Charitable Gift Annuity (CGA) – Deferred / Flexible

  • Partial income tax deduction.
  • Guaranteed, fixed income for one or two people for their lifetimes.
  • Income may be tax-favored.
  • Payments can be deferred until you need them.
  • Rates are based on the age(s) of income recipient(s), and are higher the longer you delay payments.
  • Defer and/or avoid capital gains taxes when funded with appreciated securities or property.

Charitable Gift Annuity

Bob and Kate Miller are both 70 and retired. After watching neighbors struggle with a catastrophic health issue and receive financial assistance from a United Way agency, they have been supportive of the United Way. They want to make sure their gifts continue perpetually, so they have decided to establish an endowed fund that will continue to support United Way after their deaths.

The Millers have about $250,000 in bank CDs, currently paying about 2% per year in taxable interest, about $5,000 in annual income that, after paying about $2000 in income tax has funded about $3000 in travel each year during retirement. They would like to be able to travel more to several “bucket-list” destinations, but have not been able to afford to do so. Bob and Kate mention this to their United Way volunteer, who in turn mentions it to one of United Way’s planned giving specialists. The Planned Giving Specialist suggests that when their bank CD matures, they consider using the funds to establish a Charitable Gift Annuity. Based on their ages, a Charitable Gift Annuity will produce payments of $11,500 per year, of which $8700 will be treated as tax-free return of principal. $2800 of this would be taxable in their 35% bracket, meaning their after-tax income would total about $10,520 per year versus their current $3,000. In addition the Millers would receive a charitable deduction of about $70,000, which would save them an additional $24,500 in income tax over the next several years, enough to take the European River Cruise they have dreamed. Annuity payments will continue as long as either Bob or Kate is living. When the survivor of the two dies, the principal will pass to the United Way Foundation and be placed in an endowment named for the Millers, which should produce approximately $12,500 per year for assistance in the Millers’ name for their community.

« Back to Ways to Give