Charitable Gift Annuities

Most folks want to know that they can always count on income from their investments.  Unfortunately, the safer an investment is, the lower the amount of income it provides. In other words, high yield usually means high risk. There is a safe alternative.

The Women’s Resource Center is a partner of the Endow San Diego Partnership sponsored by the San Diego Foundation. One of the wonderful benefits we can offer our supporters as a result of this partnership is charitable gift annuities.  We are very pleased about this, knowing how popular charitable gift annuities are with donors. It’s just one way that we can give as well as receive.  A minimum contribution of $25,000 is all that is needed to fund this simple gift arrangement. Some of the benefits are:

  • It’s an easy way to increase cash flow from low-yielding securities and savings accounts.
  • Income payments are fixed for lifetime and guaranteed.
  • Stock market ups and downs don’t affect income.
  • There are no asset management fees.
  • A substantial part of the income received by participants is usually treated as tax-free.
  • Income remains at the same level for surviving spouses.
  • Donors can give cash when bonds or CDs mature. If you give cash, a substantial portion of your annuity payment would be completely tax-free.
  • Gifts of stock or mutual funds are excellent ways to reduce risk in your portfolio and offer an ability to convert today’s low stock dividends into a high, secure return for life.
  • Highly appreciated and/or fully depreciated real estate may also be an excellent funding asset.
  • Money remaining after death is used by the Women’s Resource Center for charitable programs and services.

This gift annuity program is backed by the unrestricted net assets of the San Diego Foundation and income is guaranteed for life.

A Smart Way to Give and Receive

If you are considering a gift to the Women’s Resource Center and would like to receive benefits in return, we would like to talk to you about a charitable gift annuities which may be an excellent tool to accomplish these goals. Financial advisors say that the ability to make a gift while earning favorably-taxed income is a major reason for the booming popularity of charitable gift annuities across the nation. Donors like the concept of this easy-to-execute plan, which offers attractive, fixed income rates that are guaranteed for life.

There are at least three great reasons why benefiting the Women’s Resource Center through a charitable gift annuity is worth considering.

1.  Satisfaction. Most donors ease into their first gift annuity with a degree of apprehension. After all, this is a new arrangement for them and they wonder how well it will work. It doesn’t take long for any uneasiness to vanish. Donors discover they are having a positive experience.  And this satisfaction is lasting.

2.  Connection. Having a life-income agreement like the charitable gift annuity in place allows us an opportunity to be a partner in your financial security as well as ours. It is one way that the Women’s Resource Center can give back as well as receive. 

3.  Great Rates. Gift annuity rates are determined by the annuitant’s age. The older you are the better rates you receive. For example, the current rate for a single-life gift annuity involving an 85 year-old person is 9.5%. After consideration of tax advantages, the effective rate is even higher.

Gift annuities offer other advantages in addition to those mentioned above including:

  • Charitable income tax deduction
  • Tax-free income and/or income taxed at lower rates
  • Ability to transfer appreciated assets with no capital gains tax due on transfer
  • Flexible payment choices
  • Elimination of concern over stock market ups and downs
  • Simplification of financial affairs

How to Increase Income and Save Taxes with Charitable Gift Annuities

A contributer, age 85, elects to put $30,000 that is just sitting in CDs earning 5% ($1500) per year into a charitable gift annuity. The contributer would like to receive payments quarterly and is in the 28% tax bracket. Here are the results:

The contributer qualifies for a 9.5% payout based upon age, which increases the income to $2,850 per year instead of $1500. This is almost double what was being received from the CD.

The contributer receives a charitable income tax deduction of $15,417 this year for participating in the program. This is going to provide substantial income tax savings, so the donor calls his CPA with the information to reduce his estimated tax payments.

The contributer is also very pleased to learn that $2,146 of the $2,850 received in income will be treated as tax-free income by the IRS based upon life expectancy, which is approximately another 7.6 years. 

Combined with tax savings, the net result of this arrangement for the contributer is comparable to an investment paying 14.35%. As we all might appreciate, a safe investment payment of 14.35% is difficult, if not impossible, to find these days.

Charitable gift annuities don’t interfere with existing estate plans, are easy to execute (three-page contract), and there are no administration costs deducted from your payment. Participants also don’t have to worry about what is going on in the investment market, as the income amount is fixed for life.
Lifetime Guaranteed Income

As an example, below is a chart indicating the estimated payout rates by age as of 2008. The chart uses the rates suggested by the American Council on Gift Annuities. The minimum age required to obtain a charitable annuity is 55.  Payout rates for couples are lower.

55 5.5% 85 9.5%
60 5.7% 86 9.9%
65 6.0% 87 10.2%
70 6.5% 88 10.6%
75 7.1% 89 11.0%
80 8.0% 90 and over 11.3%

It’s easy to establish a gift annuity and it won’t interfere with your existing estate plan. If you are interested in knowing how a Gift Annuity Program might benefit you, give Marva Bledsoe a call at (760) 757-3500.