Charitable Gift Annuities

When you are looking for ways to help your chapter with its mission, you shouldn’t feel like you are choosing between your philanthropic goals and financial security. One gift that allows you to support the chapter while receiving fixed payments for life is a charitable gift annuity.

Not only does this gift provide you with regular payments and allow us to further the chapter’s initiatives, but when you create a charitable gift annuity you can receive a variety of tax benefits, including a federal income tax charitable deduction when you itemize.

How Does It Work?

In exchange for a gift, the chapter agrees by contract to pay a fixed amount each year to one or two beneficiaries (the annuitants) for life.

The amount of the annuity payment will depend on the ages of the annuitants and the value of the assets donated. The chapter offers the rates that are suggested by the American Council on Gift Annuities, a national organization. Upon establishing a charitable gift annuity, you are entitled to a current income tax deduction for a portion of the value of the assets given to fund the charitable gift annuity.

Benefits

  • Receive fixed annual payments for life
  • Possibly receive tax-free income
  • Diversify some of your portfolio to produce a fixed income for you, backed by the chapter’s assets
  • Federal, and possible state, income tax charitable deduction
  • Reduce or eliminate estate taxes
  • Make a gift to the chapter

Assets Used

A gift annuity is usually created using cash or securities. The chapter may have a minimum gift amount to establish a charitable gift annuity.

The Option of a Deferred Charitable Gift Annuity

You may also create a deferred charitable gift annuity, taking a tax deduction in the year of the gift but delaying the first annuity payment for one or more years. This approach can offer dependable retirement income beginning at a future date. The annuity rates for a deferred charitable gift annuity will depend on several factors, including the length of the deferral period.

EXAMPLE

John Doe, age 75, makes a cash gift of $100,000 to the chapter this year in exchange for a charitable gift annuity. He will receive annual payments of $6,200 from the chapter for the rest of his life. He is entitled to an income tax charitable deduction for current income tax purposes of almost $46,000 (based on an IRS discount rate of 3.4%). Assuming Mr. Doe is in the 35% federal income tax bracket for ordinary income and can use up the entire deduction, he will save about $16,100 in federal income taxes. Of the $6,200 he receives each year, only $1,823 will be taxed at ordinary income rates, and $4,377 per year will be tax-free for 12 years.

Learn how you can support your chapter by contacting Matt Noble of Fraternity Management Group at matt.noble@fmgtucson.com.