At Covenant Trust Company, we understand that people have different aspirations when it comes to their money. For some, it’s attaining financial security. Others want to support charities. Through Charitable Gift Annuities (CGAs), a person can achieve both of these goals. Though CGAs are first and foremost a way to donate money, they also provide tax deductions and a lifetime stream of income for the donors.
A Charitable Gift Annuity is an irrevocable contract between a donor and a charity. If, for example, you were to set up a CGA between yourself and a charity, you would agree to make a donation to them, and they would agree to make fixed payments to you (or someone else of your choosing) for the rest of your life. A two-life gift annuity (for a married couple, for example) pays throughout the life of the survivor. After the payments stop, the charity would keep the remainder of the donation.
The amounts of these fixed payments are based on several different factors, including the amount of money donated, the age of the donor(s), and the payout rates set by the American Council on Gift Annuities. Though payments deplete the principal of the donation, they are ultimately backed by all of the charity’s assets so donors can feel secure that their payments will always be there.
Part of your payments during your life expectancy will not be subject to state or federal income tax. And if you itemize deductions, your gift qualifies for a charitable deduction. Also, the amount given is removed from your estate, so it will not be subject to tax later on (for a more accurate understanding of how a CGA will affect your tax situation, be sure to contact your tax advisor).
We like to think of Charitable Gift Annuities as “win-win giving.” People can get a nice tax deduction as well as a lifetime stream of income, and charities receive a generous gift from the donor. So the next time you decide to make a donation, take a look at a Charitable Gift Annuity and see how they can benefit your favorite charities – and you as well.