Charitable Gift Annuities Allow Generosity Combined with Financial Security

An immediate annuity is a financial arrangement where you give a lump sum of money to an insurance company in exchange for a promise of regular payments to you over your lifetime. It's longevity insurance in a sense because the amount you receive is based on your life expectancy. The younger you are when you begin taking payments, the lower your payments will be.

How a Charitable Gift Annuity Works

A charitable gift annuity, or CGA, is a type of immediate annuity. The donor signs over money or other assets to a charity in exchange for regular income payments to the donor. A CGA also allows donors an income tax deduction for their donation up to a certain percent.

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CGAs are irrevocable, so you need to think long and hard before deciding to turn their money over. Also, returns on annuities are somewhat lower historically than on stocks, although they offer the guarantee of fixed return with no market risk.

An Example of a Charitable Gift Annuity

If you are 70 years old and want to establish a CGA with an irrevocable gift of $20,000, you can receive $1,340 annually for the rest of your life at a fixed rate of 6.7 percent, along with a tax deduction for a portion of your contribution.

Another option for you is to establish a deferred CGA by giving your gift now but waiting for payments to start until you are 75. By waiting, you up your monthly payments to $1,880 annually based on 9.4percent fixed annuity rate.

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