to persons in their retirement years.
If you are age 55 or more and are planning for your retirement, you might want to consider an option known as a deferred gift annuity as part of your retirement planning. With a deferred gift annuity, you transfer funds to Annandale Village today and receive an immediate income tax charitable deduction while payments to you actually begin at a future date you specify.