Creating hope in our community can benefit you, too! Charitable Gift Annuities provide a way to start your legacy now and receive dependable payments for life in exchange for a gift of at least $5,000 in cash, real estate, or appreciated securities to Catholic Charities.
What is a charitable gift annuity?
A charitable gift annuity is a contract between a donor and Catholic Charities with the following terms: As a donor, you make a sizable gift to Catholic Charities using cash or other assets. In return, you become eligible to take a partial tax deduction for your donation, and you receive a fixed stream of income from Catholic Charities for the rest of your life. The payments can begin immediately or be deferred to a future date that you choose.
You may also establish a gift annuity for someone else; however, the total number of annuitants associated with any one gift cannot exceed two. The terms of the arrangement are set forth in a contract signed by you and Catholic Charities. The arrangement terminates on the death of the annuitant(s), at which point Catholic Charities will use the remaining funds on our programs.
How does a charitable gift annuity work?
First, you make a donation to a charity. Then, the gift is set aside and invested. Based on your age(s), you receive a regular fixed payout for the rest of your life. At the end of your life (as well as your spouse’s, if you’re giving as a couple), the charity receives the remainder of the gift.
Individuals or couples can set up a charitable gift annuity. Your annuity can be funded with cash donations or non-cash assets. Minimum gifts for establishing a charitable gift annuity may be as low as $5,000 but are often much larger.
You may also be eligible to take a tax deduction at the time of the original gift, based on the estimated amount that will eventually go to the charity after all the annuity payments have been made. A portion of the payments you receive may also be tax-free for a period of time based on your statistical life expectancy.
Charitable gift annuity donors (annuitants) receive payments for the rest of their lives. The size of your payment is determined by many factors, including your age(s) when you set up the charitable gift annuity. (For example, younger donors will typically receive more payments but they’ll be smaller.) The amount is fixed and will never fluctuate or adjust for inflation, but it’s also guaranteed and will continue for your lifetime no matter how well or poorly the investments of the annuity perform.
You may be eligible to claim a partial charitable tax deduction for the year in which you set up the charitable gift annuity. The IRS views your contribution as part charitable donation and part investment.
A second tax benefit may come by donating long-term appreciated stock or other property if the charity is able to accept these assets in place of cash. By donating non-cash assets, you can reduce or eliminate the capital gains tax you’d pay if you sold them first and then donated the proceeds.
However, there is a potential tax drawback: part of your annuity income is taxable at the federal level, and possibly at the state level as well. The rules can be complex, so discussing the specifics of your situation with a tax advisor is essential.