Charitable Gift Annuity

Of all the gifts that pay you back, the charitable gift annuity is the simplest, most affordable, and most popular. The donor makes a gift to your nonprofit and in return, you agree to make fixed payments to the donor for life.

The gift agreement is a simple contract between you and the donor. Your payments become one of your general obligations, fully backed by all your assets, and will not fluctuate. Donors love that.

When the contract ends, the nonprofit applies the balance of the gift annuity to the program designated when the gift was made.

Gift annuities offer attractive tax benefits:

1. Donor will receive a federal income tax deduction for a portion of the gift, based on the full value of the assets the donor contributes minus the present value of the life-income interest the donor retains.
2. If the donor funds the charitable gift annuity with appreciated securities, naming him or herself as beneficiary, no capital gains tax is due on the transfer. Only a portion of the donor’s capital gain will be reportable, and the tax will be spread over the annuity payments.
3. Part of each annuity payment will be treated as tax-free return of the donor’s principal. This effectively increases the yield from the donor’s annuity over his or her life expectancy.

The donor’s gift annuity can start payments once the donor has made the contribution (an immediate payment gift annuity), or payments can begin at a later date selected by the donor (a deferred gift annuity). Deferral entitles the donor to a higher annuity rate and generates a larger charitable deduction.