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As we defined in module two,
a charitable gift annuity is a simple contract between the charity and the donor,
which states the donor will see
a specific annual payment in exchange for the irrevocable transfer assets.
In exchange for their irrevocable gift of cash,
securities or other asset,
the charity agrees to pay one or two annuitants a fix sum each year for life.
The payments are backed by the general resources of the charity.
The older the designated annuitants are at the time of the gift,
the greater the fixed payments charity can agree to pay.
In most cases, part of each payment is tax free increasing each payments after tax value.
If the donor gives appreciate property,
the donor will pay capital gains tax on only part of the appreciation.
In addition, if the donor name themselves as a first or only annuitant,
the capital gains tax will be spread out over
many years rather than they all do in the year of their gift.
Payments are usually made in annual,
semi-annual or quarterly installments.
The benefits of a charitable gift annuity include,
the donor will qualify for a federal income tax deduction.
Note, that deduction for gifts of
long-term appreciated property will be
limited to 30 percent of their adjusted gross income.
Gifts of cash, short term appreciated property, ordinary income property,
and not appreciated property will be limited to 50 percent of their adjust gross income.
Donors may if necessary,
take unused deductions of either kind over
the next five years subject to the same 30 percent or 50 percent limitation.
The annuitants will receive
fixed annual payments for life backed by the general resource of the charity.
If the donor funds the annuity with
long-term appreciated assets one the donor has held for more than a year,
the donor will incur tax on only part of the gain.
If the donor names themselves as the annuitant,
this tax will be spread over many years.
Their estate may enjoy reduce probate costs in
the state taxes and the donor will provide generous support to the charity.
Use a charitable gift annuity when it aligns with the donors goals.
The donor wants to secure guaranteed fixed income for self or a loved one.
These gifts are most common with donors over 70 years of age.
Now, let's look at how to give it.
The donor would establish a contract with the charity.
The donor would transfer assets to the charity in
exchange for the annual income payments for life.
This is a sample of a template for a charitable gift in a contract.
There is a template in your resources,
please pause to print that for reference before proceeding.
The most important thing to note about this document is
that it is a simple contract between the donor and the charity.
This is extremely appealing to donors because it is not complex.
This document simply says,
I give you a certain amount and in return,
the charity will give you an annual annuity for a specific amount.
The contract also has an attachment that describes the use and purpose of the gift.
This contract finalizes the terms of the charitable gift annuity.
You will encounter this document when you close this type of gift with a donor.
Here, is how I might sound if I were
describing or recommending a charitable gift annuity to a donor.
Thank you for your interest in including XYZ Charity in your estate plans.
We're grateful that you value our mission enough to make us a part of your legacy.
Let me review the charitable gift annuity contract with you.
This is a simple contract that details the terms of your charitable gift annuity.
Even though it is a simple document,
I would recommend that you review it with your professional advisor.
As you'll see in the document,
the amount of your gift is $300,000 and in return for that gift,
you will receive an annual annuity of $25,000 for the rest of your life.
Your first payment will be prorated from the period October 27 to the end of the quarter.
This payment will be received on December 31.
Your first full quarterly payment will be received on March 31.
This annuity is irrevocable and not transferable so you
cannot decide at a later time to sign this annuity to a relative,
friend, or anyone else.
Upon the satisfaction of the annuity obligation,
the residuum will be used as you've stated in Schedule B.
Once you are satisfied with the details of the contract,
then you will need to transfer the gift and sign the contract.
Thank you again for your generosity and support.
I look forward to working with you to finalize your charitable gift annuity.
I will check back with you in a couple weeks if I haven't heard from you.
It was a pleasure meeting you. We will see you soon.
Brian CaseyAssistant Vice Chancellor for Planned Giving
