A Charitable Gift Annuity provides a means for donors to make charitable gifts and receive life incomes. The donors may choose to benefit someone else during their life and designate successor beneficiaries. Community Foundation of the Ozarks can work with you to establish a Charitable Gift Annuity (CGA).
How It Works
At the time of the gift, a contract is established between the charity and the donor. The donor transfers an asset(s) to the charity and the charity agrees to make lifetime payments to the annuitants based on the age of the donor and the size of the gift. (Annuities are paid by Mutual of Omaha, the re-insurer of CGAs established with CFO.) Apart from the life income, the donor’s contribution will provide a gift that will be placed in an existing or new endowment fund within the Community Foundation of the Ozarks, as specified by the donor.
If an immediate gift annuity is chosen, the annuitant starts receiving the payments within one year of the signing of the annuity contract. A deferred gift annuity allows the annuitant to start receiving payments at a future time, which must be more than one year after the date of the contribution. The rate of the gift is then calculated based on the age of the donor at the time payments will begin, which will be a higher rate. Typically, the charity receives about 50% of the gift annuity funding amount.
Reasons to Establish a Charitable Gift Annuity
The payment amount is guaranteed for life, regardless of what happens to the economy or the stock market. Other benefits include:
- Guaranteed life income—CGA’s pay relatively high rates
- Immediate income tax deduction at the time the gift annuity is created
- A portion of the annual payment received is tax exempt
- Significant relief from capital gains taxes on gifts of appreciated securities
- Removal of the asset from estate tax liability (Estate taxes and probate costs are not paid on the amount of the gift.)
The best reason for establishing a charitable gift annuity is the satisfaction of helping a designated charity by leaving a legacy of lasting importance.