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Learn About Charitable Gift Annuities

By: J. R. Randolph

Charitable Gift Annuities are a contract where the donor(s) give an irrevocable gift of cash or other assets to a qualified charity and receives a charitable deduction. In return, the charity agrees to pay a fixed amount of money to the annuitant(s) for their lifetime. The annuity payments are not "income", a portion of the payments are considered to be a partial tax-free return of the donor's gift, which are spread over the lifetime of the annuitant(s). The contributed property becomes a part of the charity's assets, and the payments are a general obligation of the charity. The annuity is backed by the charity's entire assets, not just by the value of the contribution. Where the donation is in the form of other assets, securities for example, the value of the gift is determined by the fair market value on the gift date.

Charitable gift annuities are regulated by most states. They require a published gift annuity rate chart of the maximum annuity rate the charity offers each annuitant which must show the age to the nearest birthday (actuarial age) on the date of the gift. Charities are allowed to spend a portion of the gift immediately, but they must maintain sufficient reserves, which are determined by state regulations, and satisfy all other state regulatory requirements.

Charitable Gift Annuity Agreements Not all states permit the use of each type of the many agreements that are available. Usually the charity is required to submit each different type of agreement it would like to offer. Some of the types of gift annuities are:

Immediate Gift Annuities These annuities begin making periodic annuity payments at the end of the period (monthly, quarterly, annually, etc.) immediately following the contribution. The payment periods are defined in the agreement.

Deferred Gift Annuities This type of annuity is where the annuity payments begin at a future date chosen by the donor. The payments must begin more than one year after the date of the contribution.

Tuition Gift Annuities The annuity payments start upon the annuitant(s) attaining a specified age. Generally these types of gift annuities are created by a parent or grandparent for a young child, with the donor deferring the payments until the child is expected to enter university. The annuitant(s) then has the option of accepting the annuity payments for his or her lifetime, or elect to receive much larger payments for a term of four or five years, as defined in the annuity contract.

Flexible Gift Annuities This annuity has an annuity payment starting that is chosen by the annuitant(s). The donor chooses an initial "target date" for the payments to begin. The charity then offers a range of payouts with different fixed payment amounts and a variety of starting dates. Because the charitable deduction remains fixed, the annuity rate for each starting date changes. If the starting date is earlier, the payments would be lower and if the starting date is later, the payments would higher. The annuitant must decide on an annual basis whether or not they wanted the annuity payments to begin that year.

Versions of Agreements Typically, there are three versions of each type of agreement. They are:

"single life" agreement - annuity payments for the lifetime of the annuitant,

"two lives in succession" agreement - annuity payments for the lifetime of the annuitant and then pay a second person if he or she survives the annuitant, and "joint and survivor" agreement - annuity payments to a husband and wife simultaneously, each getting half of the payment, and upon the death of one of the annuitants, pay the survivor the full annuity.

Article Source: http://www.essentialgardenguide.com/gardening-articles

Find out if a charitable gift annuity is right for you. You will find objective, unbiased information on all kinds of annuities by clicking on Annuity-Strategies.com.
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