Charitable Gift Annuity
In Giving, You Receive...
The Charitable Gift Annuity (CGA) is a planning tool that, at its heart, recognizes the fact that the rewards of giving begin with the desire to make a gift.
The CGA marks this decision with two things: the transfer of an asset from the donor to charity, and the signing of a contract in which the charity agrees to make
annual payments to the donor(s), usually for life.
In addition to the satisfaction inherent in the act of giving, the CGA adds a tangible benefit in the form of an attractive annual income payment. The specific rate
is based on the age of the donor as illustrated in the following table's:
*Rates for One Life Charitable Gift:
| Age: |
Rate: |
| 65 |
5.5% |
| 70 |
5.8% |
| 72 |
6.0% |
| 74 |
6.3% |
| 76 |
6.5% |
| 78 |
6.8% |
|
|
 |
| Age: |
Rate: |
| 80 |
7.2% |
| 82 |
7.5% |
| 84 |
7.9% |
| 86 |
8.3% |
| 88 |
8.9% |
| 90 |
9.5% |
|
|
Funding a CGA with Stock...
While the CGA can be funded in a number of ways, let's examine the benefits of transferring an appreciated block of stock to charity.
The CGA illustration shows the highlights. Not only is there an immediate charitable income tax deduction by transferring an appreciated
block of stock into the CGA agreement, it is possible to bypass a portion of the capital gains tax due upon the sale of the stock. In the case
of our illustration - stock valued at $20,000 with an original cost of $4,000 - this can save more than $2,000 in taxes!
In addition, the CGA may significantly increase income. If the stock had been producing dividends of 3% ($600 a year), the 5.1% annuity payment to the 65-year-old couple in our illustration marks an annual increase of $420!
And the benefits do not end there. Of the $1020 annual income payment to the couple, $135 is tax-free. Based on the couple's life expectancy (26 years), annuity payments will total $26,724.
Combine the annuity payments and tax savings, and the CGA produces a 6.1% annual return for the couple...a nice improvement!
(This is not professional legal or tax advice; consult a tax advisor about your specific situation.)
*Rates Effective July 1, 2008
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