Charitable Gift Annuities (CGA’s) allow donors to support SDS, while receiving an income from the gift – guaranteed for their lifetime. CGA’s also offer donors an immediate income tax deduction and the satisfaction of supporting SDS in its mission to save and improve lives through organ and tissue donation.
How it Works
You contribute your asset to a CGA with SDS. You, the contributor, then receive an immediate income tax deduction and guaranteed lifetime income with a payout rate based on your age. When you pass away, the remainder of the CGA is contributed to an endowment fund.
With a Charitable Gift Annuity (CGA), a donor irrevocably transfers money or appreciated securities to Sierra Donor Services (SDS), in return for a quarterly or annual income from the reinvested assets for the contributor and/or other beneficiaries. At the beneficiary’s death, payments cease and the remaining annuity assets (the “Charitable Remainder” gift) go to SDS or other charities, as you have designated. The older the donor or beneficiary at the date the annuity is established, the higher the annual payout percentage.
A contributor may have multiple Charitable Gift Annuities.
NOTE: A portion of the amount used to fund a Charitable Gift Annuity is tax deductible, as is a percentage of the payouts (depends on donor’s age, tax bracket and other factors). In contrast, a standard annuity issued by a financial or insurance institution is generally tax deferred and merely delays when the full taxes must be paid by you or your heirs.
How does a Charitable Gift Annuity work?
A Charitable Gift Annuity pays the contributor a set income per year, based upon the fair market value of the donated assets at the time the Annuity is established and the ages of the income beneficiaries. Its payout is fixed throughout the term of the agreement, no matter how investment values fluctuate. Payments can be made quarterly or annually. This annuity is a contractual agreement between the contributor(s) and SDS; payments are backed by the assets of SDS.
SDS offers two versions of Charitable Gift Annuities:
Payments to the contributor/beneficiaries begin in the first quarter after the annuity is set up.
Initial payments are delayed until some specified future date. Percentage rates are higher on Deferred Gift Annuities than on standard agreements.
Who should consider a Charitable Gift Annuity?
Like other Life Income Agreements from SDS, a Charitable Gift Annuity helps its contributor obtain future income from under-producing assets, while also gaining a current charitable tax deduction. The Gift Annuity, however, is most beneficial for older contributors because it generally offers potentially higher annual payout rates than Charitable Remainder Annuity Trusts or Unitrusts.
Additionally, a Deferred Gift Annuity can be a valuable estate planning tool for any donor who seeks an immediate income tax deduction, but can afford to delay income until retirement or some other date in the future.
Estelle Gerhard is 75 years old. She desires to support SDS, but she cannot make cash donations because she may need income from her assets for future living expenses. After learning about Charitable Gift Annuities, however, she decides to transfer $15,000 for a gift annuity.
At her age, she will receive an income of $1,230 each year for as long as she lives. She can claim $7,077.82 as a charitable gift for the year in which the gift is completed, or can carry over any excess deduction for up to five additional years, based upon her taxable status. $660.51 of her annual annuity income is tax free until the year 2012, when it becomes fully taxable (in this example).
Example only. Actual data, income and tax deductions vary case by case. Your SDS consultant can answer any further questions you might have and develop specific illustrations for your personal estate planning needs and goals.
For a no-cost, no-obligation consultation in the privacy of your home, please complete the More Information form or call 1.916.473.0861.
What are some of its key benefits?
- Helps fund dynamic SDS community outreach programs to increase life-saving organ and tissue donations within our community
- Can provide income for another as well as for yourself – a spouse, parent, child, etc. Income can be paid to you for life and then to another family member, or for a specified period of years.
- Is backed by the assets of SDS and so payments continue for the full term of the annuity, as defined in the annuity agreement.
- Generates income from under-producing appreciated assets. Payout rate may well exceed dividends, rental fees or other potential revenues from the assets. SDS will sell the asset and invest the proceeds for greater income.
- Offers higher yields for older donors or for delayed payment start dates. Payout percentage rates are set by American Council on Gift Annuities actuarial guidelines. Delaying payments can increase percentages.
- Reduces Capital Gains Taxes, which can be as high as 25% if the assets are sold outright by the donor.
- Reduces or eliminates Estate Taxes by removing the value of the donated asset or money from your taxable estate.
- Can be used to delay distributions to beneficiaries until they reach a certain age or meet other criteria.
- Provides income that is taxed at lower overall rates than ordinary income-tax rates.
- Reduces income taxes. A portion of the appreciated asset donation to fund the annuity is tax deductible, and part of the annual payouts themselves may be partially tax-free for a period of years.