What the experts say
“Consider a charitable gift annuity. It will pay a bit less than similar products from private insurers, but if you choose well, you’ll get an immediate tax deduction, a decent return, zero volatility and the psychic pleasure of supporting a worthy cause.”
“Philanthropic advisers are trumpeting gift annuities as a win-win proposition. They let donors support their favorite causes and get a decent income stream in return.”
If you would like to receive a tax deduction while making a gift that pays you an income for life, consider a City of Hope charitable gift annuity.
Here is what may be the most concise explanation of gift annuities you will ever hear:
- You make a gift of at least $25,000 to of City of Hope.
- In exchange you receive fixed annual payments — for as long as you live — at an attractive payment rate and a charitable deduction, too.
- You enjoy the satisfaction of making a gift that benefits you now and, in the future, helps fund innovative research and compassionate patient care.
One of the reasons gift annuities are so popular is because they are so flexible. Here are the most common options:
An Annuity with Immediate Payments
The most common type of gift annuity. In exchange for your donation of $25,000 or more, City of Hope will make annual fixed payments to you for as long as you live, starting when your gift annuity contract is signed.
If Helen, age 82, establishes a $50,000 charitable gift annuity with City of Hope, her payment rate will be 7.2%*. She will receive an annual income of $3,600 — for the rest of her life! Compare that to the income on a CD earning 1%. In addition, Helen may be eligible for a substantial income tax charitable deduction.
Based on payment rates as of July 2017.
A Gift Annuity Funded with Appreciated Securities
If you have stock or mutual funds that you have held for more than a year and that have increased in value, you can use them to fund your gift annuity and you will bypass a significant portion of the capital gains tax. The remaining gain will be apportioned over several years of your annuity payments rather than being taxed all at once.
Evelyn, age 82, establishes a $50,000 charitable gift annuity with stock that she originally purchased for $10,000. In addition to an annual payment of $3,600 for as long as she lives and an income tax charitable deduction, more than $20,000 of her capital gain on the stock’s appreciation will never be taxed.*
*Based on payment rates as of July 2017 and a capital gains tax rate of 15%. Based on the maximum capital gains tax rate plus the investment tax.
A Gift Annuity with Two Beneficiaries
One of the great things about gift annuities is that they can be set up to benefit two people, making them an ideal tool to provide financial security for a spouse or other loved one.
Martin, age 79, wants to be sure that if something happens to him, his wife Eleanor, age 77, will be financially secure. He and Eleanor also want to help City of Hope so they donate $100,000 to create a gift annuity. The payment rate for two beneficiaries, age 79 and 77, is 5.4%, which results in an annual payment of $5,400. If either of them passes away, the surviving spouse will continue to receive the full $5,400 annuity payment each year for life.
*Based on payment rates as of July 2017.
An Annuity with Deferred Payments and a Higher Rate
If you don’t need more income immediately, a “deferred gift annuity” might be right for you. The older you are when your payments begin, the higher your payment rate will be. You schedule the payments to begin when you will need them and enjoy a higher payment rate than with an annuity that pays you immediately.
Ellen has had a successful career. In fact she loves it so much that, at age 63, she plans to continue working until she’s 70. At that time, she will welcome the additional income from a $75,000 City of Hope gift annuity. Ellen’s payment rate at age 70 will be 6.2%* and her fixed annual payment will be $4,650, a nice supplement to her retirement income.
*Based on payment rates as of July 2017.
A Gift Annuity Funded with Real Estate
A charitable remainder unitrust with City of Hope can provide you and/or other beneficiaries with income for life or for a fixed number of years. For your donation, which can be appreciated securities or real estate, you receive an immediate income tax deduction for a portion of your contribution to the unitrust and savings on capital gains taxes, too. You will also have the satisfaction of making a significant gift that benefits you now and City of Hope later. With this type of gift you can:
- Avoid paying capital gains on sales of appreciated stock
- Convert the full value of stock into a lifetime income stream
- Receive a significant charitable income tax deduction
- Remove assets from your taxable estate
Charlotte and Paul, both age 72, are concerned that estate taxes could significantly reduce the assets they are able to leave to their heirs. Paul also wants to make sure that Charlotte has more than enough income to live on even if she needs long-term care someday. After discussions with City of Hope staff and their advisors, Charlotte and Paul decided to create a 5% charitable remainder trust funded with $1 million in Paul’s highly appreciated company stock. Paul can rest assured knowing that Charlotte will have an additional $50,000 a year in retirement income. Additionally, they were able to remove $1 million from their taxable estate and avoid significant capital gains taxes.