If you’ve begun to explore Planned Giving options, you’ve likely come across the term “Charitable Gift Annuity” (CGA). Think of a Charitable Gift Annuity as a contract between you and the charitable organization of your choosing. As the donor, you agree to make an irrevocable gift of cash, securities or other assets. In return, the organization agrees to pay you a fixed stream of income for life. A Charitable Gift Annuity allows you to achieve a balance between your philanthropic goals and your desire for financial security, but the benefits don’t end there.
Here are some additional examples of how a Charitable Gift Annuity can be a beneficial investment strategy.
Insight from the Experts
In the winter 2019 issue of GenerousLiving, John Boulware Jr. and Shea Boulware-Creed, the principals in the Boulware Investment Group—a financial advisor team with RBC Wealth Management in the Sun City area—shared their insights about the merits of charitable gift annuities as beneficial investment strategies.
“CGAs may provide several important benefits to individuals, especially those who are looking for a steady lifetime income stream. A gift annuity is an agreement between the nonprofit organization and the donor(s), referred to as the annuitant. The donor makes an irrevocable contribution to the charity and enters into an agreement to receive fixed payments for life. At the end of the annuitant’s life, the charity receives the balance of the funds.”
With their insights in mind, we’ve expanded upon the benefits of a Charitable Gift Annuity as an investment strategy below.
Fixed payments for life
Once you establish your Charitable Gift Annuity, you’ll receive guaranteed payments of a set amount for the rest of your life. If you choose, your spouse or other beneficiary can receive payments as well. These payments are fixed, meaning they will never fluctuate with the stock market, interest rates or inflation. You can rest easy knowing you’ll have a steady income for life, thanks to your Charitable Gift Annuity.
How much will my annuity rate payout be?
Payout rate is based on age and most organizations follow rates established by the American Council on Gift Annuities.
All deductions and calculations will vary, depending on your personal circumstances. We encourage you to work with your financial advisor and/or estate planner along with a Sun Health Foundation Director of Philanthropy to determine the best options for you. You can contact our knowledgeable Directors of Philanthropy at (623) 832-5330.
Tax advantages
Along with fixed payments for life, Charitable Gift Annuities have several inherent tax advantages, including:
A partial charitable tax deduction now for your gift when you itemize
You can enjoy tax deduction right after funding your annuity. This deduction will equal the amount paid for your Charitable Gift Annuity minus the calculated value of the payments expected to be made under the contract.
Note that you will only receive an income tax benefit if you itemize deductions on your tax return. If you choose to claim standard deductions in the year you purchase your Charitable Gift Annuity, you will not receive any income tax benefit from it.
Part of each payment is income tax free throughout your life expectancy
You may be able to claim a charitable tax deduction for the year in which you set up the annuity. In a way, this can be thought of as a “partial” tax break, because of the fact that the IRS views your Charitable Gift Annuity as the sum of two parts:
- Your contribution to the charity
- Your annuity payouts, considered to be investment assets by the IRS
This income tax savings can help you have more money for your retirement while still contributing to your philanthropic goals.
Capital gains tax savings on appreciated property you donate
If you gift an appreciated asset to a charitable organization, you can earn capital gains tax savings. This is because a Charitable Gift Annuity reduces the capital gains tax that usually results from the donation of long-term appreciated assets. Instead, by donating assets-in-kind, the full, fair market value of the assets is preserved, rather than reduced as it would be if you had sold it and paid capital gains tax. The benefit of this is that you’ll have more money available for both your annuity payouts and for the charitable cause you chose to support.
Ability to donate many types of assets
In general, a Charitable Gift Annuity gives you some flexibility in terms of what you choose to donate. Beyond intangible cash and stocks, tangible gifts like real estate and personal property may also qualify as a charitable gift. This gives you the ability to donate in the way that’s right for you and your financial or estate plan.
Supporting a cause that’s important to you
One of the many joys of philanthropy and charitable giving is the satisfied feeling of knowing you’ve made a meaningful contribution to a cause close to your heart. With a Charitable Gift Annuity, you can leave a meaningful legacy and know your gift will make a difference for generations to come through Sun Health Foundation’s Generosity for Generations Campaign.
Learn more about Planned Giving
A Charitable Gift Annuity is one form of Planned Giving. Planned Giving allows donors to plan contributions to the causes they’re passionate about with funds carried out at a later date. Benefits include increasing your current income, planning for the financial needs of loved ones and leaving a charitable legacy.
We want you to feel reassured about placing your donation in good hands and making a real impact. Our Directors of Philanthropy are skilled at educating and explaining how Planned Giving can benefit each and every personal circumstance.
To find out if this can work for you, meet with your estate or financial planning advisors for advice. Then contact our knowledgeable Directors of Philanthropy at (623) 471-8500 to learn more about how this Planned Giving option through Sun Health Foundation can fit your financial needs and charitable goals.
