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Charitable Gift Annuity
"Whatever gift each of you may have received, use it in service to one another, like good stewards dispensing the grace of God in its varied forms."
1 Peter 4:10
The concept of the charitable gift annuity in America dates back to 1843 when a gift of money was given to the American Bible Society in exchange for a flow of income. Today, the concept includes valuable tax benefits for donors. But perhaps more valuable than the financial advantages is the satisfaction donors gain by helping to continue the mission and ministry of Tabernacle Baptist Church.
What Is A Charitable Gift Annuity?
A Charitable Gift Annuity is a contractual agreement between a donor and Tabernacle Baptist Church in which the donor transfers assets to the church in exchange for a promise to pay one or two annuitants a fixed annual income for life. The amount of the annuity is determined by the amount of the gift and the age or life expectancy of the person who is to receive the annual income. The American Council on Gift Annuities sets suggested maximum annuity rates.
Donors can choose an immediate payment gift annuity or can defer payments for a length of time. The deferral period must be for a minimum of one year.
By donating through a gift annuity, you can accomplish two things:
- Contract for a fixed payment for yourself or yourself and another individual, if you choose, and
- Make a gift to Tabernacle Baptist Church. If you itemize deductions on your tax return, savings from the charitable deduction reduce the net cost of the gift.
For a period of years, based on a government table of life expectancies, a portion of each payment received is considered a nontaxable return of your investment in the gift. This further increases your after-tax dollars available for spending or investing.
In addition to the annuity payment you receive, an annuity funded with appreciated property results in these advantages:
- The gain allocated to the gift portion completely avoids the capital gains tax, and
- The portion of gain to be recognized can be spread over the expected term of the contract, provided that the donor is a primary annuitant and the annuity interest is assignable only to Tabernacle Baptist Church.
How It Works
- You transfer cash or securities to Tabernacle Baptist Church.
- Tabernacle pays you, or up to two annuitants you name, a fixed income for life.
- When the contract ends, Tabernacle uses the remainder for your designated purpose.
Benefits
- You receive an immediate income tax deduction for a portion of your gift.
- Your annuity payments are guaranteed for life, backed by the assets of Tabernacle Baptist Church.
- Your annuity payments are treated as part ordinary income, part capital gains income, and part tax-free income.
- You have the satisfaction of making a significant gift that benefits you now and Tabernacle later.
Consult Your Financial Advisor
When considering a Charitable Gift Annuity, consult your financial and estate planning advisors. They will help you review these key areas: the balance between fixed payments and variable payments with growth potential; the option of using capital gain property; and the unified estate and gift tax implications of plans being considered.
Click the button below to calculate how
a Charitable Gift Annuity can benefit you.
A Case Study
Sarah, age 75, plans to donate a maturing $25,000 Certificate of Deposit. Since she needs continuing income, Sarah decides to use the cash for a one-life charitable gift annuity that will be issued at the suggested rate of 7.1 percent. Payments will be made quarterly.
Although Sarah's annuity rate is 7.1 percent, her actual earnings will be higher for several reasons. First, because Sarah itemizes income tax deductions, she earns a federal income tax charitable deduction of $10,742. With a marginal income tax rate of 28 percent, the tax savings of $3,008 will reduce the net cost of the gift to $21,992. Her annual payments of $1,775 will mean an effective rate of total return of 8.1 percent, which is Sarah's annual payment expressed as a percentage of the net cost.
The second advantage she will enjoy is that for the next 12.4 years, more than half of every dollar received will be considered a return of her investment and will not be subject to tax.
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If you would like more information about planned giving at Tabernacle, contact Dr. Bruce Minett - Executive Associate Pastor. He will be happy to speak with you.
Disclosure:
The information in the planned giving section of Tabernacle's web site is not designed to act as legal or financial advice. While Tabernacle Baptist Church is glad to provide general information, this information should be reviewed by professional, financial advisors prior to any action.
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