Life Income Gifts Charitable Gift Annuity 1 Create
Life Income Gifts Charitable Gift Annuity #1
Create a perspective • Any attempt… • A recognition of the sovereignty of God… • So let each one give… • It is utter folly… http: //mensajetresangeles. blogspot. com
Charitable Gift Annuities • Easy to understand • Easy to administer • Secure fixed payments, tax savings, make this gift attractive to older people • So they’re popular, right?
The 3 Players • Donor—The one who makes the gift • Annuitant—The one who receives the annuity payments • Beneficiary—The charity that ends up with the remainder (“residuum”)
The 3 Players—(1. Donor) • Donor is the one that makes the contract with the charity • Donor is the one that funds the charitable gift annuity • Donor receives charitable deduction
The 3 Players—(2. Annuitant) • May or may not be the Donor • Can be a relative or friend • Annuity can extend for only for one or two lives
The 3 Players—(3. Beneficiary) • Must be a charity (donor can restrict gift in CGA application) • Donor cannot assign remainder to another charity
The 3 Features 1. Contract between Donor and Charity 2. Fixed Payouts made to Annuitant 3. Irrevocable Gift from Donor
The 3 Features—(2. Fixed Payouts) • Charity promises to pay • Fixed annuity payments • For duration of one or two lives (not more persons or not term of years)
The 3 Features—(2. Fixed Payouts) cont. • Versions of Agreements • A “single life” agreement • pay only one person for lifetime • A “two life in succession” agreement • pay person “A” and then if person “B” survives person “A, ” pay “B” • A “joint and survivor” agreement
The 3 Features—(2. Fixed Payouts) • Charity has a general liability • Most charities maintain a reserve fund • Annuity backed by all of issuing charity’s assets, annuity payments continue for life/lives of the annuitant(s) • The Philanthropy Protection Act of 1995
The 3 Features—(2. Fixed Payouts) • Determining the Annuity Amount FMV of Assets Transferred X Annuity Rate Annual Annuity Amount Example: $10, 000 X 5% = $500
The 3 Features—(2. Fixed Payouts) • American Council on Gift Annuities • Educate • Update on state regulations • Publish suggested maximum CGA rates • Use of ACGA rates is voluntary • NAD/GC policy requires use of GC Corporation rates • GC Corporation usually votes to use ACGA rates, but can use other rates
ACGA Rates Annuity Rate Structure • Actuarially based • Mortality tables • Projected administrative costs: 1% • Gross annual investment return: 4. 25% • Assumes 50% residuum • Asset Allocation: 40% equities, 55% fixed investments, 5% cash
The 3 Features—(2. Fixed Payouts) Annuity Rates • Based on age and number of annuitants • Fixed: Cannot guarantee minimum or maximum payouts OR adjust payments based on investment return • Standardized rates discourage competition. Marketing based on merits of issuing charity
The 3 Features—(2. Fixed Payouts) Frequency of Payouts • Annual annuity amount may be paid: • Annually • Semi-annually • Quarterly • Monthly
The 3 Features—(3. Irrevocable Gift) Split Interest Gift • Part 1 – Purchase of an annuity contract • Right to receive lifetime payments • Payments not referred to as “interest” or “income” because part of each payment is tax-free return of donor’s gift • Part 2 – Outright charitable gift
The 3 Features—(3. Irrevocable Gift) • In effect, the donor has made a gift of part of the property given and purchased an annuity contract with the balance.
The 3 Features—(3. Irrevocable Gift) • The gift is irrevocable • The gift can be terminated early • Make sure Donor has other assets to live on
Funding the CGA • Cash is by far the easiest, most common • Publicly listed securities • Easily valued and marketable • Get donor’s cost basis • FMV of asset on date the asset transferred to charity
Funding the CGA cont. • IRAs (see Gift. Law Pro 3. 4. 6) • Cannot rollover IRA into CGA during life • Can fund a CGA at death with IRA • Can withdraw IRA funds during life, pay the income tax, and then fund a CGA with the remainder (taking a charitable deduction)
Funding the CGA cont. • Real Estate (Risky) • May not sell before payments are required • May have to sell for less than appraised value • You may not have a clear title • Environmental hazards could be discovered • Some states or organizations restrict or forbid
Funding the CGA cont. • Real estate (Precautions) • Get an appraisal • Identify a buyer (make sure nothing signed!) • Defer the beginning of the payouts • Suggest a lower CGA payout rate • NAD Policy: Check with Union/Division PGTRS Director/Officers
Types of Annuities • Immediate Gift Annuity • Receive payments at end (or beginning) of payment period immediately following the contribution. • Pro rata payment for current period • Next periods gets full payments
Types of Annuities • Deferred Payment Gift Annuity • More than one year between time property is gifted and date of first payment • Standard Deferred Annuity—fixed beginning date • Flexible Deferred Annuity—flexible beginning date • Testamentary Gift Annuity • Established by will or trust • Can be used to provide income for beneficiaries who are too young or inexperienced to handle a lump sum distribution • Can also be used to provide income for a surviving spouse
Charitable Gift Annuity http: //inspirationaloutreach. com
Suggest books or resources…
So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver. 2 Cor. 9: 7 (NKJV)
It is utter folly to defer to make a preparation for the future life until nearly the last hour of the present life: It is also a great mistake to defer to answer the claims of God for liberality to His cause until the time comes when you are to shift your stewardship upon others. …Dying legacies are a miserable substitute for living benevolence. . Would you make your property secure? Place it in the hand that bears the nailprint of the crucifixion. Retain it in your possession, and it will be to your eternal loss. Ellen White CS 325 -329
It is utter folly to defer to make a preparation for the future life until nearly the last hour of the present life: It is also a great mistake to defer to answer the claims of God for liberality to His cause until the time comes when you are to shift your stewardship upon others. Ellen White - Counsels on Stewardship p. 326
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