Make
A Gift. Earn Income for Life.
The SOCH Foundation Charitable Gift Annuity
Program
The SOCH Foundation's Charitable Gift Annuity (CGA) Program enables you to make a significant gift to the Hospital and receive income for you and your spouse over your lifetimes. It offers you an alternative to direct contributions.
A charitable gift annuity (CGA) is a contract under which a charitable organization, in exchange for a transfer of cash, marketable securities, or other property; agrees to pay a fixed sum of money for a period measured by one or two lives. The person transferring the property for the annuity is the "donor," and the person receiving the fixed payments is the "annuitant" or "beneficiary." Usually the annuitant is also the donor and/or donor's spouse.
In many cases, the property exchanged for the annuity is appreciated property that could generate taxable gain if it were sold outright. However, if the transaction is properly structured, any taxable gain will be deferred over the annuity period. In addition, the donor will be entitled to a current income tax charitable deduction for the excess of the fair market value of the property transferred over the fair market value of the annuity at the time of transfer.
The contributed property (gift) is given to the charity irrevocably, and becomes part of the charity's assets. The annuity is backed by the charity's assets, and the charity is contractually obligated to make the payments. The annuity payments continue for the life/lives of the annuitant(s).
Payments from a charitable gift annuity are fixed for the annuitant's
life at the time of the gift. Payments neither increase nor decrease
due to economic or market conditions. The amount of the annuity payments
depends on the gift annuity rate offered by the charity, the value of
the contribution (gift), number of annuitants, and life expectancy of
the annuitants.
Current gift annuity rates, as suggested by the American Council on Gift
Annuities, range from 5.5% for age 60 to between 7.6% and 10.5% for a
donor age 80 or more. Because the gift annuity rates are based on your
age, the older you are, the higher the rate. Charitable gift annuity rates are lower than commercial
annuities so that a significant portion of the contribution will be available
for charitable purposes. Though lower than commercial rates, gift annuities are
very attractive to individuals who want to support their favorite charity while
receiving payments for themselves at the same time.
Illustration #1:
Joan Simpson, age 66, makes a gift to the SOCH CGA of $50,000. Based
on her life expectancy and an annuity rate of 5.8%, she would receive
fixed payments of $2,900 each year for as long as she lives, and would
receive an income tax charitable deduction of $18,124 at the time of
the gift.
Illustration #2:
John Davis, age 79, has a bank certificate of deposit in the amount of
$75,000 that matured. Rather than roll the CD over at the bank at 3.5%
for 12 months, he has decided to contribute the money to a SOCH CGA.
Based on John's life expectancy and an annuity rate of 7.4%, he will
receive fixed payments of $5,550 per year for his lifetime, and would
have an income tax charitable deduction of $37,046.
Illustration #3:
Benjamin Smith, age 68, and his wife Sarah, age 66 wish to make a $75,000
gift to the SOCH CGA. Based on their joint life expectancies
and an annuity rate of 5.5%, the Smith's would receive payments of
$4,125 per year for as long as either of them lives, and would have
an income tax charitable deduction of $20,378.
The SOCH CGA provides you with the opportunity to support the Hospital with your generous gift, receive a guaranteed fixed income for the rest of your life, and take advantage of a potentially significant charitable tax deduction for a portion of the contribution.
This information is intended to present the general concepts and applications of the Charitable Gift Annuity, and should not be considered specific investment, tax, or legal advice. It is important that you consult with your personal tax, legal, or investment advisors to fully explore the appropriateness of the CGA for your specific situation. As always, we recommend consulting your personal financial advisor. To learn more about the SOCH Charitable Gift Annuity Program, the many other potential advantages of charitable estate planning, and membership in The Knight Society, please contact SOCH Foundation Executive Director Chris Rollins, CFRE, at (609) 978-3081, or crollins@soch.com.
This article was provided by Deborah R. Mathis, CPA, CHBC, a Director with the Healthcare Services Group of Cowan, Gunteski & Co., P.A., a Trustee of the SOCH Foundation, and Chair of the Planned Giving Committee, a volunteer group of the area's leading financial professionals, guiding our educational outreach efforts. Ms. Mathis may be contacted at (732) 349-6880 or dmathis@cowangunteski.com.
