financial forum
Gift Annuities
Charitable gift annuities provide guaranteed lifetime income and tax deductions — and benefit a charitable organization.
By Lt. Col. Shane Ostrom, USAF (Ret), CFP®
A charitable gift annuity (CGA) is a two-part contract with a charitable organization. You contribute an amount of money you determine to the charity. Part of your contribution becomes a donation to the organization, and the other part goes toward the purchase of lifetime income. The assets remaining in the annuity upon your death go to the charitable organization. Your contribution is managed to leave approximately 50 percent of the total contribution available for the charity upon your death. Contributions are irrevocable.
The lifetime income can be planned for one or two lives with a survivor option. You also have the option to begin income payments immediately or defer the start to a later date. Payments are annual, semiannual, quarterly, or monthly. Once the income is started, it is fixed and does not change.
A CGA works more like a commercial insurance annuity than a trust in terms of the amount of income and length of payments — the income payments are not limited by the amount of the contribution. The charity must make good on the life-time payments, regardless of the amount initially contributed.
The amount of income usually is determined according to standardized rates set by the American Council on Gift Annuities (ACGA)*. Charities are not required to use ACGA rates, but if they don’t, state laws typically establish the financial requirements. The rates don’t tend to be as high as commercial annuities, in order to preserve some funds for the charity. Rates vary by age, with higher rates for older donors.
The rate determines your income amount. A $100,000 contribution at a rate of 1.5 percent equals income of $1,500 annually. Rates for deferred annuities or appreciated assets must be calculated when you discuss the issue with the charity.
With CGAs and taxes, it’s important to consult your tax specialist on the details, but a few noteworthy items include:
■ A charitable contribution tax deduction generally is the “present value of the remainder interest.” It won’t be the total contribution amount.
■ A portion of income payments is taxable as ordinary income, and a portion is tax-free because it will be a return of the donor’s principal.
■ Charitable contributions are reported each year on Form 1099-R.
Final score: CGAs are easy to set up, have tax benefits and a low cost, don’t require a huge contribution, and provide lifetime income. As with all financial options, a CGA is not a “be all, end all,” so for more specific details, work with a charitable organization.
MO
— Lt. Col. Shane Ostrom, USAF (Ret), is a CFP® and benefits information expert at MOAA. To speak with a financial planner, contact USAA at (877) 913-6622 or
www.usaa.com/moaa. Visit
www.moaa.org/financialcenter for other resources. Email specific benefit and finance inquiries to
beninfo@moaa.org.
Support Students For more information about setting up a charitable gift annuity that supports the MOAA Scholarship Fund, call (800) 234-MOAA (6622) or visit
www.moaa.org/annuity.
*online: Find ACGA rates and state regulations at
www.acga-web.org.
44 MILITARY OFFICER APRIL 2013
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96