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Planned Giving Through Charitable Gift Annuities

Planned Giving
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Planned giving allows you to manage your wealth while blessing the ministries you feel called to serve. Through a unique marriage of stewardship and financial planning, it allows you to reach your goals for yourself, family, and ministry. There are several planned giving options available including Charitable Gift Annuities, Charitable Remainder Trusts, Charitable Lead Trusts, Donor Advised Funds, and Endowments. This article will focus on Charitable Gift Annuities.

A Charitable Gift Annuity (CGA) is designed to pay income to you and your spouse (or other person of your choice) for the rest of your lives. The rate of the annuity is based on your age at the time of your gift, and whether the annuity is for one person or two. A portion of each annuity payment may also be tax-free income. Because you’re making a gift to the ministry of your choice—you may also receive a charitable tax deduction at the time of funding.

There are some key factors to consider when deciding if a Charitable Gift Annuity is a good option for you:

  • Guaranteed Lifetime Income. In times of economic uncertainty and volatile markets, the security of a guaranteed fixed income can be very appealing. The CGA payment is paid out for the life of the donor and their spouse. This fixed lifetime payout allows the donor to better plan for expenses such as traveling and medical bills. It also provides financial certainty for the surviving spouse.
  • Age of the Donor. The payout of a CGA is determined by the age of the donor(s). The older the donor the higher the payout of the CGA. Depending on the current interest rate of the market, CGA payout rates are often the most appealing to individuals over the age of 70.
  • Higher Payouts. The current condition of the marketplace has made it challenging for seniors to generate sufficient income from record low interest rates. Investors are left to adjust their lifestyle and expectations as they are faced with the choice between volatile equity markets and historically low rates from traditional fixed-income investments. CGAs provide an alternative that typically has a higher payout rate than traditional fixed-income investments. Once the CGA is established, the rate is locked in, keeping the investor from having the risk of a changing return.
  • Tax Benefits. CGAs also provide tax benefits to the donor. When a CGA is first established, the donor may receive a charitable tax deduction up front for their contribution to the CGA. If a donor is using an appreciated asset such as stock to fund the CGA, they may also avoid the up-front capital gains that are ordinarily associated with selling an appreciated asset.
  • Gift to Ministry. One of the most significant reasons for using a CGA to help reach an individual’s goals is the potential impact it will have on the Kingdom. At the end of the payment period (usually both donors’ lives), the remainder is paid out to ministry. This allows the donor to optimize the individual tax benefit, help reach their financial goals for their family, and have a meaningful impact on the ministry they desire to bless.

FUNDING AND OPTIONS

Charitable Gift Annuities can be funded with a minimum of $1,000 cash, stocks, or other marketable securities. CGAs are available in two forms: Immediate Charitable Gift Annuity and Deferred Charitable Gift Annuity. A planned giving consultant can help you determine which option is best for you.

Planned giving provides unique benefits to the donor. The different options available allow you to create a custom financial plan that will fit your unique needs and circumstances while providing for your family and blessing others.

Questions about Gift Annuities or other planned giving options? Contact me at 417.447.2459 or blamb@agfinancial.org.

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