Learn About Charitable Gift Annuities 

By: J. R. Randolph

In return for an irrevocable gift of cash or other assets to a qualified charitable organization, a donor can receive a charitable tax deduction and a fixed amount of money to be paid for the remainder of their lifetime. This transaction is called a Charitable Gift Annuity. These lifetime payments are not considered to be "income" and are a partial tax-free return of the donor's gift. The donated property becomes part of the charity's assets and the payments are a general obligation of the charity. The annuity is backed by the entire asset base of the charity, not just by the value of the gift. In the case of a gift in the form of securities, the value is set by the fair-market value on the date of the contribution.

Many states regulate charitable gift annuities and require the charity to provide the state with a published gift annuity rate chart of the maximum annuity rate the charity offers each donor (annuitant), listed by the actuarial age (age to nearest birthday) on the gift date. The charity can spend a portion of the contribution at any time, including immediately after receipt. However, the charity must maintain sufficient reserves (as required by state laws) and satisfy regulatory requirements of the state where the charitable gift annuity was issued.

Charitable Gift Annuity Agreements Not all states permit the use of each type of the many agreements that are available. Usually the charity is required to submit each different type of agreement it would like to offer. Some of the types of gift annuities are:

Immediate Gift Annuities As the name suggests, annuities that begin making payments at the end of the period immediately following the contribution are called immediate gift annuities. These periodic annuity payments can be made monthly, quarterly, semi-annually or annually, as defined in the agreement.

Deferred Gift Annuities Deferred gift annuities provide for payments to begin at a date in the future, which is chosen by the donor, but must be more than one year after the date of the contribution.

Tuition Gift Annuities Usually these types of annuities are created by a parent or grandparent for a young child and the payments are deferred until the child is expected to enter college. The annuitant(s) then has the option of receiving annuity payments for his or her lifetime, or receive much larger payments for a term of four or five years, as defined in the agreement.

Flexible Gift Annuities The annuity payment starting date is chosen by the annuitant(s). The donor would choose an initial "target date" for the payments to start. The charity would then offer a range of payouts with differing fixed payment amounts and differing starting dates. Since the charitable deduction remains fixed, the annuity rate for each starting date would have to change. The payments would be lower if the starting date was earlier and higher if the starting date was later. Each annuitant would have to determine on an annual basis whether or not they wish the annuity payments to start that year.

Agreement Versions There are three versions of each type of agreement. They are:

"single life" agreement - annuity payments for the lifetime of the annuitant,

"two lives in succession" agreement - annuity payments for the annuitant's lifetime and then annuity payments of the same amount to a second person if he or she survives the annuitant, and "joint and survivor" agreement - annuity payments to both spouses simultaneously, each getting half of the payment, and upon the death of one of the annuitants, pay the survivor the full annuity. Find out if a charitable gift annuity is right for you. You can find objective, unbiased information on all types of annuities by visiting Annuity-Strategies.com. Click here for other unique charitable gift annuity articles. Article Directory: http://www.articledashboard.com

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