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 Questions & Answers
How are annuity payments determined?
Annuity payments are established when the gift is made. The annuity is determined by using a percentage payout associated with the age of the donor (or income beneficiary.) The older the annuitant, the larger the annuity. Over 90% of charities use annuity rates established by the American Council on Gift Annuities (ACGA). Since 1927, the ACGA, and its predecessor, has recommended charitable gift annuity rates. The rates are lower than found in commercial annuities. They are designed to result in at least 50% of the initial gift, known as the residuum, remaining for charity after the annuity payments have been satisfied. Actual experience is 97.5%.
Are there tax advantages to donors who establish a charitable gift annuity?
There are several tax advantages to donors who establish a charitable gift annuity, particularly when a highly appreciated stock is used.
- A portion of the initial gift qualifies for a charitable income tax deduction.
- A portion of the annual annuity payment is tax free, a portion taxed at capital gains rates.
- The asset is removed from the estate and is not subject to estate taxes.
What is the minimum age and amount to establish a charitable gift annuity?
The minimum age to begin receiving payments is 60. The minimum amount required to establish a charitable gift annuity is $10,000. This is true for one life and two life annuities, both immediate and deferred. |